K. RAMULLAN versus COMMISSIONER OF INCOME TAX, COCHIN

Citation: [2000] SUPP. 2 S.C.R. 283 · Decided: 09-08-2000 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

K.RAMULLAN 
A 
v. 
COMMISSIONER OF INCOME TAX, COCHIN 
AUGUST, 9, 2000 
[S.P. BHARUCHA, SYED SHAH MOHAMMED QUADRI AND 
B 
N. SANTOSH HEGDE, JJ.] 
Income Tax Act, 1961 : Section 10(4-A). 
Income Tax-Exemption from-Non-resident (External) Account-Inter-
est earned on-AYs I983-84 and 1984-85-Assessee, a foreign citizen, stayed 
in India for a short period during the AYs with his wife-Assessee claimed 
exemption under S. JO( 4-A) in re~pect of the interest accrued in his account-
Entitlement to-Held: Stay contemplated under S.2(p)(iii)(c) of the FERA has 
to be of some permanence and not a mere casual stay or stay for a short 
period-Hence, assessee is not a person resident in India-There.fore, he is 
entitled to exemption. 
Foreign Exchange Regulation Act, 1973 : 
Section 2(q)--Person resident outside India-Meaning of-Explained. 
Words and Phrases : 
"Staying"-Meaning of-In the context ofSs. 2(p)(iii)(c) of the Foreign 
Exchange Regulation Act, 1973. 
c 
D 
E 
"Person resident outside lndia"-Meaning of-In the context of Section 
F 
2(q) of the Foreign Exchange Regulation Act, 1973. 
The appellant-assessee, though of Indian origin, had settled down in 
a foreign country and had acquired its citizenship. For the Assessment 
Years 1983-84 and 1984-85, the assessee claimed that the interest accrued 
on the credit balance in his Non-Resident (External) Account could not be 
G 
included in computing his total income in view of the provisions of Section 
10(4-A) of the Income Tax Act, 1961. For a short period the said Assess-
ment years the appellant-assessee stayed with his wife in India for under-
going medical treatment. 
The Income Tax Appellate Tribunal held that the appellant-assessee 
H 
283 
284 
SUPREME COURT REPORTS 
(2000] SUPP. 2 S.C.R. 
A 
was not a person resident in India in terms of the Foreign Exchange 
Regulation Act, 1973 and, therefore, the appellant-assessee was entitled to 
exemption under Section 10(4-A) of the Income Tax Act, 1961. However, 
the High Court, on reference, overruled the Tribunal's decision. Hence this 
appeal. 
B 
The following question arose before this Court : 
c 
D 
E 
F 
Whether the appellant-assessee is a resident outside India as defined 
in Section 2(q) of the Foreign Exchange Regulation Act, 1973? 
Allowing the appeal, this Court 
HELD : 1. A plain reading of Section 2(p )(iii)( c) of the Foreign 
Exchange Regulation Act, 1973 (FERA) makes it evident that the stay 
contemplated therein has to be of some permanence and not with the 
intention of returning abroad in some short set period. The word 'staying' 
occurring in Section 2(p)(iii)(c) really mean 'residing with the spouse'. 
Even the purposes referred to in paragraphs (a), (b) and (d) of Section 2(p) 
of FERA indicate that the term 'stay' does not denote a short or casual 
stay; it has to be a stay for taking up employment or carrying on business 
or a vocation or with the intention of remaining in India for an uncertain 
period. If Section 2(p)(iii)(c) is construed to include a mere casual stay or 
stay for a short period, it would defeat the purpose of having Non-Resident 
(External) Account. Therefore, the appellant cannot be treated as a person 
resident in India during the relevant period. Consequently, he will be a 
person resident outside India within the meaning of Section 2( q) of the 
FERA. Therefore, the order of the High Court is set aside. (287-C-E] 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1659-1661 of 
1997. 
From the Judgment and Order dated 10.9.96 of the Kerala High Court 
in I.T.R. No. 109, 113 and 114 of 1992. 
G 
C.S. Vaidyanathan and E.M.S. Anam for the Appellant. 
Ranbir Chandra, Ms. Lakshmi Iyengar and Ms. Sushma Suri for the 
Respondent. 
The Judgment of the Court was delivered by 
H 
SYED SHAH MOHAMMED QUADRI, J. The short point that arises 
K. RAMULLAN v. C.1.T.[SYED SHAH MOHAMMED QUADRI, J.] 
285 
for consideration in these appeals is: whether the appellant-assessee is a resi-
dent outside India as defined in Section 2 (q) of the Foreign Exchange Regu-
lation Act, 1973? 
These appeals arise from the common order of the High Court of Kerala 
at Ernakulam passed in Income Tax Reference Nos.109 and 113-114 of 1992 
dated September 10, 1996. The questions referred to the High Court in those 
cases were under the Income Tax Act as well as the Wealth Tax Act. Being of 
the view that the second question in I.T.R. No.109 of 1992, viz., "Whether, on 
the facts and in the circumstances of the case, th

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