Case Law Details
DCIT Vs Anand Persad Jaiswal (ITAT Delhi)
Introduction: A recent case before the Income Tax Appellate Tribunal (ITAT) Delhi, involving Anand Persad Jaiswal, sheds light on the taxability of interest income earned by a Non-Resident Indian (NRI) from a foreign bank. The tribunal’s ruling clarifies that such interest income falls outside the purview of taxation in India under section 5(2) of the Income Tax Act.
Detailed Analysis:
Background of the Case: The appeal in question was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-23, New Delhi, dated 25.08.2022, pertaining to the assessment year 2003-04 (AY 2003-04).
Key Grounds Raised by the Revenue:
1. The Revenue raised objections to the CIT(A)’s decision to quash the assessment order. This decision was based on the precedent set by the Hon’ble Delhi High Court in the case of Brahm Dutt vs. ACIT, reported as 100 taxmann.com 324 (Del.). The Revenue argued that the amendment to Section 149(1) of the Income Tax Act, 1961, by the Finance Act, 2021, was retrospective in nature, as clarified by the ITAT Mumbai in the case of Dilip J. Thakkar (135 taxmann.com 208, ITAT Mumbai). They contended that the assessment order for AY 2002-03 should be reinstated.
2. The Revenue also disputed the assertion made by the CIT(A) that the non-resident assessee was exempt from tax liability due to the income being earned outside India. They argued that the assessee had not adequately proven that the source of credit in the bank accounts was not from India.
Analysis of Ground No. 1: The Senior Deputy Commissioner of Income Tax (DR) argued that the CIT(A) erred in quashing the assessment order by relying on the decision of the Hon’ble Delhi High Court in the Brahm Dutt case. They contended that the amendment to Section 149 of the Act by the Finance Act 2021 was retrospective in nature. This argument was based on the explanation to Section 149 of the Act and the ITAT Mumbai’s judgment in Dilip J. Thakkar (135 taxmann.com 208, ITAT Mumbai).
In response, the Assessee Representative (AR) referred to relevant paragraphs in the first appellate order. They asserted that since the assessment for AY 2003-04 had already been finalized on 31.03.2010, and the last date for issuing a notice had expired before the amendment in Section 149 of the Act took effect on 01.07.2012, the CIT(A) rightly followed the precedent set by the Hon’ble High Court of Delhi in the Brahm Dutt case. This judgment held that the Assessing Officer had no jurisdiction to reopen proceedings under Section 147 of the Act for assessment years concluded before the amendment became effective.
Upon careful consideration, it was noted that the Assessing Officer issued the notice under Section 148 of the Act on 20.03.2020. In response, the assessee filed a letter dated 27.03.2021 along with a copy of the return of income filed under Section 139(1) of the Act for AY 2003-04. The CIT(A) based the decision on the binding precedent of the Hon’ble Delhi High Court in the Brahm Dutt case, which had established that the amendment to Section 149, which extended the limitation for reopening assessments to sixteen years, could not be applied to proceedings concluded before the amendment became effective on 01.07.2012.
Given the binding nature of the precedent established by the Hon’ble Delhi High Court, the tribunal found no reason to interfere with the CIT(A)’s decision to quash the reassessment notice and the impugned reassessment order. Therefore, Ground No. 1 raised by the Revenue was dismissed.
Analysis of Ground No. 2: Ground No. 2 involved the taxation of interest income earned by the non-resident assessee from Standard Chartered Bank’s New Jersey Foreign Branch. According to Section 5(2) of the Act, which serves as the charging section for non-resident taxpayers, Indian income of non-residents is taxable under the provisions of the Income Tax Act, 1961. However, any income earned outside India is not taxable in India.
In this context, it was clarified that the interest income earned by the non-resident Indian assessee from the foreign bank was not taxable in India. The income had accrued to the non-resident assessee from deposits in a bank located outside India. Consequently, this interest income could not be deemed as received, or deemed to be received, in India, nor could it be considered as accruing or arising, or deemed to be accruing or arising, in India.
The CIT(A) correctly held that this interest income was not liable to tax in India for the non-resident Indian assessee. Therefore, the tribunal found no reason to interfere with the CIT(A)’s conclusion on the merits, and Ground No. 2 raised by the Revenue was dismissed.
Conclusion: The ITAT Delhi’s ruling in the case of Anand Persad Jaiswal clarifies that interest income earned by a non-resident Indian from a foreign bank is not subject to taxation in India, as per Section 5(2) of the Income Tax Act. Additionally, the decision highlights the importance of adhering to binding precedents established by the Hon’ble High Courts, such as the Brahm Dutt case, in matters of taxation. In summary, this case serves as a reminder of the tax rules surrounding income earned by NRIs from foreign sources and the significance of legal precedents in Indian tax law.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal has been filed by the Revenue against the order of CIT(A)-23, New Delhi dated 25.08.2022 for AY 2003-04.
2. The grounds raised by the Revenue are as follows:
1. The Ld. CIT(A) has erred in quashing the assessment order relying on the decision of Hon’ble Delhi High Court in the case of Brahm. Dutt (100 taxmann.com 324) without appreciating that the amendment to Sec 149(1) of the Income-tax Act, 1961 by Finance Act, 2021 was retrospective in nature in view of Explanation to Sec 149 as held by ITAT (D Bench Mumbai) in the case of Dilip J. Thakkar (135 taxmann.com 208) after considering the decision of Hon’ble Delhi High Court in Brahm Dutt (supra).
