J.B. Koshy, J.
1. This appeal is filed by the Revenue raising the following questions as substantial questions of law arising from the order of the Income Tax Appellate Tribunal.
'1. Whether, on the facts and in the circumstances of the case, the assessee is entitled to the benefit of Section 115H of the Income-tax Act? '
2. Whether, on the facts and in the circumstances of the case and the provision being applicable only in a case where the person was assessed earlier as a non-resident, the Tribunal is right in law and fact in relying on the order of the Tribunal for a subsequent year (1992-93) for which year there was no adjudication of the issue by the Tribunal?
3. Whether, on the facts and in the circumstances of the case, should not the Tribunal have considered the issue on merits for the assessment year without relying on an order for the subsequent year?'
The assessment year is 1991-92. The assessee was a non-resident and he had deposited money in non-resident account with various branches of State Bank of Travancore, Central Bank of India, Indian Bank etc. When he came back to India, he claimed concessional rate of tax under Section 115H of the Income-Tax Act and filed necessary declaration for being taxed only at the rate of 20% interest. That was disallowed by the assessing officer. The Commissioner of Income Tax (Appeals) allowed the appeal. The Tribunal dismissed the appeal of the Revenue on the reasoning that the same benefit was given to the assessee by the same Tribunal for assessment year 1992-93 in I.T.A. Nos. 816 and 817 (Coch)/95 by order dated 30-8-1999 and it has become final. The appeals were allowed on the basis of an order of the Tribunal in another assessee's case in I.T.A.No. 462/Coch/95 wherein the same question was decided in favour of the assessee. It was pointed out by the counsel for the assessee that no appeal was filed by the revenue for the assessment year 1988-89 and 1989-90 also though same issue was decided in favour of the assessee. However, appeal was filed by the Revenue for this assessment year alone.
2. We may first consider the relevant sections. Section 10(4)(ii) is quoted below:
'10. Incomes not included in total income: In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included-
XXX XXX XXX XXX(4)(ii) in the case of an individual, any income by way of interest on moneys standing to his credit in a Non-Resident (External) Account in any bank in India in accordance with the Foreign Exchange Regulation Act, 1973 (46 of 1973), and the rules made thereunder:
Provided that such individual is a person resident outside India as defined in Clause (q) of Section 2 of the said Act or is a person who has been permitted by the Reserve Bank of India to maintain the aforesaid Account:
But, that benefit is applicable only so long as a person is completely a Non-Resident. But, normally, he will be liable to tax when he comes to India and becomes a Resident. Section 115H as existed during the relevant time is as follows:'115H. Benefit under Chapter to be available in certain cases even after the assessee becomes resident:-- Where a person, who is a non-resident Indian in any previous year, becomes assessable as resident in India in respect of the total income of any subsequent year, he may furnish to the Assessing Officer a declaration in writing alongwith his return of income under Section 139 for the assessment year for which he is so assessable, to the effect that the provisions of this Chapter shall continue to apply to him in relation to the investment income derived from any foreign exchange asset being an asset of the nature referred to in Sub-clause (ii) or Sub-clause(iii) or Sub-clause (iv) or Sub-clause (v) of Clause (f) of Section 115C; and if he does so, the provisions of this Chapter shall continue to apply to him in relation to such income for that assessment year and for every subsequent assessment year until the transfer or conversion (otherwise than by transfer) into money of such assets:'
In this appeal, revenue has no dispute that the income in question is arising out of foreign exchange asset as mentioned in Clause (f) of Section 115C. We may also extract Section 115E(1):
'115E. Tax on investment income and long-term capital gains:-- (1) Where the total income of an assessee, being a non-resident Indian, consists only of investment income or income by way of long-term capital gains or both, the tax payable by him on his total income shall be the amount of Income-tax calculated on such total income at the rate of twenty per cent of such income.'
3. Before going into the rival contentions, we may also refer to the budget speech of the Finance Minister and Memorandum explaining the Finance Bill for 1983-84 while the above section was introduced (See: (1983) 140 ITR 27) as well as object of incorporating Section 115. Budget speech reads as follows:
'As I indicated earlier, I have decided to liberalise further the tax incentives in respect of non-resident Indians investing in India. I propose to levy a flat rate of tax of 20 per cent, plus surcharge on incomes derived by such persons from their specified investments in India made through foreign exchange remittances.'
The object as stated in the Finance Bill is as follows:
'New Section 115E seeks to provide that income-tax on any investment income or income by way of long-term capital gain of a non-resident Indian will be calculated at the rate of twenty per cent, plus surcharge at the rate of 12 1/2% of such income-tax. It is also proposed to provide that investment income and long-term capital gain of a non-resident Indian will not be aggregated with his other Indian income for charging income-tax on such other income.'
