The Gujarat High Court (Ahmedabad Bench) ruled that income earned by a non-resident Indian on deposits received from NRE (non-resident external) accounts would be exempt under Section 10(4)(ii) of the Income Tax Act, and, therefore, no question of escapement of income arises on account of failure to furnish ITR showing such income.
The High Court held so after finding that the remission was from the overseas savings to NRE Accounts in India, and the petitioner has furnished the tax residency certificate issued by the Uganda Revenue Authority to substantiate that he is a tax resident in Uganda. Reference was made to the decision in the case of Nitin Mavji Vekariya vs. Income-Tax Officer, reported in [(2024) 461 ITR 18 (Guj)].
The Division Bench comprising Justice Bhargav D. Karia and Justice Pranav Trivedi therefore quashed the reopening notice under Section 148 as well as the order passed under Section 148A, observing that the income earned in the NRE Account is exempt under Section 10(4)(ii) once the source of income is explained by the taxpayer, which is duly substantiated by the Certificate of Tax Residency provided by the Uganda Revenue Authority.
Briefly, in this case, the petitioner, a Non-Resident Indian (NRE) and Managing Partner of Grant Thornton, Uganda, has been remitting overseas savings into NRE Accounts in India, and claimed that this overseas income would not be taxable in India in terms of Section 9 read with Section 5 of the Income Tax Act. Since the petitioner did not file his ITR in India, he received an intimation under Section 148A(a) stating that, despite carrying out the transaction of Rs. 20.93 crores, he did not file ITR.
In response, the petitioner submitted that in view of the provision of section 10(4)(ii) of the Income Tax Act, any income earned by way of interest on money standing to credit in a Non-Resident external account is exempt from tax. Even though adducing classification by the bankers of the petitioner as a Person Resident outside India under the FEMA Regulations, the notice issued under Section 148A(a) culminated in the proposal for reassessment. The petitioner objected to the said proposal and furnished a tax residency certificate issued by the Uganda Revenue Authority. However, disregarding such evidence, the respondent Department passed an order under Section 148A(d).
Appearances:
Advocate Manish J Shah, for the Petitioner/ Taxpayer
Advocate Maithili D Mehta, for the Respondent/ Revenue
