Interpretation of "non-resident" under tax law denied exemption where the assessee was not a non-resident under the Income-tax Act.

Section 10(4A) of the Income-tax Act was interpreted to use the Act's own definition of "non-resident" under section 2(30), unless the context required otherwise. The provision did not justify borrowing the Foreign Exchange Regulation Act definition of "person resident outside India". The later Finance Act, 1982 amendment, which replaced "non-resident" with "person resident outside India" and linked that term to FERA, confirmed that the earlier wording applied only to assessees who were non-residents under the Income-tax Act. On that construction, a resident but not ordinarily resident assessee was not entitled to exemption on interest credited to a Non-resident (External) Account.

---

---

Issues: Whether the expression "non-resident" in section 10(4A) of the Income-tax Act, 1961 meant a "non-resident" as defined in the Income-tax Act, 1961 or a "person resident outside India" under the Foreign Exchange Regulation Act, 1973, and whether the assessee was entitled to exemption on interest credited in a Non-resident (External) Account.

Analysis: The definition provisions in section 2 of the Income-tax Act, 1961 apply to terms used in the Act unless the context otherwise requires. The word "non-resident" in section 10(4A) was held to bear the meaning assigned in section 2(30) of the Income-tax Act, 1961. The context of the clause did not justify importing the definition of "person resident outside India" from the Foreign Exchange Regulation Act, 1973. The subsequent amendment by the Finance Act, 1982, substituting "person resident outside India" for "non-resident" and expressly linking that expression to section 2(q) of the Foreign Exchange Regulation Act, 1973, showed that the earlier provision applied only to assessees who were non-residents under the Income-tax Act, 1961.

Conclusion: The assessee, being resident but not ordinarily resident and not a "non-resident" within section 2(30) of the Income-tax Act, 1961, was not entitled to the exemption under section 10(4A).

---