Madhya Pradesh High Court
Purshottam Khatri vs Commissioner Of Income Tax on 3 May, 2006
Equivalent citations: [2007]290ITR277(MP)
Bench: Chief Justice, R.K. Gupta
JUDGMENT A.K. Patnaik, C.J.
1. This is an application filed by the assessee/applicant under Section 261 of the IT Act, 1961 (for short 'the Act') for a certificate from the High Court that the appeal against the judgment of the Hon'ble High Court dt. 25th Jan., 2006 in MA (IT) No. 114 of 2000 [reported as CIT v. Purshottam Khatri (2006) 203 CTR (MP) 1--Ed.] delivered under Section 260A of the Act is a fit one for appeal to the Supreme Court.
2. The relevant facts briefly are that the assessee left India in 1968 and was employed in Muscat and Dubai till the year 1992-93 and returned to India thereafter. A search was carried out under Section 132 in the premises of the assessee at Bhopal for a period of 13 days from 18th Oct., 1996 to 30th Oct., 1996. On the basis of the said search, an assessment was made under Section 168BC read with Section 143(3) of the Act for the asst. yrs. 1992-93 to 1997-98. In the said assessment, the AO found that the assessee was a person not ordinarily resident in India and had made several deposits in foreign currency in his NRE accounts in different banks in India. The AO excluded from the said deposits remittances of foreign currency directly received from abroad, foreign currency which had been brought by the assessee from outside India after making declarations under the notifications issued under the Foreign Exchange Regulations Act and foreign currency within the limits beyond which the declarations had to be made at the time of visiting India and held remaining deposits of foreign currency in the NRE accounts of the assessee totalling to Rs. 1,03,50,020 as unexplained deposits and treated the same as undisclosed income of the assessee in the assessment order dt. 29th Oct., 1997. By the said assessment order, the AO also added interest of Rs. 1,45,000 on such unexplained deposits in the NRE bank accounts of the assessee as part of the income of the assessee.
3. The assessee filed an appeal before the Tribunal making a grievance that prior to the block period, he visited India number of times and on each such occasion, had brought foreign currency with him in the form of pounds and dollars either in cash or traveller cheques and had produced declarations and exchange vouchers with regard to such foreign currency brought into India before the AO to prove that the foreign currency was retained by him in India and was not taken back by him outside India and was ultimately deposited in the NRE accounts during the block period, but the AO had included such foreign currency as unexplained deposits of Rs. 1,03,50,020. The Tribunal held that such foreign currency brought by the assessee covered by the declarations made under the Foreign Exchange Regulations Act and also by the foreign exchange vouchers showing conversion of foreign exchange represented the income which had been earned by the assessee outside India and accordingly deleted the said addition of Rs. 1,03,50,020 in its order dt. 7th June, 2000. By the said order, the Tribunal also deleted the addition of interest of Rs. 1,45,000 on such unexplained deposits in the NRE accounts of the assessee from the income of the assessee.
4. The Department filed MA (IT) No. 114 of 2000 under Section 260A of the Act before this Court and in the judgment dt. 25th Jan., 2006, we held that under the proviso to Section 5(1)(c) of the Act, the total income of previous year of a person not ordinarily resident in India, accruing or arising to him outside India is exempt from tax under the Act and the assessee has been able to establish before the Tribunal by furnishing declarations under the notifications issued under the Foreign Exchange Regulations Act that he had brought into India foreign currencies in the form of pounds and dollars which had been earned outside India prior to the block period and had deposited during the block period in his NRE accounts in the banks and the findings of the Tribunal accepting the said explanation of the assessee could not be disturbed by this Court in an appeal under Section 260A of the Act which was confined to only substantial questions of law. By the said judgment, we further held that the finding of the Tribunal that the remaining foreign currency in respect of which no declarations could be produced by the assessee and instead exchange vouchers issued by the exchange centres abroad and certificates issued by the banks in India also represent income of the assessee which had accrued to him outside India was without any evidence or one which could not be reasonably maintained on the evidence before the Tribunal and hence the Tribunal was not justified in deleting the additional amounts equivalent to the foreign exchange covered by foreign currency exchange vouchers from the income of the assessee. In the said judgment, we also held that deleting of the addition of interest on foreign currency deposits which were not covered by the declarations under the notifications issued under the Foreign Exchange Regulations Act but were covered by exchange vouchers issued by foreign exchange centres outside the country was not correct in law as under Section 10(4)(ii) of the Act, only income by way of interest standing to the credit of a person in NRE account of the bank in accordance with the Foreign Exchange Rules and Regulations are only exempt from tax.
5. Mr. A.P. Shrivastava, learned Counsel for the assessee submitted that our judgment of the High Court raises substantial questions of law of general importance relating to taxability of income of a person who is not ordinarily resident and this is a fit case in which we should grant a certificate to appeal to the Supreme Court under Section 261 of the Act. In support of his submission, he cited the decisions of the Calcutta High Court in Union Carbide India Ltd. v. CIT (1988) 73 CTR (Cal) 225 : (1988) 174 ITR 229 (Cal) and in CIT v. Hindustan Aluminium Corporation Ltd. (1990) 184 ITR 140 (Cal), decision of the Kerala High Court in CIT v. N. Krishna Jyer (HUF) , and the decision of the Madras High Court in CIT v. C.R. Alagappa Chettiar in which the High Courts have issued certificates of appeal under Section 261 of the Act on the ground that the question of law raised is one of general importance.
6. Mr. Rohit Arya, learned senior counsel for the Department, on the other hand, submitted that this is not a fit case for appeal to the Supreme Court as our findings in the judgment are confined to the facts of the present case and there are no conflicting judgments of different High Courts on the issues decided in our judgment.
7. We have considered the aforesaid submissions of the learned Counsel for the parties and we are of the considered opinion that this is a fit case in which we should grant certificate to appeal against our judgment dt. 25th Jan., 2006 in MA (IT) No. 114 of 2000 inasmuch as substantial questions of law of general importance relating to the interpretation of the proviso to Section 5(1)(c) and Section 10(4)(ii) of the IT Act, 1961 relating to the taxability of the income of a person who is not ordinarily resident in India arise for decision and it will be appropriate if the highest Court of the country considers the questions and decides the same.
8. Accordingly, we allow the application and issue the certificate.