Non-resident account interest exemption denied where resident but not ordinarily resident status fell outside the statutory provision

Interest on a Non-resident (External) Account was held taxable because the exemption under section 10(4A) applied only to a non-resident, not to a person resident but not ordinarily resident. The distinction between "non-resident" under section 2(30) and the separate residency category under section 6(6) meant the statutory exemption ceased once the assessee was no longer non-resident. Hardship, promissory estoppel, and RBI circulars could not enlarge the clear language of the Income-tax Act, and foreign exchange instructions could not control tax liability. The later Finance Act, 1982 amendment confirmed that the earlier provision did not extend to resident but not ordinarily resident persons.

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Issues: Whether interest earned on a Non-resident (External) Account was exempt under section 10(4A) of the Income-tax Act, 1961 when the assessee was resident but not ordinarily resident, and whether RBI notifications or circulars could extend that exemption.

Analysis: Section 10(4A) granted exemption only to a non-resident. Under section 2(30), a non-resident is only a person who is not resident, while section 6(6) creates the separate category of resident but not ordinarily resident. Once the assessee ceased to be a non-resident, the statutory exemption no longer applied. The plea based on hardship, promissory estoppel, and RBI circulars could not override the clear language of the taxing provision. The RBI instructions were issued under foreign exchange law and could not control the operation of the Income-tax Act. The subsequent amendment by the Finance Act, 1982 showed that the earlier provision did not cover persons resident but not ordinarily resident.

Conclusion: The assessee was not entitled to exemption under section 10(4A), and the interest was rightly included in taxable income.

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