'New Section 115H seeks to provide that in the case of non resident Indian who becomes resident in India in a subsequent year, the provisions of the new Chapter XII-A will continue to apply in relation to the investment income derived from debentures of and deposits with an Indian public limited company and Central Government securities, acquired in convertible foreign exchange, until the transfer or con version (otherwise than by transfer) into money of such asset.'
A perusal of the section clearly shows that the concessional rate of tax provided under Sections 115H and 115E is enacted with a beneficial object intended to give concessional rate of tax to the persons like the assessee on the income of investment they made while they were non-residents in spite of the fact that they became residents subsequently provided foreign exchange is not converted. They are entitled to concessional rate provided they conform to the procedure prescribed under Section 115H.
4. On going through the section, we see no room for a different interpretation. Even if the contention of the learned Senior Standing Counsel that another view is possible, the well-known principle in taxation is that if two views are possible, the view in favour of the assessee has to be accepted as held by the Apex Court in Commissioner of Income Tax, Punjab v. Kulu Valley Transport Co. P. Ltd. : [1970]77ITR518(SC) . A taxing statute has to be interpreted strictly. The Supreme Court in A.V. Fernandez v. State of Kerala : [1957]1SCR837 observed as follows:
'In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law. If the revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the Legislature and by considering what was the substance of the matter.'
Though the rule of strict compliance is applicable in taxation law, assessee claiming exemption has to establish the same as held by the Apex Court in Commissioner of Income Tax, Bihar and Orissa v. Sri Ramakrishna Deo : [1959]35ITR312(SC) . But, exemption made with a beneficial object has to be liberally construed. (See: Commissioner of Income Tax, Lucknow v. U.P. Co-operative Federation Ltd. : [1989]176ITR435(SC) ) and Tata Oil Mills Co. Ltd. v. Collector of Central Excise : 1989(43)ELT183(SC) . An exemption notification cannot be denied full effect by any circuitous process of interpretation. (Swadeshi Polytex Ltd. v. Collector of Central Excise : 1989(44)ELT794(SC) ). Apex Court in Collector of Customs v. Bharat Heavy Electricals Ltd. : 1992(61)ELT332(SC) held that a reasonable construction which gives effect to true intent and purpose of the provisions has to be adopted without violating the language of the notification. It is true that the question whether exemption is applicable shall be construed strictly and once the doubt about the applicability is lifted, exemption shall be given a wider and liberal construction as held by the Apex Court in Union of India and others v. Wood Papers Limited and another : 1991ECR235(SC) . As far as Section 115H is concerned, it was enacted with the beneficial object of earning and preserving foreign exchange and there is no room for doubt that the subject-matter is clearly covered by Section 115H. When words are clear and directly conveying the meaning, there is no need for any interpreting process as held by the Apex Court in Mangalore Chemicals and Fertilisers Ltd. v. Deputy Commissioner of Commercial Taxes and Ors. : 1993ECR23(SC) , There is no other view possible than in favour of the assessee. Further, we also notice that the Authority for Advance Rulings, considered the same point and it was answered like this as can be seen from the decision reported in (Advance Ruling application No. P-5 of 1995):
'Question No. 4: (a) No income-tax will be payable in India on the interest from the fixed deposits with the State Bank of India and the Indian Bank, (items (a), (b) and (c) of paragraph 7 in annexure 'I' for any assessment year if, in respect of the relevant assessment year, the conditions set out in Section 10(4)(ii) of the Income-tax Act, 1961, are fulfilled. However, even if the exemption is not available under Section 10(4) (ii), the applicant will be liable to tax on the gross interest income at the concessional rate of 20 per cent under Sections 115C and 115D read with Sections 115E and 115H, provided the applicant fulfils the procedural requirements of Section 115H.'
5. A contention was raised by the Senior Standing Counsel that to apply Section 115H, the assessee should be a non-resident and should have been assessed as such in the previous year. The above view is also not tenable because Section 115H is applicable when a non-resident in previous year becomes a resident and liable for taxation. We also note that with regard to another assessee, the same view was taken by the Tribunal and the Department accepted the same for the previous years in assessee's case also. Those orders were allowed to become final. The Department should be consistent at least in respect of the same assessee and it cannot also differentiate between various assessees as held by the three-member Bench of the Apex Court in Union of India and Ors. v. Kaumudini Narayan Dalai and Anr. : [2001]249ITR219(SC) . In this case, we are in full agreement with the views of the Tribunal and therefore the question of law referred are to be answered in favour of the assessee and the appeal is dismissed.