Taxability of foreign-held income: foreign deposits by a non-resident are not taxable absent receipt in India or nexus.

Section 5(2) read with Section 9 was applied to confirm that income accruing or arising outside India is not taxable in India unless received in India or otherwise falls within taxable categories; the addition was deleted because the foreign account was opened while the taxpayer was non-resident and the Revenue failed to prove the deposits originated in India or were received in India. Provisions for unexplained credits could not be used to widen the scope of taxability absent a domestic nexus; burden of proof lay on Revenue and circumstantial evidence was insufficient, avoiding double taxation.

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Issues: Whether the addition of Rs. 6,13,09,845/- made by the Assessing Officer could be sustained by treating foreign bank deposits as taxable income of a non-resident where (a) the deposits were in an HSBC Geneva account opened while the assessee was a non-resident, and (b) the Revenue relied on circumstantial evidence and the assessee's non-production of bank statements.

Analysis: The decision examines applicability of Section 5(2) read with Section 9 of the Income-tax Act, 1961 to determine whether income held or received outside India in the hands of a non-resident is taxable in India. It applies the principle that income accruing or arising outside India is not taxable under Section 5(2) unless it is received in India or otherwise falls within taxable categories under the Act. The factual findings recorded by the lower authorities establish that the HSBC Geneva account was opened in 1997 when the assessee was a non-resident and that the Revenue failed to demonstrate that the deposits originated in India. The analysis addresses the limits of invoking Sections 68 and 69 against a non-resident, holding that those provisions cannot expand the scope of Section 5(2) to tax foreign receipts absent a connection to income arising in India. The burden of proof principle is applied, placing onus on the Revenue to establish taxability within statutory parameters. The appellate findings regarding lack of proof of source, insufficiency of circumstantial evidence relied upon by the Assessing Officer, and considerations against double taxation are accepted as fact-based conclusions that negate the addition.

Conclusion: The deletion of the addition of Rs. 6,13,09,845/- is upheld; the addition cannot be sustained as taxable income of the non-resident under the Income-tax Act, 1961.

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