COMMISSIONER OF INCOME TAX Vs. K C JOHN
HIGH COURT OF KERALA
COMMISSIONER OF INCOME TAX
K C John
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G.SIVARAJAN, J. -
(1.) THE following questions of law are referred by the Tribunal under Section 256(1) of the IT Act at the instance of the CIT, Kochi for decision by this Court :
'1. Whether, on the facts and in the circumstances of the case, and also in the light of the provisions of Section 115E, the assessee is eligible for the rebate under Section 88 of the IT Act, 1961? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in holding that the computation of the tax liability denying the rebate under Section 88 was by way of a prima facie adjustment, which could not be made under Section 143(1)(a) of the Act?'
(2.) THE brief facts necessary are as follows : The respondent -assessee is a nonresident Indian. The assessment year concerned is 1994 -95. The only income of the assessee is income from investments made in India. In the return filed by the assessee for the year. 1994 -95 he made a claim for rebate under Section 88 of the Act on PPF of Rs. 40,000 and MEP of Rs. 10,000. The said return was processed by the AO under Section 143(1)(a) of the Act and an intimation (Annex. A) was issued to the assessee. In the said intimation the AO made prima facie adjustment by disallowing the rebate claimed under Section 88 of the Act. In appeal by the assessee, the Dy. CIT(A), Trivandrum allowed the claim and directed the AO to allow the rebate on PPF and MEP claimed in the return. This was confirmed by the Tribunal in appeal by the Department.
The question that arises for consideration in this case is as to whether the assessee who is a non -resident Indian having only income from investment is entitled to get the deduction by way of rebate provided under Section 88 of the Act. There is also a subsidiary question as to whether the AO is entitled to disallow the said claim by making prima facie adjustment contemplated under Section 143(1)(a) of the Act.
(3.) SRI P.K.R. Menon, learned senior Central Government standing counsel for the Department submitted that an assessee who is a non -resident Indian, having only income from investment is not entitled to claim any deduction provided under the Act in the computation of his income from investment in view of the special provisions contained in Chapter XII -A of the Act particularly Section 115D(2)(a) r/w Section 115E(1) therein and that the entire investment income has to be subjected to tax at the rate of 20 per cent as provided in Section 115E(1) of the Act. The senior counsel took us to the provisions of Sections 115D, 115E, 115 -I, Section 80C as it stood prior to 1st Jan., 1991, and the provisions of Sections 87 and 88 of the Act and submitted that the legislative intention in enacting a special provision for computation of total income of non -resident in respect of investment income was to assess the investment income at a lesser rate of 20 per cent without any deductions provided under the other provisions of the Act, The senior counsel also submits that if such an assessee wants to have the computation of his total income as provided under the other provisions of the Act, Section 115 -I of the Act clearly provided for the same and the assessee is free to make a request in the return itself seeking for computation of the total income in accordance with the other provisions of the Act. The senior counsel with reference to the provisions of Section 87 of the Act in regard to the rebate allowable under Section 88 of the Act and the provisions of Section 115E particularly Sub -sections (1) and (2) thereof submitted that the legislative has clearly made a distinction in Section 87 as well as in Sub -section (1) of Section 115E on the one hand and Sub -section (2) on the other by using the expression 'tax payable on the total income and tax chargeable on the total income' and further submitted that this also makes the position clear that if the only income of the non -resident Indian, is his income from investment or from capital gains, tax has to be paid on such income at the rate of 20 per cent whereas in the case of a non -resident Indian who is having other income also the expression 'chargeable' used shows that the other income has to be computed in accordance with the general provisions. In short the submission of the senior counsel is that in the computation of total income of a non -resident Indian who is having income only from investment his total income the entire invest income has to be assessed at the rate of 20 per cent without any deduction or rebate whatsoever.;
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