IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 17.02.2015 CORAM: HONOURABLE MR.JUSTICE R.SUDHAKAR and HONOURABLE MR.JUSTICE R.KARUPPIAH Tax Case (Appeal) No.101 of 2008 Commissioner of Income-Tax Trichy .. Appellant versus Shri.N.Sundararaman 2, Ganapathy Colony, Tiruchirapalli - 620 005. .. Respondent PRAYER: Tax Case Appeal filed under Section 260A of Income Tax Act, 1961 as against order dated 27.09.2005 made in I..T.A..No.2106/Mds/2003 on file of Income Tax Appellate Tribunal, Madras 'D' Bench for assessment year 1998-1999. For appellant : Mr.J.Narayanasamy Standing Counsel for Income Tax For respondent : Mr.Philip George 2 JUDGMENT (Judgment of Court was delivered by R.SUDHAKAR,J.) This Tax Case (Appeal), filed by Revenue as against order of Income Tax Appellate Tribunal, was admitted by this Court on following substantial questions of law: "1. Whether on facts and in circumstances of case, Income Tax Appellate Tribunal was right in holding that assessee was entitled to concessional rate of tax under Section115H when assessee has not satisfied procedural and substantive requirements under Chapter XII of Income Tax Act? 2. Whether on facts and in circumstances of case, Income Tax Appellate Tribunal was right in holding that assessee was eligible under Section 54F in respect of purchase of property held in name of his wife?" 2. brief facts of case are as follows: assessee filed his return of income for assessment year 1998-99 admitting taxable income of Rs.21,19,890/-. income thus returned consisted of interest accrued on/received from bank deposits. Hence, assessee computed tax due at concessional rate of 20% as per provisions of Section 115-E read with Section 115-H of Income Tax Act. During scrutiny assessment, Assessing Officer after clubbing income of 3 assessee's wife and father-in-law, determined taxable income. In doing so, Assessing Officer followed assessment for assessment year 1993-94. 3. Aggrieved by said order of Assessing Officer, assessee preferred appeal before Commissioner of Income Tax (Appeals), who upheld action of Assessing Officer by adding income of assessee's wife, but deleted addition of income of assessee's father-in-law. 4. As against said order of Commissioner of Income Tax (Appeals), assessee preferred further appeal before Income Tax Appellate Tribunal. Tribunal, by relying upon its own decision pertaining to same assessee for assessment years 1993-94 to 1997-98, allowed appeal in favour of assessee. 5. Being aggrieved by order of Tribunal, Revenue is before this Court. 6. Heard learned Standing Counsel appearing for Revenue 4 and learned counsel appearing for assessee and perused materials placed before this Court. 7. It is fairly submitted by both learned counsel appearing for assessee and learned Standing Counsel appearing for Revenue that second question of law admitted by this Court was wrongly framed, since said question of law was not issue before Tribunal. 8. In view of above submission, it is not necessary to answer second question of law admitted by this Court, which does not call for any consideration. 9. With regard to first substantial question of law, both learned Standing Counsel appearing for Revenue and learned counsel appearing for assessee, fairly submitted that first substantial question of law was already decided by this Court in favour of assessee in respect of very same assessee for assessment years 1994-95 to 1996-97 in T.C.(A)Nos.1053 to 1056 of 2004 dated 07.02.2012. 5 10. In T.C.(A)Nos.1053 to 1056 of 2004 (Commissioner of Income Tax Vs. N.Sundarraman), this Court, by order dated 07.02.2012, while dealing with issue whether on facts and in circumstances of case, Income Tax Appellate Tribunal was right in holding that assessee was entitled to concessional rate of tax under section 115H when assessee has not satisfied procedural and substantive requirements under Chapter XIIA of Income Tax Act, which is identical issue in present appeal, held as follows: "7. As far as question of law Nos.4 and 5 are concerned, it is claim of assessee that returns were filed based on section 115E of Act. On other hand, Assessing Officer had found that returns were filed under section 115H of Act and as per said section, at time of filing return, it is incumbent on part of assessee to make declaration in writing to effect that provisions of Chapter XII-A shall continue to apply to him in relation to investment income derived from any foreign exchange asset being asset of nature referred to in sub-clause (ii) or sub- clause (iii) or sub-clause (iv) or sub-clause (v) of clause (f) of section 115C of Act. Inasmuch as declaration was made much later and not along with returns, assessee was not entitled to benefit of tax exemption as per Chapter XII-A and therefore, on strength of 6 declaration that he is Resident, he is liable to pay tax as applicable in case of regular assessment. There is no dispute that assessee was working in UNICEF and he had been earning salary and had been remitting same in India in foreign exchange, which amount had been invested mainly in bank deposits. From records, it is seen that respondent/assessee had been 'Non- Resident" for 12 years prior to his return to India. He has been in India only for 323 days during previous seven years preceding assessment year 1993-94. Therefore, Tribunal was of view that respondent/assessee falls within scope of Section 6(6)(a) of Income Tax Act, 1961. So, Tribunal held that status of assessee is "Not Ordinarily Resident". It is pertinent to note that assessee in his original return declared his status as "Resident". Therefore, Assessing Officer denied benefit. real status of assessee cannot be denied merely assessee made wrong declaration when he satisfied