1963 (8) TMI 69 - HC - Income Tax

Summary

Issues Involved:
1. Can an assessee have different statuses for the same assessment year?
2. Interpretation of the term "year" in Section 4A(a) of the Income-tax Act, 1922.
3. Application of Section 17(1) of the Income-tax Act, 1922, concerning non-resident status for taxation.

Issue-Wise Detailed Analysis:

1. Can an assessee have different statuses for the same assessment year?

The court examined whether an assessee could have different statuses (resident or non-resident) for the same assessment year due to different previous years for separate sources of income. The court concluded that it is indeed possible for an assessee to have different statuses for the same assessment year. This conclusion was supported by the fact that the Income-tax Act allows for different previous years for separate sources of income, and the tests of residence must be applied with reference to each previous year. The court cited the decision of the Madras High Court in Commissioner of Income-tax v. V.E.K.R. Savumiamurthy, which supported this interpretation.

2. Interpretation of the term "year" in Section 4A(a) of the Income-tax Act, 1922.

The court held that the term "year" in Section 4A(a) should be interpreted as "previous year" as defined in Section 2(11) of the Income-tax Act. The court emphasized that no section should be read in isolation and that the entire statute should be considered to understand the legislative intent. The court referred to the Privy Council decision in Wallace Brothers and Co. Ltd. v. Commissioner of Income-tax, which interpreted the term "year" in a similar context to mean "previous year." The court rejected the contention that "year" should be interpreted as the financial year, stating that the legislative scheme and the context of the Act necessitate interpreting "year" as "previous year."

3. Application of Section 17(1) of the Income-tax Act, 1922, concerning non-resident status for taxation.

The court examined whether Section 17(1) applies when an assessee is not resident in the taxable territories for some sources of income but is resident for others. The court concluded that Section 17(1) applies only when an assessee is non-resident in the taxable territories in respect of all sources of income. The court reasoned that the term "total income" in Section 17(1) refers to the total income from all previous years and sources, and it would be inappropriate to apply the higher tax rate to an assessee who is resident for some sources of income. The court emphasized that the legislative intent was to apply the higher tax rate only to those who are non-resident in respect of all sources of income. The court also noted that if there is any doubt in the interpretation of a taxation statute, it should be resolved in favor of the assessee.

Conclusion:

The court answered the first question by stating that the term "year" in Section 4A(a) refers to the "previous year" as defined in Section 2(11). For the second question, the court held that Section 17(1) does not apply when the assessee is a resident in respect of some sources of income and a non-resident only in respect of other sources of income. The Commissioner was ordered to pay 2/3rds of the costs of the reference to the assessee.