Resident outside India test governs NRE interest exemption and wealth exclusion where Indian ties negate statutory non-resident status.

Interest credited to a Non-resident (External) Account was exempt under section 10(4A) of the Income-tax Act only if the assessee qualified as a person resident outside India under the Foreign Exchange Regulation Act definitions. On the facts, the assessee's stay in India with a resident spouse and his substantial family and proprietary ties in India brought him within the statutory concept of a person resident in India, so the exemption condition failed. As a result, the interest could not be excluded from income, and the same reasoning applied to the wealth-tax claim, leaving the account balance includible in total wealth.

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Issues: Whether the assessee was a person resident outside India so as to claim exemption of interest on moneys standing to the credit of a Non-resident (External) Account under section 10(4A) of the Income-tax Act, 1961, and consequent exclusion of the amounts from total wealth under the Wealth-tax Act, 1957.

Analysis: Section 10(4A) applied only to a person resident outside India. The Explanation carried the meaning of that expression to section 2(q) of the Foreign Exchange Regulation Act, 1973, while the concept of a person resident in India was governed by section 2(p) of that Act. On the facts found, the assessee had come to India and stayed with his spouse, who was resident in India, and also had substantial family and proprietary connections in India. On that footing, the statutory definition treated him as a person resident in India and, therefore, not a person resident outside India. As the basic condition for the exemption was absent, the interest credited in the Non-resident (External) Account could not be excluded from income, and the same reasoning governed the wealth-tax question as well.

Conclusion: The assessee was not entitled to the exemption under section 10(4A) of the Income-tax Act, 1961, and the amounts in the Non-resident (External) Account were not excludible from his total wealth; the answers were in favour of the Revenue.

Final Conclusion: The common legal issue was decided against the assessee and the revenue authorities' view was sustained across the connected income-tax and wealth-tax references.

Ratio Decidendi: Exemption for interest on a Non-resident (External) Account is available only when the assessee satisfies the statutory status of a person resident outside India, as determined by the definitions in the Foreign Exchange Regulation Act, 1973.

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