all conditions. Therefore, Tribunal, applying scope of provisions of Section 6(6)(a) of Act, given categorical finding that status of assessee is "Not Ordinarily Resident" during relevant assessment year and also upto assessment year 2001-02. Because of status of assessee is 'Not ordinarily resident' during year, assessee is entitled to benefit of Section 115 E of Income Tax Act, 1961. In present cases, entire deposit held by assessee was brought into India in 7 form of Foreign Exchange through legal channels as approved by Reserve Bank of India. status of assessee was "Non Resident" upto assessment year 1992-93. There is no dispute and assessing officer himself held that only income of assess after 12.11.1992 has to be taxed. relevant provision for our consideration is Section 115 E of Income Tax Act which grants to assessee choice to be taxed at concessional rate of 20% as against normal rate. Chapter XII of Income Tax Act, 1961 deals with special provisions relating to certain incomes of Non- Residents. said chapter was inserted by Finance Act, 1983 with effect from 1 June 1983. purpose of introduction of this Chapter was with view to encouraging flow of foreign exchange remittances into India and investment in India by "non-resident Indians". It deals with special provisions of taxation of following categories of income derived by non-resident Indians. (a) investment income and (b) long-term capital gains. Section 115 E of Act deals with tax on investment income and long-term capital gains. Section reads as follows:- "115 E . Tax on investment income and long term capital gains Where total income of assessee, being non-resident Indian, includes - (a) any income from investment or income from long-term capital gains of asset other than specified 8 asset ; (b) income by way of long-term capital gains, tax payable by him shall be aggregate of - (i) amount of income-tax calculated on income in respect of investment income referred to in clause (a), if any, included in total income, at rate of twenty per cent ; (ii) amount of income-tax calculated on income by way of long-term capital gains referred to in clause (b), if any, included in total income, at rate of ten per cent ; and (iii) amount of income-tax with which he would have been chargeable had his total income been reduced by amount of income referred to in clause (a) and (b)." 8. From reading of above, it is clear that assessee has to be "Non-Resident". word "Non- Resident" is defined in Section 115 C (e) of Act. It means individual, being citizen of India or person of Indian origin who is not "resident". Therefore, Tribunal applied above definition and has come to conclusion that assessee status is only "Not Ordinarily Resident". Therefore, Tribunal held that assessee is not resident and entitled to benefit of Section 115 E of Act. In this case, there is no dispute regarding interest earned on various deposits in Bank, which is specified under Section 115 E of Act and assessee is subject to 20% of taxation. So, argument 9 of Revenue that requirement of filing of declaration does not arise since that is not condition for getting benefit. Therefore, Tribunal correctly held that assessee had no obligation to file any declaration under Section 115 H or 115 E of Act. Therefore, Tribunal had correctly held that assessee was not obligated to file any such declaration until assessment year 2002- 03. In respect of nature of investment, Tribunal also held in detail in paragraph 28 and has come to conclusion that subsequent redesignation of NRE accounts into NRNR accounts have been made only from out of convertible Foreign Exchange lying to credit of assessee in his various accounts which had been opened with inflow of original Foreign exchange transferred to India as approved by Reserve Bank of India. Under these circumstances, assessee must be Non-Resident Indian. This question was considered by Assessing Officer, who had gone by declaration of assessee made in terms of section 115H of Act and consequently, impliedly, negatived claim of tax benefit under section 115E of Act. This question was considered by Tribunal, which held that merely because declaration was made by assessee due to ignorance of law, it would not nullify entitlement of Non-Resident Indian. Factually, Tribunal found that assessee, at time of filing returns, was "Non- Resident Indian and hence, assessee would be entitled to file returns under section 115E of Act. That apart, 10 in wake of provisions of section 115E that he is Non-Resident Indian and income derived is from investment in bank, claim of assessee could be considered only under section 115E of Act. Though assessee had filed returns claiming benefit under section 115E read with section 115H of Act, keeping in mind factual scenario, Tribunal had correctly held that assessee is Non-Resident Indian and merely because there is wrong description in returns that he is Resident, it would not alter status of assessee that he is Non-Resident Indian for assessment years in question. On basis of above factual finding, Tribunal allowed appeals." 11. Following above-said decision of this Court in respect of very same assessee for assessment years 1994-95 to 1996- 97, first question of law is answered in favour of assessee and against Revenue. Accordingly, this Tax Case (Appeal) stands dismissed. No costs. Index:Yes/No (R.S.,J.) (R.K.,J.) Internet: Yes / No 17.02.2015 sl To 11 1. Income Tax Appellate Tribunal, Madras 'D' Bench. 2. Commissioner of Income Tax (Appeals), Tiruchirappalli. 3. Assistant Commissioner of Income Tax, Company Circle-I, Tiruchirapalli. R.SUDHAKAR,J. AND 12 R.KARUPPIAH,J. sl Tax Case (Appeal) No.101 of 2008 17.02.2015 Commissioner of Income-tax, Trichy v. N. Sundararaman