Law:

Section:

Section 115D, read with sections 88 and 115E, of the Income-tax Act, 1961 - Non-resident - Computation of total income - Assessment year 1994-95 - Whether there is no prohibition either in section 115D or in section 115E with regard to allowance of rebate provided under section 88 - Held, yes FACTS The respondent-assessee was a non-resident Indian and had income only from the income from investments made in India. In the return for the relevant assessment year, the assessee made a claim for rebate under section 88 on PPF and MEP. The Assessing Officer processed the said return under section 143(1)(a) and issued an intimation to the assessee wherein he made a prima facie adjustment by disallowing the rebate claimed by the assessee under section 88. On appeal, the Dy. Commissioner (Appeals) allowed the assessee's claim and directed the Assessing Officer to allow the rebate claimed in the return. On further appeal, the Tribunal confirmed the order of the Dy. Commissioner (Appeals). On reference, the department submitted that the assessee was not entitled to claim any deduction provided under the Act in the computation of his income from investment in view of the special provisions contained in Chapter XII-A, particularly section 115D(2)(a) read with section 115E(1) therein and that the entire investment income had to be subjected to tax at the rate of 20 per cent as provided in section 115E(1). HELD Section 115D is a special provision for computation of total income of non-residents. Section 115D(1) only says that no deduction in respect of any expenditure or allowance shall be allowed under any of the provisions in computing investment income of a non-resident Indian. Clauses (a) and (b ) of sub-section (2) of section 115D deal with the separate treatment of investment income/income by way of long-term capital gains of a non-resident Indian. The ban under clause (a) is regarding the deduction under sub-section (2) of section 48 or under Chapter VI-A. In other words both under sub-section (1) of section 115D and under clause (a) of sub-section (2) of section 115D the ban is only in allowing deduction of expenditure or allowance in computing the investment income.…

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