(1) No deduction in respect of any expenditure or allowance shall be allowed under any provision of this Act in computing the investment income of a non-resident Indian.

(2) In the case of an assessee, being a non-resident Indian, where–

(a) the gross total income consists only of investment income or income by way of long-term capital gains or both, then no deduction shall be allowed under Chapter VIII;

(b) the gross total income includes any income referred to in clause (a), –

(i) the gross total income shall be reduced by such income; and

(ii) the deductions under Chapter VIII shall be allowed as if the gross total income as so reduced was the gross total income of the assessee.