Residency status and foreign income taxability turn on statutory conditions, receipt rules, and strict compliance for exemptions.

Section 6(6) was applied to treat a returning individual as resident but not ordinarily resident where the statutory tests for ordinary residence were not both satisfied. Foreign-source income from overseas investments was outside Indian tax unless it was received or deemed to accrue in India, while a foreign currency fixed deposit remained taxable only on receipt or enforcement in India. Proposed sale of foreign holdings and purchase of new foreign units did not attract Indian capital gains or income tax on the stated facts. Interest and unit income from specified Indian deposits and units were exempt or eligible for concessional taxation only if the prescribed statutory and procedural conditions were met; the claim under section 115AC was unavailable.

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Issues: (i) Whether the applicant, on return to India, would be resident but not ordinarily resident for the relevant assessment years under the statutory test in section 6(6); (ii) whether income from overseas investments and a foreign currency fixed deposit received abroad would be chargeable to Indian income-tax; (iii) whether proposed liquidation of foreign investments and purchase of new foreign units would attract Indian income-tax, including capital gains consequences; and (iv) whether interest and unit income from specified Indian deposits and units would be exempt or taxable at a concessional rate.

Issue (i): Whether the applicant, on return to India, would be resident but not ordinarily resident for the relevant assessment years under the statutory test in section 6(6).

Analysis: Section 6(6) was treated as creating a dual condition for ordinary residence: the person must have been resident in nine out of the ten preceding previous years and must also have been physically present in India for at least 730 days during the preceding seven years. If either condition was not met, the person would remain resident but not ordinarily resident. On the facts stated, the applicant satisfied only the lesser status for the years identified in the ruling.

Conclusion: The applicant would be resident but not ordinarily resident for the assessment years 1996-97 to 2004-05.

Issue (ii): Whether income from overseas investments and a foreign currency fixed deposit received abroad would be chargeable to Indian income-tax.

Analysis: Income from shares of foreign companies and other overseas investments was treated as income accruing in the United Kingdom and not falling within the deeming provisions governing Indian-source income. The interest on the foreign currency fixed deposit was also regarded as prima facie foreign income, and no factual basis was shown for deeming it to accrue in India merely because repayment could be made in India. Taxability would arise only if the interest was received, or the right to receive it was exercised, in India.

Conclusion: Income from the overseas investments was not chargeable to Indian income-tax, but interest on the fixed deposit would be taxable if received or enforced in India.

Issue (iii): Whether proposed liquidation of foreign investments and purchase of new foreign units would attract Indian income-tax, including capital gains consequences.

Analysis: The proposed sale of the existing foreign holdings was to occur while the applicant remained outside India, and the capital asset was situated outside India. On that footing, no Indian capital gains charge arose. The subsequent purchase of new foreign units with no business connection to India likewise did not attract Indian tax, since the income from such units would also be foreign income outside the relevant charging provisions.

Conclusion: No Indian income-tax would be attracted on the proposed transactions, assuming the stated factual foundations were fulfilled.

Issue (iv): Whether interest and unit income from specified Indian deposits and units would be exempt or taxable at a concessional rate.

Analysis: Interest on non-resident external rupee deposits with Indian banks was exempt only if the statutory conditions for maintenance of the account and Reserve Bank permission were satisfied. Failing exemption, the deposits, being in Indian companies or deemed Indian companies, could still qualify for the concessional regime for foreign exchange assets if the procedural requirements were met. Income from Unit Trust of India units was exempt only if the investment was made out of permitted non-resident external funds or foreign exchange remittances in accordance with the foreign exchange law, but the claimed concessional treatment under section 115AC was unavailable because the applicant would be resident but not ordinarily resident. Interest on the Lloyds Finance fixed deposit was not exempt, but the concessional rate under Chapter XII-A could be claimed on compliance with the declaration and procedural conditions under section 115H.

Conclusion: The stated deposits and units were exempt only where the specific statutory conditions were satisfied, and otherwise the applicant could obtain concessional taxation only in the manner and to the extent permitted by the relevant provisions; the claim under section 115AC was rejected.

Final Conclusion: The ruling accepts the applicant's residence position and grants relief on most foreign-source receipts, while limiting Indian tax exposure to the specific deposits and income streams governed by the exemption and concessional-tax provisions identified in the ruling.

Ratio Decidendi: A person is resident but not ordinarily resident unless both statutory conditions for ordinary residence are fulfilled, and foreign-source income is not chargeable in India unless it falls within the specific charging, deeming, or receipt-based provisions of the Act; exemption or concessional taxation depends strictly on compliance with the statutory conditions attached to the relevant provision.

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