D. M. BOHRA v. INCOME TAX OFFICER
[Citation -1986-LL-1129-2]

Citation 1986-LL-1129-2
Appellant Name D. M. BOHRA
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 29/11/1986
Assessment Year 1981-82
Judgment View Judgment
Keyword Tags ordinarily resident • promissory estoppel • foreign exchange • tax-free income • interest earned • non-resident • reserve bank
Bot Summary: This appeal reiterates the claim for exemption of interest earned on non- resident external accounts with the Banks under s. 10(4A) of the IT Act. 1981-82, it would apply only a non-resident as defined under the IT Act and since the assessee was not an ordinarily resident during the assessment year, the assessee would not be entitled to the relief. The explanatory note in the Finance Act and the speech o the Finance Minister appears to support the claim of the Revenue that the intention of the amendment was to enlarge the scope of the remuneration and grant exemption to non-residents defined under the Foreign Exchange Regulation Act who may not be non-resident for the purpose of Income-tax, and such persons were not entailed to relief prior to the amendment. It is pointed out on behalf of the assessee that the Reserve Bank of India has been holding out of the non-residents by means of brochures, advertisements, etc. That the non-residents as defined under the Foreign Exchange Regulation Act would earn tax-free income if they deposit their amounts in the non-resident external accounts with the banks. Also as held by the Supreme Court in the case of Motilal Padampat Sugar Mills vs. State of UP 118 ITR 326 we are of the opinion that the Revenue cannot be heard to interpret the provisions of the Act in such a manner as to defeat the claim of the assessee. We accept the claim and direct that the interest from non-resident a/c be exempted in computing the total income of the assessee.


This appeal reiterates claim for exemption of interest earned on non- resident external accounts with Banks under s. 10(4A) of IT Act. This claim was denied by Revenue on ground that this section has been amended w.e.f. 1st April, 1982 to apply to non-resident as denied under Foreign Exchange Regulation Act, whereas for present asst. yr. 1981-82, it would apply only non-resident as defined under IT Act and since assessee was not ordinarily resident during assessment year, assessee would not be entitled to relief. explanatory note in Finance Act and speech o Finance Minister appears to support claim of Revenue that intention of amendment was to enlarge scope of remuneration and grant exemption to non-residents defined under Foreign Exchange Regulation Act who may not be "non-resident" for purpose of Income-tax, and, therefore, such persons were not entailed to relief prior to amendment. But it is pointed out on behalf of assessee that Reserve Bank of India has been holding out of non-residents by means of brochures, advertisements, etc. that non-residents as defined under Foreign Exchange Regulation Act would earn tax-free income if they deposit their amounts in non-resident external accounts with banks. It was submitted that since assessee was invited to open such account with specific assurance that interest therefrom would be exempt, Government could not go bank on promise by claiming that amendment which was made to clarify issue was only prospective and not retrospective. In view of well settled principle of promissory estoppel which applies to Govt. also as held by Supreme Court in case of Motilal Padampat Sugar Mills vs. State of UP (1979) 118 ITR 326 (SC) we are of opinion that Revenue cannot be heard to interpret provisions of Act in such manner as to defeat claim of assessee. We, therefore, accept claim and direct that interest from non-resident a/c be exempted in computing total income of assessee. appeal is allowed. *** D. M. BOHRA v. INCOME TAX OFFICER
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