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Huned T. Attari Vs. Seventh Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Judge
Reported in(1985)13ITD215(Mum.)
AppellantHuned T. Attari
RespondentSeventh Income-tax Officer
Excerpt:
.....in non-resident (external) account opened by all the persons who came with the definition of the term 'person resident outside india' in section 2(q) of the foreign exchange regulation act, irrespective of the fact whether he was non-resident within the meaning of section 2(30) of the income-tax act. we are unable to agree. if such had been the intention, there would have been express reference to the 'person resident outside india' in said clause and said term would have been separately defined in the act. our attention was invited to clause (4) of section 10 and comparison was made between the provision contained therein and that contained in clause (4a) of section 10 and on the basis of the comparison, it was contended that the intention underlying clause (4a) was to give effect to.....
Judgment:
1. These three appeals by the asses-see relates to the assessment years 1977-78 to 1979-80. The assessee is Tayyeb A. Attari. He is represented by his legal heir Huned T. Attari. The assessee was resident but not ordinarily resident during the relevant years. One of the items of his income was interest income, what has been termed as NDR Account. We were told at the hearing that this NDR account is Non-resident (External) Account opened by the assessee under Rule 3 of the Non-resident (External) Accounts Rules, 1970. These rules were framed under the Foreign Exchange Regulation Act, 1947. We shall proceed on the assumption that it is this account with which we are concerned. In the three years, interest credited in this account was Rs. 12,973, Rs. 20,375 and Rs. 19,377, respectively. The assessee claimed that said income was not includible in computing the total income. He relied on the provisions of Section 10(4A) of the Income-tax Act, 1961 ('the Act'). The ITO as well as the Commissioner (Appeals) negatived this claim on the ground that exemption under the said clause would be available only to a non-resident and not to an assessee, who was resident and not ordinarily resident. Since the assessee was resident and not ordinarily resident, the said exemption was not available to him. The assessee has now come in appeal before us.

2. Before we deal with the contention of the assessee, it is necessary to reproduce clause (4A) of Section 10 as that provision stood prior to its amendment with effect from 1-4-1982 by the Finance Act, 1982: In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included-- (4A) in the case of a non-resident, any income from interest on moneys standing to his credit in a Non-resident (External) Account in any bank in India in accordance with the Foreign Exchange Regulation Act, 1947 (7 of 1947), and any rules made thereunder; 3. The contention on behalf of the assessee is that the word 'non-resident' in Clause (4A) of Section 10 would mean 'a person resident outside India' as defined in Section 2(q) of the Foreign Exchange Regulation Act, 1973 and not 'non-resident' as defined in Section 2(30) of the Income-tax Act. According to the assessee, he was 'a person resident outside India' within the meaning of the said expression in the Foreign Exchange Regulation Act, and as such exemption under clause (4A) of Section 10 of the Income-tax Act would be available to him.

4. Section 2(q) of the Foreign Exchange Regulation Act, 1973, defines the expression, a 'person resident outside India' as a person who is not resident in India. The expression 'person resident in India' is defined in Section 2(p) of the said Act. The contention on behalf of the assessee is that he does not come within the definition of 'person resident in India' in Section 2(p) of the said Act and as such, he comes within the ambit of a 'person resident outside India' in Section 2(q) of the said Act.

5. The question whether the assessee comes within the ambit of 'person resident outside India' within the meaning of that expression in Section 2(q) of the said Act has not yet been investigated.

Investigation into said question would be necessary only if we accept the contention of the assessee to the effect that the term 'non-resident' in clause (4A) of Section 10 of the Income-tax Act refers to a 'person resident outside India' as defined in the Foreign Exchange Regulation Act and not to the term 'non-resident' as defined in Section 2(30) of the Income-tax Act. If we hold against the assessee on this point, there would be no necessity for investigating the aforesaid question.

6. After hearing the parties, we have come to the conclusion that the expression 'non-resident' in clause (4A) of Section 10 means 'non-resident' as defined in Section 2(30) of the said Act. Section 2 expressly states that the definitions given therein would apply to the terms defined whenever those terms were found used in the body of the Act unless the context otherwise requires. We are unable to agree with the contention that the context requires otherwise as far as the term 'non-resident' in Clause (4A) of Section 10 is concerned. We asked the learned representative of the assessee whether Clause (4A) of Section 10 would become meaningless if the definition of the term 'non-resident' in Section 2(30) was applied to said term as used in the said clause. He admitted that it would not be so and that the said clause would apply to interest received by persons who come within the definition of the term 'non-resident' in Section 2(30). We do not see any reason to hold that the term 'non-resident' in Clause (4A) of Section 10 does not refer to 'non-resident' as defined in Section 2(30).

7. It was submitted that the purpose behind the provision was to grant exemption in respect of interest in Non-resident (External) Account opened by all the persons who came with the definition of the term 'person resident outside India' in Section 2(q) of the Foreign Exchange Regulation Act, irrespective of the fact whether he was non-resident within the meaning of Section 2(30) of the Income-tax Act. We are unable to agree. If such had been the intention, there would have been express reference to the 'person resident outside India' in said clause and said term would have been separately defined in the Act. Our attention was invited to Clause (4) of Section 10 and comparison was made between the provision contained therein and that contained in Clause (4A) of Section 10 and on the basis of the comparison, it was contended that the intention underlying Clause (4A) was to give effect to even those assessees, who are 'resident and ordinarily resident' within the meaning of that expression under the Act provided they were 'persons resident outside India' within the meaning of that expression under the Foreign Exchange Regulation Act. We have carefully considered these provisions and we find that there is no such underlying intention in Clause (4A) of Section 10.

8. We may mention here that Clause (4A) of Section 10 has been amended by the Finance Act, 1982, with effect from 1-4-1982 and by the said amendment, the words 'person resident outside India' have been substituted for word 'non-resident' and as regards the term 'person resident outside India' it has been expressly mentioned in the Explanation inserted in the said clause by the said amendment that the said term would have the meaning assigned to it in Clause (q) of Section 2 of the Foreign Exchange Regulation Act, 1973. Thus, after this amendment, the clause would be applicable to all those persons who come within the definition of 'person resident outside India' in Section 2(q), of the Foreign Exchange Regulation Act, 1973, irrespective of the fact whether there were 'non-resident' or not within the meaning of Section 2(30) of the Income-tax Act. This change has been brought about by express amendment in the clause. This confirms our view that prior to the said amendment, the provision applied to only those assessees who came within the meaning 'nonresident' in Section 2(30). We are concerned in these assessment years with the provision as it stood prior to the said amendment. Since admittedly, the assessee was not a 'non-resident' as defined in Section 2(30), in the relevant years, he was not entitled to exemption under Clause (4A) of Section 10 of the said Act. We, accordingly, confirm the orders of the Commissioner (Appeals) rejecting the assessee's claim for exemption under the said clause.


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