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TMI Blog1938 (11) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... ffee for profit. By appeal to the Assistant Commissioner the assessee disputed his liability in respect of any part of the sum of ₹ 25,963 and on his appeal being dismissed required the Commissioner to make a reference to the High Court. An agreed question having been stated and referred (July 24, 1936), in terms to be presently mentioned, the High Court decided in favour of the assessee, holding that the whole income derived by the assessee by the sale of the produce of his coffee estates was exempt from taxation. From the joint judgment (dated April 29, 1937), of Beasley, C.J. Varadachariar and King, JJ., this appeal has been brought pursuant to a certificate granted by the High Court on October 13, 1937. There is no dispute as regards the material facts, and the figure (Rs. 25,963) determined by the Income-tax Officer as the amount of net profit is not in itself in disputes as a question of amount. In arriving at this figure deduction has been made from the proceeds of sale for all expenses incurred whether in or outside British India. The Commissioner's statement of the facts is as follows:- "The petitioner owns two coffee estates in the Mysore State for whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or brought into British India, be deemed to have accrued or arisen in British India and to be income, profits and gains of the year in which they are so received or brought notwithstanding the fact that they did not so accrue or arise in that year: Provided that nothing contained in this sub-section shall apply to any income, profits or gains so accruing or arising prior to April 1, 1933, unless they are income, profits or gains of a business and are received in or brought into British India within three years of the end of the year in which they accrued or arose: Provided further that nothing in this sub-section shall apply to income from agriculture arising or accruing in a State in India from land for which any annual payment in money or in kind is made to the State. Explanation.-Income, profits or gains accruing or arising without British India shall not be deemed to be received or brought into British India within the meaning of this sub-section by reason only of the fact that they are taken into account in the balance sheet prepared in British India. "(3) This Act shall not apply to the following classes of in- come: **** "(viii) Agricultural income.&qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... narily employed by the cultivator to render the produce fit to be taken to the market" (as described in the definition of "agricultural income" given by Section 2 sub-section (1)(b)(ii) of the Act) they held that the assessee was entitled to exemption "in respect of the whole price realised by the sale of his coffee." Having regard to the assessee's contention that he was not conducting any business in coffee and to certain observations made by the learned Judges of the High Court, it is necessary to state expressly their Lordships' opinion that the assessee is carrying on a "business" within the definition of the word given by Section 2, sub-section (4) and within the meaning of Section 10 of the Act. The observations of the Commissioner in his letter of reference are justified: "Such profits as the petitioner in the case derives from his possession of land in Mysore is derived by means of a business; and the fact that agricultural operations form an element in the business does not render it any the less a business." On the other hand, the mere circumstance that income is to be placed under the head "business" has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted profit was there received for the first time. It was contended, therefore that the assessee was liable under sub-section (1) of Section 4 and that sub-section (2) and its proviso did not affect the assessee's liability. The answer given by the High Court has been stated and is now to be examined. But as the section has from time to time been altered by the Legislature in view of rulings of the Courts, it is legitimate and it will be convenient to consider its history: though its present wording will prima facie determine its meaning completely, being intended to state with exactness the test of liability. The Indian Income Tax Act of 1918 contained no clause corresponding to the second sub-section of the present Section 4, but Section 3(1) of 1918 was similar to the present Section 4(1) as hereinbefore set out. It was as follows:- "3-(1). Save as hereinafter provided, this Act shall apply to all income from whatever source it is derived if it accrues or arises or is received in British India, or is under the provisions of this Act deemed to accrue or arise or to be received in British India". When the Act of 1922 was passed, the section was revised and expand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined its previous immunity unless it was business income within the three years' limit. At the same time the second proviso was introduced upon which the assessee is now relying. The occasion for and to some extent the explanation of the second sub-section it its original form is to be seen in decisions of the Courts upon the word, "received" as it appeared in the first sub-section of Section 3 of 1918. These decisions were to the effect that if income had been received by the assessee outside British India, it could not be again received by him within the meaning of the first sub-section. Sundar Das v. Collector of Gujrat; Board of Revenue v. Ripon Press, (cases under the Act of 1918), Saiyid Ali Imam v. Emperor, (under the Act of 1922 but not a case of "business" profits). The view taken was that the same sum could not be received a second time as income. There was a further difficulty or discrepancy under the earlier forms of the section if the income of one year was brought into British India in a later year. The result was that under sub-section (1) income could only be taxed on the ground of having been received in British India if it was income of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words to the effect that it "shall be charged to tax as such and not otherwise". Still, no doubt, a draughtsman even at his fourth attempt may not succeed in saying quite as much as he means. Other indications must be carefully considered. If the exact language of the second proviso be examined with any care, it must appear that if nothing in sub-section (2) is to apply to the income of the assessee, he can hardly rely upon sub- section (2) to take his case out of sub-section (1). No doubt, had it been expressly stated, or if it be held or assumed, that in the case of a resident, income received in British India is never to be charged as such but only as having "accrued or arisen" it might become necessary to read the second proviso as meaning only that sub- section (2) should not apply to charge it. Even so, however, the language of the proviso is a second difficulty in the assessee's contention, which involves both that in the main clause of the sub- section, the Legislature has said less than it meant and that in the proviso it must be taken to have meant less than it said-if not, indeed, something different in kind. A third consideration must be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hwar Singh of Darbhanga was a case of "agricultural income" to which the Act does not apply [Section 4(3)(viii)]. "The exemption is conferred and conferred indelibly, on a particular kind of income and does not depend on the character of the recipient" [per Lord Macmillan at p. 223]. The proviso now in question is not rendered otiose or even unimportant by the assumption that its opening words are a correct expression of its intention. Their Lordships have reached the conclusion that upon this question the meaning and intention of the Legislature is yielded by a strict construction of Section 4 according to its language, and that any departure therefrom which can be suggested in favour of the assessee appears upon a full consideration to be unjustified. The assessee must be held liable to tax under sub-section (1) of Section 4. The answer proper to be given to the question stated by the Commissioner is that no part of the income therein mentioned is exempt from taxation under the second proviso to Section 4(2) of the Indian Income Tax Act. Their Lordships will humbly advise His Majesty that the appeal should be allowed and that the question referred to the Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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