9911796707
TMI Blog2025 (3) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... the credits were from an Indian taxable source, the additions are legally unsustainable.
Considering all the facts, legal precedents, and provisions of Section 10(4) of the Act, it is evident that funds remitted from foreign sources into NRE accounts are not taxable in India unless there is material to establish that they originate from taxable Indian income.
In AY 2013-14, the addition credited on 13-09-2012 in HSBC Bank (NRE) is deleted, as it represents a redemption of an NRE fixed deposit, which qualifies for exemption under Section 10(4). However, the addition in HDFC Bank (NRE) and in Deutsche Bank (NRE) requires further verification by the AO to ascertain whether the original source of funds in the NRO account was from taxable income or tax-free foreign remittances.
For AY 2015-16, the addition credited on 23-01-2015 in HDFC Bank (NRE) is deleted, as it is an inward remittance from JP Morgan Chase Bank, UK, and qualifies for exemption under Section 10(4) of the Act. Accordingly, the appeal for AY 2013-14 is partly allowed for statistical purposes, with a direction to the AO for further verification. X X X X Extracts X X X X X X X X Extracts X X X X ..... dditions Made by AO Rs. 3,79,69,033/- Rs. 3,67,60,000/- Final Assessed Income Rs. 3,85,48,052/- Rs. 3,68,40,733/- 3. As the assessee was not satisfied with the orders of AO passed u/s 147 r.w.s. 144C(13) of the Act, the assessee preferred an order before us with following grounds of appeal: In ITA No. 105/Ahd/ 2023 for AY 2013-14 1.0 ADDITION OF Rs. 3,79,69,033/- ON ACCOUNT FUNDS RECEIVED IN NRE ACCOUNT: 1.1 On the facts and circumstances of Your Appellant's case and law, the ld.AO has made addition of Rs. 3,79,69,033/- for the failure to prove source of funds received in NRE Bank accounts. ld.AO as well as Hon'ble DRP failed to appreciate the fact that source of fund along with source of source was properly explained. ld.AO as well as Hon'ble DRP failed to appreciate the fact that entire money was transfer from one account to other account and therefore source was very well explained. The action of ld. AO is totally arbitrary and not in accordance with provisions of law. 1.2 Your appellant prays that Your Honor be pleased to hold the action of ld. AO unjustified and delete the impugned addition. Your appellant craves leave to add, to amend and / or alter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raves leave to add, to amend and / or alter the above referred grounds. 4. Since the issues involved in both these appeals are common, we heard them together and dispose of the same by way of a common order for the sake of convenience. 5, During the course of the hearing before us, the Authorized Representative (AR) submitted that the additions made by the AO were solely on account of credits in the NRE account, which are not subject to tax as per the provisions of Section 10(4) of the Act. The AR further emphasized that the assessee's non-resident status is an admitted fact, and throughout the assessment and DRP proceedings, the assessee had duly explained all credits appearing in the NRE accounts. 6. The Departmental Representative (DR), on the other hand, referred to the DRP's order in case of AY 2013-14, stating that the assessee had failed to establish the source of a credit entry of Rs. 1,80,00,000/- in the HDFC Bank NRE account on 06-02-2013. As per the bank statement, this amount was transferred from the assessee's own NRO account with HDFC Bank, where two cheques of Rs. 1 crore and Rs. 80 lakhs were deposited on 03-12-2012 and 10-12-2012, respectively. The DR also point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that the AO has incorrectly made additions based on credits in the NRE account. In particular, the AO should have verified the credit entries in the NRO account from where certain transfers were made to the NRE account instead of directly taxing the NRE credits. The AR argued that if the AO doubted the source of funds in the NRO account, the addition should have been made at that stage, not at the NRE account level, which is contrary to settled legal principles. 8.3. We verified the disputed credits in NRE bank account which are tabulated below - A.Y. Date Bank NRE Account No. Amount (Rs.) Reasons for addition DRP Order Page Remarks 2013-14 06/02/2013 HDFC Bank (NRE) 1471560001628 1,80,00,000/- Transfer from NRO A/c No.1471510000790 - In said NRO account there were two deposits of Rs. 1,00,00,000/- by way of Cheque No. 93582 on 03- 12-2012 and Rs. 80,00,000/- by way of Cheque No. 93563 on 10- 12-2012. These two entries assessee could not explain. Page No. 17 HDFC Bank NRO Statement is available from 05-01-2013 2013-14 13/09/2012 HSBC Bank (NRE) 030-344220-006 48,69,033/- Amount credited to NRE account on 13-09-2012 with Narration "HSBC INC FD-SH TRM PLN- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 16/09/2012, involving a credit of Rs. 1,50,00,000/- in the Deutsche Bank (NRE) account (A/c No. 420014713780019), remains unexplained, as no supporting explanation or additional evidence has been provided by the assessee. Furthermore, the bank statement for Deutsche Bank is not available in the paper book submitted during the course of hearing before us. Given the lack of documentary support, this transaction requires further verification by the AO to determine the actual source of funds. 8.9. Regarding the inward remittance of Rs. 3,67,60,000/- (GBP 400,000) dated 23/01/2015 in HDFC Bank (NRE) account, the assessee stated that these funds were accumulated from the sale proceeds of pharmacy businesses in the UK between 1992 and 2006. The last store was sold in 2006- 07, and a portion of the proceeds was transferred to India. The assessee transferred GBP 950,000 to India on 12/11/2008, with the majority of these funds invested in FCNR deposits and mutual funds. As per the submission, this inward remittance of GBP 400,000 was part of the tax-paid funds accumulated over the years and repatriated to India. Based on the detailed explanation and supporting documents submitted bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, funds deposited in an NRE account are not subject to Indian taxation if they originate from foreign income. The assessee has provided documentation showing that the funds were either foreign remittances or redemptions of existing NRE deposits and hence should not be considered taxable under Indian law. 8.13. Based on the analysis of Section 10(4) of the Act, and the facts of the case, the following conclusions can be drawn: - Credits directly originating from foreign remittances into the NRE account are exempt from taxation under Section 10(4) of the Act. The Rs. 3,67,60,000/- credited on 23-01-2015 in HDFC Bank (NRE) is a foreign remittance from the UK and should be deleted from the assessed income. The Rs. 48,69,033/- credited on 13-09-2012 in HSBC Bank (NRE) is a redemption of an NRE fixed deposit, which is also tax-free under Section 10(4). - Transfers from an NRO account to an NRE account require verification of the original source in the NRO account. If the source of the NRO account deposit was an earlier foreign remittance, Section 10(4) of the Act applies. If the NRO account contained taxable income earned in India, the AO's action may be justified to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
