Investments from NRE Accounts not taxable under Section 10(d) of Income Tax

Nitin Mavji Vekariya Vs ITO (Gujarat High Court)

In the case of Nitin Mavji Vekariya versus the Income Tax Officer (ITO) before the Gujarat High Court, the court dealt with the challenge to an order issued under section 148A(d) of the Income Tax Act, 1961 for the Assessment Year 2018-19. Here’s a summary of the judgment:

1. The petitioners, who are family members and residents and citizens of the Republic of Uganda, sought to quash and set aside the order issued under section 148A(d) of the Income Tax Act, 1961.
2. Mr. Divatia, learned counsel for the petitioners, argued that all investments in Time Deposits and Mutual Funds were made from Non-Resident External (NRE) Accounts, and therefore, not subject to tax under Section 10(d) of the Income Tax Act. The petitioners furnished details and documents supporting their claim.
3. The Revenue, represented by Mr. Karan Sanghani, contended that the residency period in India of the petitioners was unclear from the passport details furnished, and the investments from the NRE Accounts were unexplained.
4. The court considered the submissions and noted that all investments were indeed made from NRE Accounts, which are exempt from taxation under Section 10(4) of the Income Tax Act.
5. The court observed that the impugned orders lacked jurisdiction as they failed to recognize that the funds originated from NRE Accounts, which are beyond the reach of taxation authorities. Additionally, Section 10(4) of the Income Tax Act exempts such incomes from inclusion in the total income.
6. Consequently, the court quashed and set aside the impugned orders dated 29.03.2022, ruling in favor of the petitioners.

In conclusion, the Gujarat High Court ruled that the orders issued by the Income Tax Officer were without jurisdiction and allowed the petitions.