Circular No. 5-Income Tax dated 20-2-1969

472. Persons migrating from West/East Pakistan, Burma, East African countries, namely, Mozambique, Zanzibar, Kenya, Tanzania andUganda – Claims as to origin of money/assets brought into India to be freely admitted up to a limit of Rs. 50,000 subject to certain conditions

1. It has been represented to the Board that persons of Indian origin residing abroad but intending to return to India and settle here permanently, apprehend that the money brought in or remitted from abroad by such persons might be subjected to income-tax in India.  The apprehension appears to be due to lack of information regarding the correct legal position about the taxability of the remittances of money from abroad.  The general position, in this regard, is clarified below.

2. Money brought into India by non-residents for investment or other purposes is not liable to Indian income-tax.  Therefore, there is no question of a remittance into the country being subjected to income-tax in India.  The question of assessment to tax arises only when there is no evidence to show that the amount, in question, in fact represents such remittance.  In other words, in the absence of proper supporting evidence, the taxpayers’ story that the money has been brought into India from outside may be disbelieved by the Income-tax Officer who may then proceed to hold that the money had in fact been earned in India.

3. If the money has been brought into India through banking channels or in the form of assets like plant and machinery or stock-in-trade, for which the necessary import permits had been obtained, no questions at all are asked by the Income-tax Officers as to the origin of the money or assets brought in.  It is only in case where the money is claimed to have been brought from outside otherwise than through banking channels and there is no evidence regarding the transfer of the money, that the department has to make enquiries about the source thereof.  Even in these cases, having regard to the difficulties experienced by persons migrating from Pakistan, Burma and East African countries, instructions have been issued to the Income-tax Officers that such claims should be freely admitted up to the limit of Rs. 50,000 in each case provided the following conditions are satisfied :

1. The assessee migrated to India on or after the dates mentioned below from the countries shown against each and had no source of income in India :

2. He had sufficient resources in the foreign country.

3. He had no source of income either in India or in any foreign country, other than the country from which he migrated, prior to migration and he was not assessed as “resident” in India either for the assessment year preceding the year in which he migrated or for earlier years.

4. The amount brought in has been duly introduced in the books regularly maintained in India and an intimation of such introduction is given to the Income-tax Officer within two months of the migrant’s arrival.

4. Cases not covered by preceding paragraph, namely :

     a.    where the money (in the case of Mozambique, Zanzibar, Kenya, Tanzania, Uganda, East Pakistan and Burma) and money and/or the personal jewellery in the case of West Pakistan claimed to have been brought exceeds Rs. 50,000; or

     b.   where the assessee had some sources of income either in India or in any foreign country, other than the one from which he had migrated, prior to migration; or

      c.   where the assessee was assessed as resident in India either for the assessment year preceding the year of his/her migration or in the earlier years,

will not be entitled to any special concession. Thus, any claim by such migrants that the funds or the jewellery have been brought from the abovementioned countries, will be accepted only if the persons concerned produce adequate evidence to show that they had sufficient funds/wealth in those countries and that the transfer of the cash/jewellery to India can directly be linked with the said funds or wealth. In other words, these migrants will have to lead proper evidence like any other assessees, about the source of the cash/jewellery alleged to have been brought by them from these countries.  In support of the claim that they had sufficient funds in those countries, they might produce before the income-tax authorities in India their bank accounts in those countries as also copies of the assessment orders passed in their cases by the income-tax authorities of those countries.  The migrants would also then be required to prove that the amounts brought into India can directly be linked with the funds which they had possessed in those countries.

Circular : No. 5 [F. No. 73A/2/69-IT(A-II)], dated 20-2-1969.

JUDICIAL ANALYSIS

The above circular was referred to in ITO v. Shri Lachhumal Bahrumal Sedari Nadiad [1979] Tax 52(6) 77 (Ahd. – Trib.).

ANNEX I – CIRCULAR NO. 8, DATED 22-5-1967 REFERRED TO IN CLARIFICATION

1. It has been represented to the Board that in view of the difficulties faced by persons migrating from East African countries, viz, Zanzibar, Kenya, Tanzania, Uganda and Mozambique, to India, it may not be possible for a migrant from these countries to lead the evidence necessary to prove his claim that a particular sum of money has been brought over by him from those countries.

2. The Board consider that the case of bona fide migrants from these countries should be dealt with in a sympathetic manner.  In their cases, production of direct or documentary evidence in the shape of transfer through banks, hundies, etc., in support of remittance from these countries need not be insisted upon.  However, with a view to ensure that unscrupulous persons do not abuse the concessions, the Income-tax Officers should ensure the satisfaction of the following conditions before accepting a claim of remittance from the abovementioned countries :

1. The assessee has migrated to India from Mozambique on or after July 30, 1962 and from Zanzibar, Kenya, Tanzania and Uganda on or after January 1, 1963.

2. The assessee had sufficient resources in these countries to which the remittance could be reasonably attributed.

3. The assessee had no source of income either in India or any foreign country, other than one from which he migrated, prior to migration and he was not assessed as resident in India either for the assessment year preceding the year in which he migrated or for earlier years.

