Query No. 1: Details of foreign bank account in case of non-resident

Does the assessee who is a non-resident in India, residing in a foreign country and having genuine business in the foreign country need to disclose the information of bank accounts abroad in the return of income?


Section 139(1) of the Income-tax Act 1961, provides that:

“Every person –

a) being a company or a firm or

b) being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to Income tax, —-“

shall on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed:—-“

Thus, a person is liable to file his return of income, if his income is chargeable to tax and exceeds the exemption limit, but the ambit of taxation varies with the factor of residence in the previous year.

Persons who are non-resident in India in the accounting year are chargeable to tax on:

i) Income received or deemed to be received in India, and

ii) Income which accrues or arises or is deemed to accrue or arise in India.

So, the non-resident in India is chargeable to tax in India, only if he receives or deemed to be received any income in India or income which accrues or arises or is deemed to accrue or arise in India. Till then, he is not required to file any return of income, unless he is claiming any income tax refund.

Thus, any non-resident having income chargeable to tax claiming refund and not having his bank account in India may at his option furnish the details of one foreign bank account, so that, the Department may credit his refund in that account. Therefore, column of 14(c) in Form No. 2 provides that “non-residents, who are claiming income tax refund and not having bank account in India may, at their option furnish the details of one foreign bank account”.

Query No. 2: Applicability of S. 115BBE

Income declared in return as other income. Can it be covered under section 115BBE though neither found recorded in any book (section 68) nor investment (Section 69)?


Section 115BBE(1) reads as under:

“(1) where the total income of an assessee –

a) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, and reflected in the return of income furnished u/s. 139, or

b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a)

the income tax payable shall be aggregate of –

i) the amount of income tax calculated on the income referred to in clause (a) and clause (b) at the rate of sixty percent; and

ii) the amount of income tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i)”

Thus, section 115BBE as amended by the Finance Act, 2016 w.e.f. April 1, 2017 i.e., from assessment year 2017-18 prescribes a flat rate of 60% for all income brought to tax for lack of proof as to the source under sections 68, 69, 69A, 69B, 69C and 69D, or when the Assessing Officer is unable to link the unexplained investment to real owner. The flat rate now applicable would neutralise the advantage of such disclosures in benami names in the year in which the amount is surfaced.

It would mean such income would be taxed on standalone basis, so as to be taxable even in the hands of the person, whose aggregate income including such income falling under the provisions falls below taxable limit.

Therefore, irrespective of the “head” under which it is assessable such income would be taxed at flat rate of 60%.

Query No. 3: Land for land allotment by local authority

Cost to be taken on the basis of original cost of land surrendered or the estimated value on the date of allotment? What should be the period of holding?


The term ‘exchange’ has been specifically defined in section 118 of the Transfer of Property Act, thus:

“When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing nor both the things being money only, the transaction is called ‘exchange”. So, “exchange” presupposes existence of different properties owned by different persons. As a result, the ownership of one property is transferred to the owner of other property and vice-versa”.

Further section 49(1) states that where the capital assets became the property of the assessee by “devolution” the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it. The expression ‘devolution’ has wider meaning in the context and includes not merely a succession on death but also a change of ownership from one living being or body to another.

Thus from the fact, it is clear that land was surrendered to the local authority in exchange of another land. The value at which the land was surrendered to be taken as a cost. If it is surrendered at cost, the cost to be considered.

Query No. 4: Deduction u/s. 24 by the Trust etc.

Is it permissible to show rental income from shops u/s. 22 & claim any deduction in the hands of the Trust?


‘Owner’ for the purpose of section 22 may be an individual, a company, a firm, an association of persons or an artificial juridical entity. The term “owner” includes a legal owner such as a trustee, an executor and an official assignee or an official receiver etc. Thus, the trustee of the Trust or trust can be owner.

Similarly, as per the Supreme Court in East India Housing and Land Development Trust Ltd. [42 ITR 49], shops, Bazaars and stalls are buildings within the meaning of section 22 and fall to be chargeable under that section. Thus income from a market consisting of shops, bazaars, stall and open spaces appurtenant to the building in the hands of the owner thereof would be assessable under the head “Income from house property”. This is on the basis that the words “buildings” and “house property” are not defined in the Act and they have to be understood in the same sense and in their ordinary dictionary meaning. Further sections 22 to 27 of the Act are wholly silent as to the purpose for which a building or a house property is to be used [see CIT v. Kanaiyalal Nimani and Others [120 ITR 892 (Cal.)]

So, once a property falls under section 22 and it is owned by the Trust, deductions mentioned under section 24 are available.

Query No. 5: Can husband and wife create an HUF?

An assessee wants to create a HUF with his wife. Is it possible to create a HUF with gift from the family members?


A Hindu Undivided Family (HUF) is the normal condition of Hindu Society. The HUF with all its incidents is a creature of law and cannot be created by act of parties.

A Hindu Undivided Family is different from a Hindu coparcenary. A Hindu coparcenary is special feature of the Mitakshara School of Hindu Law. It consists exclusively of male members, much narrower than Hindu Undivided Family. A coparcenary includes only those who acquire by birth an interest in the joint or coparcenary property. No coparcenary can commence without a common male ancestor.

The Hindu Succession Act, 1956 has been amended with effect from September 9, 2005 with a view to give daughter on birth equal right as a son on his birth, consequently, the daughter has right to be a coparcener and also a right to claim partition or vest her individual property in the HUF. These are important rights hitherto denied to the daughter

Thus to start an HUF at least two coparceners are required either son or daughter. Therefore only husband and wife cannot create an HUF, unless the property has been received by a coparcener on partition or otherwise. There is no impediment to start a new HUF by gift from family members.

Note: Please send your queries relating to Direct, Indirect & International Taxation, Accounting & Auditing Standards and Company Law, FEMA etc., to AIFTP, having interest to the Members.

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