Wealth-tax exemption for NRE deposits turns on non-resident status under the Income-tax Act, with later amendment not retrospective.

Deposits in Non-resident (External) Accounts were treated as debts representing assets in India, and the exemption under section 6 of the Wealth-tax Act depended on the assessee being non-resident in the relevant year. Explanation IA, effective from 1-4-1982, widened the class of qualifying non-residents for that asset category by reference to section 2(q) of the Foreign Exchange Regulation Act, 1973, but it did not alter the basic character of the deposits or retrospectively create exemption. For years where non-resident status under the Income-tax Act was established, the exemption applied; for the remaining years, residential status required verification.

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Issues: Whether deposits standing in Non-resident (External) Accounts were exempt under section 6 of the Wealth-tax Act for the relevant assessment years, and whether the benefit of Explanation IA applied only from 1-4-1982 or also clarified the pre-existing position.

Analysis: Section 6 excludes specified assets from net wealth in the case of a non-resident or other qualifying assessee. The deposits in the Non-resident (External) Accounts were treated as debts representing assets in India. Explanation IA, inserted with effect from 1-4-1982, enlarged the class of non-residents for that specific asset category by linking the expression to section 2(q) of the Foreign Exchange Regulation Act, 1973, but it did not create the basic character of such deposits as debts for section 6(ii). For years prior to that amendment, entitlement depended on whether the assessee satisfied the definition of non-resident under the Income-tax Act. On the facts found in the income-tax proceedings, the assessee was shown to be non-resident for some years, while the status for the intermediate years required re-examination.

Conclusion: The exemption was available where the assessee was non-resident under the Income-tax Act in the relevant year, so the assessee succeeded for the years where that status stood established, and the matter for the remaining years was remitted for verification of residential status.

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