1953 (9) TMI 28 - HC - Income Tax

Summary

Issues:
1. Tax liability on income accrued in the past years and remitted within taxable territories.
2. Interpretation of Section 4(1)(b)(iii) of the Income-tax Act.
3. Application of exemptions under Section 14(2)(c).
4. Determining tax liability based on direct receipt of income in taxable territories.

Analysis:
1. The judgment involves the tax liability of an assessee on income accrued in the past years and remitted within the taxable territories. The case revolves around a transaction where the assessee transferred a sum of money from Bhavnagar to Bombay through a third party. The key question was whether the assessee became liable to pay tax on his share of the transferred amount.

2. The interpretation of Section 4(1)(b)(iii) of the Income-tax Act was crucial in determining the tax liability. This section deals with the taxation of income brought into or received in the taxable territories by the assessee. The court analyzed the language and intent of the section, emphasizing that the liability to tax is based on the direct bringing into or receiving of income by the assessee in the taxable territories.

3. The application of exemptions under Section 14(2)(c) was also considered in the judgment. This section provides exemptions for income accrued in certain states unless brought into the taxable territories by the assessee. The court highlighted the distinction between direct and indirect receipt of income, emphasizing that the legislative intent was to tax accumulated income only when directly brought into the taxable territories.

4. The court analyzed the transaction in question from various perspectives to determine the tax liability based on direct receipt of income in the taxable territories. It was established that the assessee did not directly receive or bring the money into the taxable territories but merely transferred the debt from one entity to another. The court emphasized that the legislative language required direct receipt by the assessee for tax liability to apply.

In conclusion, the court answered the question submitted in the negative, ruling that the assessee was not liable to pay tax on the transferred amount as it did not constitute direct receipt in the taxable territories as per the provisions of the Income-tax Act.