S. 69 read with S. 5(2)(b) of the Income-tax Act, 1961 — When assessee brings money into India through banking channel, onus on assessee u/s.69 stands discharged and S. 5(2)(b) does not apply.

The assessee, a non-resident, had made substantial deposits
in non-resident accounts in Indian Bank. She filed her return of income showing
total income as NIL. The Assessing Officer passed assessment order and assessed
the aforesaid deposits as the income of the assessee u/s.69. On appeal, the
CIT(A) confirmed the Assessing Officer’s action.

The Tribunal held that since the assessee had brought the
money into India through banking channel, the onus on the assessee u/s.69 stood
discharged, and, therefore, it was not taxable in India u/s.5(2)(b). The CBDT
Circular No. 5 in F.No.73A/2(69)-IT(A-II), dated 20-2-1969 squarely supports the
case of the assessee.

The Tribunal noted as under :

(1) It is seen from Ss.(2) of S. 5 that a person, who is
a non-resident, has to pay tax only on that income which is either received
by him in India or is deemed to be received by him in India or accrues to
him in India or arises to him in India or is deemed to accrue to him in
India or is deemed to arise to him in India during the year. The words ‘in
India’ appearing in Ss.(2) of S. 5 are crucial. The principle underlying S.
5 makes the chargeability of income depend upon the ‘locality’ of accrual or
receipt.

(2) A non-resident person, having money in a foreign
country, could not be called upon to pay income-tax on that money in India
because in respect of that money it will not be possible for the Assessing
Officer to say that it was either received by him in India or it was deemed
to be received by him in India or it accrued to him in India or it arose to

him in India or it was deemed to accrue to him in India or it was deemed to
arise to him in India.

(3) If a non-resident person, having money in a foreign
country, brings that money to India, through a banking channel, he cannot be
called upon to pay income-tax on that money in India, firstly for the
reasons stated above and secondly because the remittance of money into India
through banking channel will make the onus on the assessee u/s.69
discharged.

(4) If certain income, profits or gains was ‘received’ by
the assessee outside India, it does not become chargeable to income-tax in
India by reason of that money having been brought into India. This is
because what is chargeable is the first ‘receipt’ of the money and not a
subsequent dealing by the assessee with the said money. In that event, the
money is brought by the assessee as his own money which he had already
‘received’ and had control over it and it does not take the character of
income, profits and gains after being brought in India.