Law:

Section:

Section 115H of the Income-tax Act, 1961 - Non-resident - Benefit of scheme available in certain cases even after non-resident becomes resident - Assessment year 1996-97 - Whether where assessee received interest on investment made out of foreign funds which was chargeable to tax at concessional rate under section 115H, said special treatment could not be extended to interest on interest redeposited with original sum - Held, yes FACTS The assessee originally made investment in bank out of the funds brought by him from abroad. Periodically, the assessee renewed the matured deposits along with the interest amount. The interest accrued on the interest portion of the deposit was also taken as foreign investment eligible for concessional rate of tax in the returns filed for the assessment year 1996-97. The assessee made the said claim under section 115H. The assessment order was passed under section 143(3) accepting the claim made under section 115H for concessional levy. The Commissioner viewed that even though interest along with the original deposit was reinvested or reviewed, since the interest, an interest on the investment out of foreign funds, had accrued in India, the same did not acquire the status of an investment made with foreign exchange. Thus, the assessment was set aside to enable the Assessing Officer to redo the assessment in accordance with law. On appeal, the Tribunal held that the special treatment given to the interest on foreign investment could not be extended to the interest on interest redeposited with the original sum. Thus, the Tribunal confirmed the revisional order passed by the Commissioner under section 263. On appeal: HELD Chapter XII-A of the Act contains special provision relating to non-resident Indians in respect of their investment income and/or long-term capital gains arising from foreign exchange assets both procedural and substantive with an object of encouraging investment of the foreign exchange earnings in assets in India. Section 115-I gives an option to the non-resident Indian assessees to declare that the provisions of Chapter XII-A need not be applied to them. [Para 6] Section 115E provides for concessional rate of…

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