2. The Ld. CIT(A) has erred in holding that the assessee, being non-resident, is out of purview of the tax liability as the income was earned outside India without appreciating the fact that the assessee has failed to discharge its onus in establishing that the source of credit in the bank accounts of the is not from India.
Ground no. 1 of Revenue
3. The ld. Senior DR submitted that the ld. CIT(A) has erred in quashing the assessment order relying on the decision of Hon’ble Delhi High Court in the case of Brahm Dutt vs. ACIT reported as 100 taxmann.com 324 (Del.) without appreciating that the amendment to section 149(1) of the Act by Finance Act 2021, was retrospective in nature in view of explanation to section 149 of the Act as has been held by ITAT Mumbai in the case of Dilip J. Thakkar 135 taxmann.com 208 (ITAT Mumbai) after considering the judgment of Hon’ble Delhi High Court in the case of Brahm Dutt (supra). Therefore conclusion of ld. CIT(A) quashing the reassessment order may kindly be reversed restoring the reassessment order dated 18.06.2021 for AY 2002-03.
4. Replying to the above, the ld. Assessee Representative (AR) drew our attention towards relevant paras of first appellate order and submitted that when the assessment for AY 2003-04 had attained finality on 31.03.2010 and thus the last date of issuing notice was expired on 31.03.2010 before insertion of amendment in section 149 of the Act on 01.07.2012 then the ld. CIT(A) was right in following the ratio of the judgment of Hon’ble High Court of Delhi in the case of Brahm Dutt (supra) wherein it was held that on 22.03.2021 the Assessing Officer has no power to assume jurisdiction u/s. 147 of the Act for initiation of reassessment proceedings and thus impugned reassessment order was rightly quashed by the ld. CIT(A).
5. On careful consideration of above submissions, first of all, we note that the Assessing Officer issued notice u/s. 148 of the Act on 20.03.2020 and in response to same the assessee filed letter dated 27.03.2021 along with copy of the return of income filed u/s. 139(1) of the Act for AY 2003-04. The assessee carried the matter before ld. CIT(A) on the strength of preposition rendered by Hon’ble jurisdictional High Court of Delhi in the case of Brahm Dutt vs. ACIT (supra). In the said judgment the Hon’ble Delhi High Court rendered preposition that amendment to section 149 by Finance Act 2012, which extended limitation for reopening assessment to sixteen years, cannot be restored to for reopening proceedings concluded before amendment became effective (on 01.07.2012). In that case, the first issue before Hon’ble High Court was, as to whether AY 1998-99 could not have been reopened beyond 31.03.2005 in terms of provisions of section 149 as applicable at relevant time. Hon’ble High court answered in affirmative. The second issue before the Hon’ble High Court was as to whether subsequent amendment to section 149, by Finance Act, 2012, which extended limitation for initiation of reassessment proceedings to sixteen years, could not be resorted to for reopening concluded proceedings in respect of which limitation had already expired/lapsed before amendment became effective. Hon’ble High Court answered in affirmative. The ld. Senior DR has placed vehement reliance on the order of ITAT Mumbai in the case of Dilip J. Thakkar (supra) and the ld. AR has pressed into service judgment of Hon’ble jurisdictional High Court of Delhi in the case of Brahm Dutt (supra) which has binding effect on all the authorities below including this Tribunal. Therefore, binding preposition rendered by Hon’ble jurisdictional High Court (supra) has rightly been followed by the ld. CIT(A).
6. We are unable to see any ambiguity and perversity or any other valid reason to interfere with the findings recorded by the ld. CIT(A) while quashing the reassessment notice u/s. 148 of the Act dated 20.03.2020 and impugned reassessment order dated 18.06.2021 u/s. 147 r.w.s. 143(3) of the Act by relying ratio of the judgment of Hon’ble jurisdictional High Court of Delhi in the case of Brahm Dutt vs. ACIT (supra). Accordingly, ground no.1 of Revenue is dismissed.
Ground no. 2 of Revenue
7. Apropos ground no. 2 the ld. Senior DR supported the action of the Assessing Officer and the ld. AR supported the first appellate order.
8. As per provision of section 5(2) of the Act which is charging section for non-resident, Indian income of non-resident is taxable under the provisions of Income Tax Act 1961, and any other income earned outside India is not taxable in India. As per said legal position the interest income earned by the non-resident assessee from Standard Chartered Bank, New Jersey Foreign Branch is not taxable in India as the same has been accrued to non-resident assessee from the deposits in the bank situated outside India and thus the same interest income cannot be deemed as received or deemed to be received in India or accrue or arises or deemed to be accrue or arise in India and thus the ld. CIT(A) was correct and justified in holding that the same was not liable to tax in India in the hands of non-resident Indian assessee. Accordingly, no interference is called for in the conclusion drawn by the ld. CIT(A) on merits and thus the ground no. 2 of Revenue is dismissed.
9. In the result the appeal of Revenue is dismissed.
Order pronounced in the open court on 06.09.2023.
