1970 (4) TMI 48 - HC - Income Tax

Not ordinarily resident - previous year - assessee had no business in India during this previous year. During this previous year the assessee had two accounts in India - remittances received - taxability

Summary

Issues Involved:
1. Taxability of Rs. 58,275 under section 4(1)(b)(ii) read with the second proviso of the Indian Income-tax Act, 1922.
2. Nature of remittances: Whether they were capital or business profits.
3. Whether remittances were profits of the previous year ending on 31st March, 1958.
4. Whether the remittances were brought into or received in the taxable territories by the assessee himself.

Issue-wise Detailed Analysis:

1. Taxability of Rs. 58,275 under section 4(1)(b)(ii) read with the second proviso:
The Income-tax Appellate Tribunal held that Rs. 58,275 in the hands of the assessee was chargeable to tax under section 4(1)(b)(ii) read with its second proviso. The Tribunal's decision was based on the fact that the assessee was "resident but not ordinarily resident" during the relevant previous year, and the provisions of section 4(1)(b)(ii) would apply if the amount sought to be taxed was his income, profits, or gains which accrued or arose to him outside the taxable territories during the previous year ending on 31st March, 1958. The second proviso would exclude the amount if it was brought into or received in the taxable territories during the same previous year.

2. Nature of remittances: Whether they were capital or business profits:
The assessee contended that the remittances were either capital accumulated in the past or profits accrued in earlier years, not the previous year in question. The affidavit dated 14th March, 1958, stated that the assessee had significant capital and assets in Hongkong and was only involved in business in New York since 1948. The Tribunal, however, found that in the absence of other data, the department was justified in holding that the remittances represented profits accruing to the assessee outside the taxable territories during the year of account.

3. Whether remittances were profits of the previous year ending on 31st March, 1958:
The Tribunal's order indicated that the amounts of the drafts were considered to be business profits accrued during the previous year itself. The assessee argued that profits of a business cannot be remitted in the same year they arose, as profits can only be ascertained after the year-end. This principle was supported by the judgment in Shankar Iranna Gumdel v. Commissioner of Income-tax. The Tribunal's findings, however, suggested that the remittances were treated as current year profits.

4. Whether the remittances were brought into or received in the taxable territories by the assessee himself:
The assessee argued that the amounts were not brought into or received in the taxable territories by himself. The Tribunal's findings indicated that the drafts were sent from Singapore to India and credited to the assessee's accounts in India. The Tribunal confirmed the department's view that the remittances were profits accruing outside the taxable territories and brought into India during the previous year.

Conclusion:
The High Court concluded that the Tribunal's finding that the remittances were business profits accruing during the previous year was a finding of fact. Based on the principle laid down in Shankar Iranna Gumdel's case, such profits were not liable to be taxed in the same year they arose. Therefore, the question was answered in the negative, and the Commissioner was ordered to pay the assessee's costs.