Section 115C(c)

Section 115C(c) — the law in short

What the courts have decided on section 115C(c), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Dr. M. Manohar v. ACIT (Madras High Court) — the s.115H benefit does not extend to interest earned on interest that was re-deposited with the original sum; 'derived from' requires a direct nexus with the foreign exchange asset High CourtHelps departmentValidity unconfirmed
  My client, a returned NRI, keeps renewing his bank deposits by rolling the accrued interest back into the principal, and has claimed the concessional rate under section 115H on the whole of the interest each year. The Commissioner has revised the assessment under section 263. Is the claim on the interest-on-interest sustainable?
  No. The Madras High Court held that section 115H does not allow that elasticity: the concessional rate is available only to investment income DERIVED FROM the foreign exchange asset, and unless the interest income has a direct nexus with the foreign exchange asset the benefit cannot be extended. The section 263 revision and the Tribunal's order confirming it were upheld and the assessee's appeal was dismissed.
• Smt. Trishla Jain v. Dy. CIT (ITAT Delhi) — short-term capital gains derived from a foreign exchange asset fall within 'investment income' in s.115C(c) and take the concessional rate, notwithstanding that s.115E names only long-term capital gains ITATHelps taxpayerValidity unconfirmed
  My NRI client bought equity shares of an Indian company in convertible foreign exchange and sold them within a year. The assessing officer says section 115E mentions only long-term capital gains, so the short-term gain goes at ordinary rates. Is there any authority the other way?
  Yes. The Tribunal held that a short-term capital gain derived from a foreign exchange asset is income derived from that asset and therefore falls within the definition of 'investment income' in section 115C(c), so the assessee is entitled to the concessional rate under section 115E. It rejected the Revenue's argument that the express mention of long-term capital gains in section 115E excludes short-term gains by necessary implication.
• Statutory position — s.115C: the Chapter XII-A definitions, and the convertible-foreign-exchange condition that the whole chapter turns on CBDT Circulars & InstructionsCuts both ways
  My client is a person of Indian origin living in Dubai. He bought shares in an Indian listed company out of rupees lying in his NRO account. The assessing officer says Chapter XII-A does not apply to him at all and has taxed the gain at the ordinary rate. Is he right?
  On these facts, yes — and the reason is the funding, not the status. Section 115C(b) defines a "foreign exchange asset" as any specified asset "which the assessee has acquired or purchased with, or subscribed to in, convertible foreign exchange", so an asset bought out of rupee funds is not a foreign exchange asset, and nothing in Chapter XII-A — not s.115E, not s.115F, not s.115H — can reach it. Being a non-resident Indian within s.115C(e) is a necessary condition but never a sufficient one.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.