TMI Blog2003 (1) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... under: "1. CIT appeal erred in holding that the investments remained unexplained in the context of its taxability inIndia. 2. CIT appeal erred in holding against the appellant in the matter of compliance of legal requirements and cooperation." 2. Briefly stated, the facts as gathered from the orders of lower authorities and material placed on record are these: The assessee is an overseas corporate body incorporated inBahamashaving status of non resident. According to the Assessing Officer, its authorized capital was $ 5,000 and paid up capital of $ 2 only. No business was ever carried on inIndiaand consequently, the assessee had neither any office nor any permanent establishment inIndia. However, the assessee had brought inward remittances from abroad in the year under consideration amounting to Rs. 5,23,24,500. These amounts were received through banking channels and with prior approval of the Reserve Bank ofIndia. The remittances so received were deposited in an NRE account with Sanwa Bank,New Delhi. These amounts were invested in acquiring assets inIndialike shares of certain companies and fixed deposits etc. The income of Rs. 41,430 by way of dividend and interest on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve that the amount received was taxable in the hands of assessee as income. Reliance was placed on the judgment of Bombay High Court in the case of Dalmia Dadri Cement Ltd. v. CIT [1974] 94 ITR 303. Lastly, on facts, it was contended that finding of the Assessing Officer that assessee-company's paid up capital was only $ 2 was factually incorrect since in fact the paid up capital was $ 50,000. Reliance was placed on OAC form filed with RBI and placed on record. 5. In the course of appellate proceedings, the CIT(A) thought that provisions of section 68 could also be made applicable to the facts of the case. Hence, it was put to the assessee as to why the addition could not be sustained under this section. In response, it was contended and reiterated that income of non-resident is chargeable only under section 5(2) and the provisions of section 68 could not override the provisions of section 5(2). According to the assessee, section 68 gives statutory recognition of the principle that the amounts credited in the books of account, in the absence of explanation, may be deemed to be the income of assessee but it cannot tax what is not taxable under the charging provisions of section 5( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was prepared. Therefore, assessee could not be allowed to change its stand orally before him. Accordingly, he was of the view that assessee was required to explain the source of the credit by way of inward remittances. On merits, he rejected the contention of the assessee that the source stood explained since it was shown that money was brought from abroad from its own account. According to him, transferring of money from one pocket to another would not make the unexplained money into explained money. It was incumbent upon the assessee to produce books of account atBahamasand copy of the bank account to show that he was really in possession of that money. This requirement was pertinent in view of the finding of the Assessing Officer that assessee was merely a company having paid up capital of $ 2. Even the assertion of assessee that it was US $ 50,000 company did not make significant difference. Hence, capacity of the assessee was not only suspect but was unproved since receiving of money through normal banking channels was not sufficient to discharge the onus under section 68 in view of the Calcutta High Court judgment in the case of CIT v. Precision Finance (P.) Ltd [1994] 208 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nIndiain the previous year by the assessee or on behalf of the assessee; or (b) accrues or arises or is deemed to accrue to arise to him inIndiaduring such year. Explanation I provides that income accruing or arising outsideIndiashall not be deemed to received inIndiawithin the meaning of this section by reason only of the fact that it is taken into account in the balance sheet prepared inIndia. It is pertinent to note that such provisions of section 5(2) are subject to the other provisions of the Act. That means in case of any conflict between the provisions of section 5(2) and any other provision of the Act, then the other provision in the Act would have overriding effect. 12. So the question arises whether there is any conflict between the provisions of section 5(2) and the provisions of section 68 or 69. It is the settled legal position that burden is on the revenue to prove that income of an assessee falls within the net of taxation. Once it is so proved then the burden is on the assessee to prove that such income is exempt from taxation. Reference can be made to the Supreme Court judgment in the case of Parimisetti Seetharamamma v. CIT [1965] 57 ITR 532. Section 52 bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved that such money is relatable to the income accrued or arising inIndia. Therefore, the same cannot be taxed under section 68 merely on the ground that assessee fails to prove the genuineness and source of such cash credit. Therefore, we are of the considered view that provisions of section 68 or 69 would be applicable in the case of non-resident only with reference to those amounts whose origin of source can be located inIndia. Therefore, the provisions of section 68 or 69, in our opinion, have limited application in the case of non-resident. 14. Now let us examine the facts of the case in the light of the material on record. Let us first examine whether the provisions of section 68 are applicable to the present case. Such provisions are applicable where any sum is found credited in the books of account maintained by the assessee for the previous year. That means the maintenance of books of account is a condition precedent in application of such section. The CIT(A) has proceeded on the basis of statement of facts which had been denied by the assessee before the CIT(A). Admittedly, there is no evidence on the record that any books of account was maintained by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these certificates clearly shows that these amounts were remitted from the bank account of the assessee in the foreign country i.e., Barclays Bank and Sanwa Bank atNew York. The genuineness of these certificates are not in doubt since these are in Form No. 10H prescribed under Rule 27A of Income-tax Rules, 1922 as approved by the RBI for this purpose. These certificates have been accepted by the CIT(A). The perusal of these certificates clearly shows that all the amounts were remitted through assessee's own bank account. Once it is shown that the remittances were made from assessee's own bank account with banks atNew York, the CIT(A) was, in our opinion, justified in coming to the conclusion that income, if any was already received inNew Yorkand consequently, it could not be said that such income was received inIndiaagain. This conclusion is fortified by the decision of Supreme Court in the case of Keshav Mills Ltd., wherein it has been held that income can be said to be received for the first time and if any amount is remitted out of such money then assessee cannot be said to have received the same as income again in India when it is so received. The relevant observations appeari ..... X X X X Extracts X X X X X X X X Extracts X X X X
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