Ita/145/2009 Of The Commissioner Of Income Tax v. Sri.abraham Koshy

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN MONDAY, THE 7TH SEPTEMBER 2009 / 16TH BHADRA 1931 ITA.No. 145 of 2009() --------------------- ITA.159/COCH/2001 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT: ---------------------------------------- THE COMMISSIONER OF INCOME-TAX, KOTTAYAM. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): RESPONDENT: -------------------------- SHRI.ABRAHAM KOSHY, KARIPPAL HOUSE, KALATHIPADY, KOTTAYAM. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ALONG WITH ITA NOS.303 & 338/2009 ON 07/09/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &V.K.MOHANAN, JJ. ....................................................................I.T. Appeal Nos.145, 303 and 338 of 2009 ....................................................................Dated this the 7th day of September, 2009. JUDGMENT Ramachandran Nair, J. The common question raised in the three connected appeals filedby the department against two assessees is whether the respondents-assessees are entitled to the benefit of concessional rate of tax underSection 115E in respect of income from specified assets referred to inSection 115C(f) of the Income Tax Act. We have heard SeniorStanding Counsel appearing for the appellants and have gone throughthe orders of the Income Tax Appellate Tribunal and that of the lowerauthorities. 2. Respondents-assessees were non-residents and admittedly the investments made by them fall under clause (ii),(iii),(iv) and (v) ofclause (f) of Section 115C of the Income Tax Act. However, duringthe previous year relevant for the assessment years assessees wereresident in India and therefore, they claimed benefit of concessionalrate by filing declaration in terms of Section 115H of the Income Tax Act. In fact, in one case it is seen that declaration was filed along withrectification application under Section 154 of the Income Tax Act afterassessee came to know about the benefit based on Circular issued bythe Central Board of Direct Taxes. The Assessing Officer found thatthe respondents-assessees were never assessed in respect of their Indianincome on investments while they were non-residents. Therefore,according to him, they are not entitled to the benefit of Chapter XIIA asthe assessment is made for the first time on investment income afterthey became resident Indians. In other words according to the officer,non-resident assessees who were being assessed in India in respect ofincome from specified assets falling under Section 115C(f) of the Actonly are entitled to the continued benefit of concessional rate underSection 115H after the assessees became residents in India. The C.I.T.(Appeal) held that there was no need for any prior assessment of theassessee as a non-resident for the purpose of claiming concessional rateof tax under Section 115H in respect of income from specified assetsfalling under Section 115C(f) of the Act. On further appeal, theTribunal confirmed the order of the C.I.T.(Appeal) and hence thedepartment has filed these appeals before us. 3. Since the question relates to interpretation of Section 115H, we extract hereunder the said Section for easy reference: “S.115H. Benefit under Chapter to be available incertain cases even after the assessee becomes residents 3. Since the question relates to interpretation of Section 115H, we extract hereunder the said Section for easy reference: “S.115H. Benefit under Chapter to be available incertain cases even after the assessee becomes residents Where a person, who is a non-resident Indian in anyprevious year, becomes assessable as resident in India inrespect of the total income of any subsequent year, he mayfurnish to the Assessing Officer a declaration in writingalong with his return of income under section 139 for theassessment year for which he is so assessable, to the effectthat the provisions of this Chapter shall continue to apply tohim in relation to the investment income derived from anyforeign exchange asset being an asset of the nature referredto in sub-clause (ii) or sub-clause (iii) or sub-clause (iv) orsub-clause (v) of clause (f) of Section 115C; and if he doesso, the provisions of this Chapter shall continue to apply tohim in relation to such income for that assessment year andfor every subsequent assessment year until the transfer orconversion (otherwise than by transfer) into money of suchassets.” The concessional rate of income tax on various investments categorised under specified assets under Section 115C(f) provided under ChapterXIIA is essentially to encourage non-residents to bring in their savingsin foreign exchange for investment in India. Concessional rate of tax atvarying rates provided in respect of income from several specifiedassets are covered by Section 115E of the Act. In fact, it may happenthat the non-residents who have made investments in specified assets continue to be non-residents and during such period they are entitled tothe concessional rate provided under Chapter XIIA for the income fromspecified assets received in India. The purpose of Section 115H is toextend the benefit of concessional rate on income from specified assetseven after the non-resident Indians return to India and becomeresidents in India. The department does not dispute the entitlement ofconcessional rate of tax on income from investments in specified assetsmade while assessees were non-residents, even after they becomeresidents in India. However, the objection raised by the AssessingOfficer is that a non-resident returning to India and making investmentin specified assets is not entitled to benefit under Section 115H, if hebecomes a resident in India in the previous year in which he startsearning income from the specified asset for the first time. We do notthink Section 115H stipulates a condition that the assessee claimingconcessional rate in respect of income received from specified asset forthe first time after he becomes a resident in India should have beenassessed on such income for any earlier assessment year. We are of theview that the benefit of Chapter XIIA can be claimed for the first timeon income received from specified assets, even if the assessee becomes a resident in India in the previous year in which he started earningincome from such specified assets. In other words, an assesseeclaiming benefit for the first time under Section 115H need not havebeen assessed earlier under the Income Tax Act on the income from thesame specified asset for any preceding year. All what is required foreligibility for concessional rate under Section 115H is that assesseeshould have been a non-resident Indian prior to his becoming a residentin India and in that event, he will be entitled to the concessional rateunder Chapter XIIA on the investment referred to therein so long as theasset is retained by him and is not converted into money. We,therefore, agree with the view expressed by the C.I.T.(Appeal)confirmed by the Tribunal. Consequently the departmental appeals aredismissed. C.N.RAMACHANDRAN NAIRJudge V.K.MOHANANJudge