2026 (8) TMI 1467

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....short 'the Act') for the A.Y. 2020-21 2. The substantive issue raised by the Assessee pertains to the disallowance of exemption claimed under section 10(4)(ii) of the Act qua interest income of Rs. 27,13,810/- earned on NRE deposits. 3. The relevant facts, in brief, are that the Assessee filed the return of income declaring total income of Rs. 58,27,340/- and exempt income of Rs. 38,22,174/-. Subsequently, proceedings under section 147 of the Act were initiated. During the assessment proceedings, the Assessing Officer noticed that the Assessee had claimed exemption under section 10(4)(ii) in respect of interest earned on NRE deposits. 4. The Assessee furnished explanations and supporting material and, inter alia, relied upon the ap....

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.... available on record and given thoughtful consideration to the rival claims of the parties. At the outset, it is observed that section 10(4)(ii) of the Act exempts interest on moneys standing to the credit of an individual in a Non-Resident (External) Account maintained in accordance with FEMA and the applicable rules and regulations. The proviso thereto contemplates two alternative conditions, namely, that the individual is either a person resident outside India under FEMA or a person permitted by the Reserve Bank of India to maintain the aforesaid account. 10. Thus, the residential status of the Assessee by itself is not conclusive, as the second limb of the proviso independently recognises the entitlement of a person, who is permitted....

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....e RBI framework and CBDT Circular No. 590 dated 30.01.1991, allowed the exemption in respect of interest on the concerned NRE/FCNR deposits. 14. We have also considered the decision in Baba Shankar Rajesh (supra). In the said case, the claim was rejected, inter alia, because the material produced therein did not establish that the Assessee had been permitted by RBI to maintain the NRE account after becoming resident. Thus, the said decision essentially turned upon the absence of material satisfying the second limb of the proviso. 15. In the present case, the Assessing Officer has treated the amount of Rs. 27,13,810/- as interest earned on NRE deposits. However, there is no clear factual finding as to whether, during the relevant perio....