D. Manmohan, JM - (1.) THESE two appeals filed by the Revenue pertain to the assessment years 1990-91 and 1991-92. The facts necessary for disposal of these appeals are as under :--
(2.) The assessee is a non-resident Indian settled in England. She inherited from the estate of her husband, Late Shri Subodh Welinkar certain shares which were purchased by him by utilising convertible; foreign exchange money. The assessee's husband expired on 16-1-1983 and the permission to transfer the shares in the name of the assessee was given somewhere in the year 1989. During the previous year relevant to the assessment years under consideration, the assessee sold .some equity shares of Gujarat Narmada Valley Fertilizer Ltd., Tala Engineering & Locomotive Co. Ltd, and Grasim Industries Ltd. In the returns filed, the assessee claimed taxability of capital gains as per proviso to section 48(1)(a) of the Income-tax Act read with Rule 115A of the Income-tax Rules. The Assessing Officer denied the benefit of proviso to Section 48 of the Act on the ground that the assessee who purchased the shares should have been in existence in order to claim deduction as per proviso to the said section whereas in the instant case, the original purchaser of shares expired and the assessee merely Inherited the shares of the deceased. In this regard, the Assessing Officer observed that section 48 has to be read along with section 115C(a) to (e) of the Act and also observed that definitions of various terms such as convertible foreign exchange etc. show that a property acquired by a non-resident should have been purchased out of N.R.I. account and are subscribed to in convertible foreign exchange whereas in the instant case, the assessee, though a nonresident, has acquired the estate by way of bequest or rather acquired the shares on account of legality of law of inheritance and as such she is not the investor of foreign currency. He also made the following observations- "That the benefit of Chapter XII-A of Special rates to non-resident is available to estate of late Shri Subodh Welinkar is in existence but loses the special status to be taxed at Special rates on the date when the assets arc distributed to the beneficiaries." He, thus, concluded that the benefit available under section 48 of the Act is fully dependent on fulfilling the conditions laid down in section 115C of the Act. He, thus, rejected the benefit available under the proviso to section 48 of the Act.
(3.) AGGRIEVED, the assessee contended before the CIT (Appeals) that proviso to section 48 of the Act allows computation of capital gains, in respect of the shares in Indian Companies acquired in foreign currency, in the hands of an Indian non-resident by conversion of cost of acquisition as well as sale proceeds of the shares into foreign currency which was initially utilised for acquisition of the assets and thereafter the conversion thereof into Indian currency at the prevailing rate of exchange in the manner provided therein. The Assessing Officer of the assessee claimed that the assessee satisfies all the conditions, inasmuch as, she is a nonresident Indian, the shares were purchased in foreign currency and there is no requirement in the said provision that the appellant herself must be the same person who acquired the shares in foreign currency. In other words, it was claimed that so long as the shares were acquired in foreign currency, the benefit of the said provision would be available even to the person who acquired the shares by inheritance. The CIT (Appeals) agreed with the contention of the assessee and therefore, directed the Assessing Officer to allow benefit of section 48 of the Act.;