1970 (4) TMI 23 - SC - Income Tax

Firm resident in taxable territory - non-resident partner not entitled to exclude from his share income accruing outside the taxable territories

Summary

Issues:
1. Validity of assessing a non-resident individual's share of foreign income from a resident firm.
2. Correctness of levying tax at the maximum rate on the non-resident individual.

Detailed Analysis:

Issue 1: The main issue in this case was the validity of assessing a non-resident individual's share of foreign income from a resident firm. The appellant, a non-resident individual, was a partner in a registered resident firm conducting money-lending business in India and Malaya. The entire income of the firm for the assessment year accrued outside India, and the appellant's share of the income was foreign income. The Income-tax Officer set off a loss incurred by the appellant in his own business against the foreign income and assessed him at the maximum rate. The argument raised was based on the interpretation of sections 4(1)(c) and 23(5)(a) of the Income-tax Act, 1922. The High Court, relying on a previous decision, held against the assessee, stating that the non-resident partner's income should not be excluded based on the provisions of the Act.

Issue 2: The second issue was regarding the correctness of levying tax at the maximum rate on the non-resident individual. The Appellate Assistant Commissioner confirmed the assessment, and an appeal to the Appellate Tribunal was unsuccessful. The Tribunal referred two questions of law, including the validity of the assessment and the correctness of levying tax at the maximum rate. The High Court, based on precedent, ruled against the assessee. The Privy Council's decision in a similar case was cited, supporting the inclusion of the non-resident partner's share of profits in the total income without excluding foreign income derived outside the taxable territories.

In conclusion, the Supreme Court dismissed the appeal, upholding the assessment and the levy of tax at the maximum rate on the non-resident individual. The decision was based on the interpretation of relevant provisions of the Income-tax Act and previous judicial decisions, including the Privy Council's ruling. The Court found no grounds to dispute the correctness of the decisions relied upon, leading to the dismissal of the appeal with costs.