ITA Nos. 4862 & 5153/Bom/1994 17 January 2000 A.Y. 1990-91 & 1991-92. Case: Assistant Commissioner Of Income Tax Vs Mrs. Zita Welinkar. High Court of Bombay (India)

Case NumberITA Nos. 4862 & 5153/Bom/1994 17 January 2000 A.Y. 1990-91 & 1991-92
CounselFor the Appellant: Navinchandra and For the Respondent: H S Raheja
JudgesPradeep Parikh, A.M. & D. Manmohan, J.M.
IssueIncome Tax Act 1961 - Sections 48(1), 115C(a)
Citation(2000) 68 TTJ 492 (Mumbai)
Judgement DateJanuary 17, 2000
CourtHigh Court of Bombay (India)

Order:

D. Manmohan, J.M.

  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. Tata 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.

  3. 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 NRI account and are subscribed to in convertible foreign exchange whereas in the instant case, the assessee, though a non-resident, 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 looses the special status to be taxed at special rates on the date when the assets are 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.

  4. Aggrieved, the assessee contended before the Commissioner (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...

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