1936 (4) TMI 15 - HC - Income Tax

Summary

Issues:
1. Whether the assignment of a British Indian decree in discharge of a debt due to a foreign business constitutes an actual receipt in British India.

Analysis:
The judgment addresses a case where the assessee, as the manager of an undivided Hindu family, owned a money-lending business in Penang outside British India. The assessee had a current account with a business in Penang, and upon settlement, the debtor owed the assessee a sum of 11,700 dollars. The debtor executed a promissory note in favor of the assessee, which later resulted in a decree in the Devakottah Sub-Court in British India. The debtor satisfied this decree by selling jewels valued at &8377; 7,842-12-0 and agreeing to pay &8377; 15,962-12-0 to another party, who assigned a decree against the debtor to the assessee. These amounts were credited to the assessee's accounts in Karaikudi. The Income Tax Officer considered this as a receipt by the assessee in British India and included &8377; 10,900 in taxable profits for assessment in 1934-35.

The assessee contended that no money had been realized from the assigned decree and argued that the assignment should not be considered a receipt under Section 4(2) of the Act. The Assistant Commissioner dismissed the appeal, leading to the question of whether the assignment of a British Indian decree in discharge of a debt due to a foreign business constitutes an actual receipt in British India. The court held that the assessee received moneys worth through the assignment and acquisition of jewels, even if no cash was physically received. The court emphasized that the assets of the Penang business were diminished, and the assessee's assets in British India increased by the assigned decree and jewels. The court rejected the argument that no money was received, stating that the assessee had transferred assets to British India, which could be realized at any time.

The court referenced various cases to support its decision, highlighting that the manner of realizing profit does not determine tax liability. The court's decision aligned with the principle that a profit is realized when the seller receives the price bargained for, even if the form of payment is not cash. The court concluded that the transactions constituted a remittance of moneys or moneys worth into British India, leading to a taxable receipt. The court answered the question in the affirmative, ruling in favor of the Income Tax Commissioner and awarding costs of &8377; 250.