Income Tax
Whether penalty is warranted when assessee was under bona fide impression that he was 'person resident outside India' as defined under FEMA and has not offered interest income for tax due to wrong interpretations of law - NO: ITAT
THE assessee is an employee of Cognizant Technology Solutions as Sr. Software professional. During the course of scrutiny assessment, the AO observed that the assessee had opened a bank account in ICICI Bank. The amount in this savings account was transferred to NRE Fixed Deposit account in 2002. During that period, the assessee was sent on a particular assignment by the employer company to US. The Fixed Deposits in NRE account were made in the year 2002 that had matured in the year 2009. The interest received by the assessee was not offered to tax in the return of income filed by the assessee for the relevant period. The assessee during the course of assessment proceedings gave explanation that u/s.10(4) of the Act, interest income in the NRE A/c is exempt from tax. It was submitted that the assessee was under a bona fide impression that he was a resident outside India in terms of the definition of 'persons resident outside India' defined in section 2(q) of the Foreign Exchange Regulation Act [FERA], 1973.
THE issue before the Bench is - Whether penalty is warranted when assessee was under bona fide impression that he was a 'person resident outside India' as defined under FEMA and has not offered interest income for tax due to wrong interpretations of law. NO is the answer.
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