TMI Blog2015 (3) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... bonds; in clause (b) against enquiry or investigation on the ground that such person owns such bonds and in clause (c) against the reception in evidence of the fact that any of the persons mentioned in clause (a) owns such bonds, in any proceedings relating to an offence or the imposition of any penalty under the Acts in question. Thus the judgment of the Division Bench at Lucknow in Usha Omer (2011 (7) TMI 441 - Allahabad High Court ) would have to be read down so as to confer an immunity only on compliance with the conditions of Section 6 and to the extent legislated, as explained in answer to Question-A above. - Decided against assessee. - Writ Tax No 432 of 2005, Writ Tax No 433 of 2005, Writ Tax No 434 of 2005 - - - Dated:- 5-2-2015 - Hon'ble Dr Dhananjaya Yeshwant Chandrachud, CJ, Hon'ble Dilip Gupta And Hon'ble Suneet Kumar,JJ. For the Petitioners : Mr S K Garg, Senior Advocate, assisted by Mr Ashish Bansal, Advocate For the Respondents : Mr Dhananjay Awasthi, Advocate JUDGMENT (Per Dr D Y Chandrachud, CJ) The questions which have been referred to the Full Bench, turn on the interpretation of the Remittances of Foreign Exchange and Inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verruled by the Assessing Officer. Eventually, a writ petition was filed for challenging the notice under Section 147 as well as the notices issued under Sections 142 (1) and 143 (2) by the Assessing Officer. The Act received the assent of the President on 18 September 1991. The long title to the Act describes it as an Act to provide for certain immunities to persons receiving remittances in foreign exchange and to persons owning the Foreign Exchange Bonds and for certain exemptions from direct taxes in relation to such remittances and bonds and for matters connected therewith or incidental thereto . Chapter III of the Act deals with investment in foreign exchange bonds. Section 5 (a) defines the expression Foreign Exchange Bonds 5 to mean bonds issued by the State Bank of India in accordance with such scheme as the Reserve Bank of India may specify by a notification in the official gazette, where the investment is made after the commencement of the Act but before the specified date. The expression Non Resident Indian 6 is defined in Section 5 (b) to mean an individual, being a citizen of India or a person of Indian origin who is resident outside India. The proviso to Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, the Reserve Bank notified the India Development Bonds Scheme, 19917 on 21 September 1991. Clause 2 (b) defined FEBs as India Development Bonds8 in the nature of promissory notes, denominated in US Dollars, issued by the State Bank of India in accordance with the Scheme. Clause 5 of the Scheme provided as follows: 5. Persons who are eligible to apply for FEBs. (1) Non-Resident Indians (hereinafter referred to as NRIs), Overseas Corporate Bodies (hereinafter referred to as OCBs) and banks acting in fiduciary capacity on behalf of NRIs and OCBs may apply for the FEBs. (2) Applications may also be made in the name of a minor, who is an NRI, through his guardian. (3) Banks acting in fiduciary capacity on behalf of NRIs or OCBs or both may not disclose the names and addresses of NRIs or OCBs on whose behalf investment is being made, but, at no stage during the currency of FEBs, the banks shall hold these FEBs on behalf of any person other than NRIs or OCBs. Provided that the banks may be allowed to hold the FEBs on behalf of NRIs or OCBs other than those NRIs or OCBs on whose behalf of investments in FEBs were made in the first instance. Clause 10 (1) of the Scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1), no inquiry or investigation could be commenced against any of the persons referred to in clause (a) on the ground that such person owns such bonds. Under clause (c), the fact that such a person referred to in clause (a) owns the bond is not to be taken into account and is inadmissible as evidence in any proceedings relating to any offence or the imposition of a penalty under specified legislation. Clause (a) of sub-section (1) of Section 6 makes it abundantly clear that the immunity which is prescribed therein applies to an NRI or OCB who or which owns FEBs and to a person resident in India and to whom a gift of the FEBs has been made by an NRI or OCB. The protection against being required to disclose the nature and source of investment is, hence, attracted to entities situated abroad, namely to NRIs and OCBs owning FEBs and to a resident in India to whom a gift of such FEBs has been made by an NRI or OCB. The immunity extends to a protection against being required to disclose for any purpose whatsoever the nature and source of the investment in such bonds. The non-resident entity is protected against being required to explain the nature and source of the investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, they have given blanket permission to NRIs to send foreign exchange under the provisions of these two Schemes framed under the Act. The Government of India as well as the Central Board of Direct Taxes clarified that identity of the NRIs/OCBs would not be required to be disclosed at all and even emphasized that it must not be disclosed. If these are the facts and the Government of India had cleared doubts in the mind of general public that the recipient of the India Development Bonds will not be expected to disclose the identity from whom the India Development Bonds were received by them under the Scheme, then the Department of Income-tax cannot be permitted to violate the said provisions. Further, the Central Board of Direct Taxes itself has also made it clear that the Assessing Officer will not be making any inquiry with regard to remittances in the India Development Bonds received by any person from NRIs. The Central Board of Direct Taxes circular is binding on the authorities working under the Act. The observation of the Division Bench that the recipient of the India Development Bonds will not be expected to disclose the identity from whom the India Development Bonds wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The immunity would be available to an NRI or OCB who or which owns the bonds on the one hand and, on the other hand, to a resident of India to whom a gift of such bonds have been made by an NRI or OCB. Where this requirement of Section 6 (1) (a) is not fulfilled, the immunity will not be attracted. Consequently, we answer the reference by holding with reference to Question-A that the immunity which is provided in Section 6 (1) (a) of the Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991 extends to a Non Resident Indian or Overseas Corporate Body who or which owns the Foreign Exchange Bonds and to a person resident in India to whom a gift of such bonds has been made by such an NRI or OCB. The immunity would not be applicable where the gift is found not to meet the requirements spelt out in clause (a) of sub-section (1) of Section 6. The immunity in clause (a) is against a disclosure of the nature and source of the investment in such bonds; in clause (b) against enquiry or investigation on the ground that such person owns such bonds and in clause (c) against the reception in evidence of the fact that any of the person ..... X X X X Extracts X X X X X X X X Extracts X X X X
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