Non-resident definition under income tax law controls exemption for NRE interest, denying relief to resident but not ordinarily resident assessees.

Interest on a Non-Resident (External) Account was not exempt under section 10(4A) for the years before 1 April 1982 where the assessee was resident but not ordinarily resident. The expression "non-resident" in section 10(4A) was held to take its meaning from the Income-tax Act, 1961, specifically section 2(30), because the Act's internal definitions apply unless the context requires otherwise. The context did not justify borrowing the Foreign Exchange Regulation Act definition of "person resident outside India". The later amendment substituting that expression from 1 April 1982 was treated as confirming that the earlier exemption applied only to persons non-resident under the Income-tax Act.

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Issues: Whether, for the assessment years in question and prior to the 1 April 1982 amendment, interest on a Non-Resident (External) Account was exempt under section 10(4A) of the Income-tax Act, 1961 in the case of an assessee who was resident but not ordinarily resident.

Analysis: The expression "non-resident" in section 10(4A) was held to be governed by the definition in section 2(30) of the Income-tax Act, 1961, because the Act's internal definitions apply unless the context requires otherwise. The context of section 10(4A) did not justify importing the definition of "person resident outside India" from section 2(q) of the Foreign Exchange Regulation Act, 1973. The later amendment substituting that expression from 1 April 1982 was treated as confirming that the earlier text applied only to persons who were non-resident under the Income-tax Act.

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

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