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TMI Blog1948 (10) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... tax in respect of the profits and gains of its life insurance business under rule 2(b) of the schedule to the Act, is entitled under the third proviso to Section 4(1) of the Act to a deduction of ₹ 4,500 in respect of certain income derived by it from the investments of part of its business funds outside British India, which income however was not brought into or received in British India. The facts of the case are as follows:- The respondents company is resident in British India and carries on the business of life insurance in British India with its head officer at Satara in the province of Bombay. It has no branches outside British India. All its profits are derived from its life insurance business. Among other investments ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment of the income of that year so much of such excess as does not exceed four thousand five hundred rupees. *** Section 42. (1) All income, profits or gains accruing or arising, whether directly or indirectly, through or from any business connection in British India, or through or from any property in British India, or through or from any asset or source of income in British India or through or from any money lent at interest and brought into British India in cash or in kind, shall be deemed to be income accruing or arising within British India, and where the person entitled to the income, profits or gains is not resident in British India, shall be chargeable to income-tax either in his name or in the name of his agent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 1940-41, he assessed the company under rule 2(b) upon the average of the surplus disclosed by the actuarial valuation made for the last intervaluation period a triennial period ending on the December 31, 1938, without allowing the deduction of ₹ 4,500 under the proviso to Section 4(1). It was common ground that in each year of assessment and in each year of the triennial period the amount of the respondents income accruing or arising without British India exceeds the amounts brought into India in that year. The company appealed to the Appellate Assistant Commissioner of Income-tax, Belgaum Range, Belgaum, the only material ground of appeal being that in respect of the income accruing or arising without British India and not bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the March 26, 1945, the High Court of Bombay, Kania and Chagla, JJ., delivered judgment, holding that the view of the Income-tax Appellate Tribunal was correct. The question which now arises was not argued in the High Court, the judgments of the learned judges being based upon the construction of Section 42 of the Act which they held only applied to non-residents and had no application to the present case in which the income in question had clearly accrued to the company outside British India. Their Lordships agree with the High Court that Section 42 has no application but express no opinion upon the question whether the section refers only to non-residents. The argument before their Lordships Board was principally directed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase does draw attention to the distinction between an assessment upon actual income and an assessment upon a notional income and in so far as an average derived from a triennial period is the basis for computation of the income of one year in this Act the case has an important bearing. But apart from authority, their Lordships are of opinion that the appellant's contention is correct and they find it impossible to apply the words of the third proviso to Section 4(1) to an assessment under rule 2(b) of the schedule and they will therefore humbly advise His Majesty that this appeal should be allowed with the costs of this appeal, and that the assessment of the Income-tax Officer for Satara should be restored. Their Lordships made no order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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