4. The assessee has intimated the Income-tax Officers concerned about the sum brought over and the date(s) of its introduction in the books of account within two months of the date of his arrival in India and in the case of persons who have already migrated, by July 31, 1967.

The above concession will be subject to an overall ceiling of Rs. 50,000 in respect of all sums brought over from these countries and introduced as such in the account books by the assessee and all his family members taken together.

3. In the following cases, namely :

     a.   where the money claimed to have been brought over exceeds Rs. 50,000;

     b.   where the assessee had some sources of income prior to migration either in India or any other country, other than one from which he has migrated; or

      c.   where the assessee was assessed as resident in India either for the assessment year preceding the year in which he migrated or for earlier years,

any claim that the funds have been brought from the East African countries mentioned above will be accepted only if the assessee produces adequate evidence to reasonably satisfy the Income-tax Officer that he had sufficient resources in these countries to cover the remittance, provided that the assessee has migrated from these countries to India on or after the dates specified in paragraph 2(i) and has given the necessary intimation to the concerned Income-tax Officer within the time specified in paragraph 2(iv).  The assessee, however, will not be required to establish the actual remittance of moneys through banks, etc.

ANNEX II – CIRCULAR NO. 16D, DATED 15-6-1964 REFERRED TO IN CLARIFICATION

1. It has been represented to the Board that in view of the difficult circumstances in which persons belonging to minority communities have recently been migrating from East Pakistan to India, it may not be possible for a migrant assessee to lead requisite evidence to prove his claim that a particular sum of money has been brought over by him from that country.  Although under the 1961 Act, remittance is no more a basis of tax liability fears have been expressed that due to lack of adequate evidence such amounts may be assessed to tax as income accruing or arising in India.

2. The Board consider that the cases of genuine migrants should be dealt with in a sympathetic manner and that production of direct/documentary evidence, e.g., transfer through banks, hundies, etc., in support of a claim for transfer of funds from East Pakistan may not be insisted upon in such cases.  However, with a view to ensure that these unfortunate persons are not used by tax evaders as their instruments for passing off their concealed income, the Assessing Officers should ensure the satisfaction of the following conditions before accepting a claim of remittance of funds from East Pakistan :

     (i)   that the assessee has migrated to this country after January 1, 1964 and he has had no source of income in India or in any foreign country other than Pakistan prior to his migration;

    (ii)   that he had sufficient resources in Pakistan to which the remittance could be traced; and

   (iii)   that an intimation about the sum brought over and the date(s) of its introduction in the account books has been given to the concerned Income-tax Officer within two months of the date of arrival in India.  For persons who have already migrated, the intimation should be given by July 31, 1964.

3. This concessional treatment will be subject to an overall ceiling of Rs. 50,000 in respect of all amounts claimed to have been brought over from Pakistan, and introduced as such in the account books by the assessee and all his family members taken together.

4. Where the remittance exceeds Rs. 50,000 the assessee should establish the availability of sufficient resources in East Pakistan to cover the remittance.  He will, however, not be required to establish the actual remittance of moneys through banks, etc.

ANNEX III – CIRCULAR NO. 11, DATED 22-5-1965 REFERRED TO IN CLARIFICATION

1. It has been represented to the Board that in view of the difficulties faced by persons migrating from Burma to India, it may not be possible for a migrant from that country to lead the evidence necessary to prove his claim that a particular sum of money has been brought over by him from that country.

2. The Board consider that the cases of bona fide migrants from Burma should be dealt with in a sympathetic manner.  In their cases, production of direct or documentary evidence in the shape of transfer through bank, hundies, etc., in support of remittance from Burma need not be insisted upon.  However, with a view to ensure that unscrupulous persons do not abuse the concessions, the Income-tax Officer should ensure the satisfaction of the following conditions before accepting a claim of remittance from Burma :

1. The assessee has migrated from Burma to India on or after January 1, 1964.

2. The assessee had sufficient resources in Burma to which the remittance could be reasonably attributed.

3. The assessee had no source of income either in India or any foreign country, other than Burma prior to migration and he was not assessed as resident in India either for the assessment year 1963-64 or for the earlier years.

4. The assessee has intimated the Income-tax Officer concerned about the sum brought over and the date(s) of its introduction in the books of account within two months of the date of his arrival in India, and in the case of persons who have already migrated, by July 31, 1965.

The above concession will be subject to an overall ceiling of Rs. 50,000 in respect of all sums brought over from Burma and introduced as such in the account books by the assessee and all his family members taken together.

3. In the following cases, namely :

     a.   where the money claimed to have been brought over exceeds Rs. 50,000;

     b.   where the assessee had some sources of income either in India or any other country, other than Burma, prior to migration; or

      c.   where the assessee was assessed as resident in India either for the assessment year 1963-64 or for earlier years,

any claim that the funds have been brought from Burma will be accepted only if the assessee produces adequate evidence to reasonably satisfy the Income-tax Officer that he had sufficient resources in Burma to cover the remittance, provided that the assessee has migrated from Burma to India on or after January 1, 1964 and has given the necessary intimation to the concerned Income-tax Officer within the time specified in paragraph 2(4).  The assessee, however, will not be required to establish the actual remittance of moneys through banks, etc.