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TMI Blog2001 (5) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... interest earned by the assessee on Commonwealth Treasury Bonds" during this year in computing the world income of the assessee in this year ?" The dispute relates to the assessment year 197l-72. The factual scenario, as indicated in the statement of the case, is as follows : The assessee, a company fully owned by the Government of Australia, operates the well known airline "Qantas". The assessee filed a return of income declaring a total income of Rs. 3,85,528. The same was worked out as fellows : "Adjustment profit: Adjusted profit Rate of profit = --------------- Total world revenue i.e., 6,495,160 = ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of $AU 8,32,832 from the assessments He upheld the Income-tax Officer's view., The matter was carried in appeal before the Tribunal. It was contended that no part of the amount in question could be said to have accrued or arisen in India and therefore the same was not liable to be included in the income. It was submitted that the amount of insurance reserves increased yearly by interest received from investments of the reserves which under the directions of the Government of Australia have to be invariably made in Australian Commonwealth Treasury Bonds and sometimes also by capita-I gains realised on the sale of such investments. These amounts were duly credited to the insurance reserve account at the direction of the Australian Ministe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year. 9. Income deemed to accrue or arise in India.-(1) The following incomes shall be deemed to accrue or arise in India (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income iii India, or through the transfer of a capital asset situate in India ;" "10. In any case in which the Income-tax Officer is of opinion that the actual amount of the income accruing or arising to any non-resident per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income in the case of a non-resident has to be treated as income from whatever source derived which is received or is deemed: to have been received in such a year by or on behalf of such a person, additional income that arises, or is deemed to have arisen or accrued to a person has also to be taken note of. Cumulative conditions necessary for bringing in application under the aforesaid provisions are that income which is deemed to have accrued or arisen in India, has to be income whether directly or indirectly or through any business connection in India; through or from any property in India ; through or from any asset or source of income in India ; through or from any money lent at interest and brought into India in cash or in ki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business which can be treated as deemed income under, section 9 must be one which has accrued or arisen in India and the same forms part of the income derived from business carried out in India. The stand of the Revenue is that the surplus which was a part of the reserve and was invested in bonds has a link with the income earned in India and a note to the statement of account on which reliance was placed reads as follows: "Revenue: Traffic revenue 177,511,508 158,164,034 Charter revenue 27,046,923 22,965,266 Contract work 16,194,979 14,241,939 Income from investments (note 14) 91,169 36, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness operation in India and it cannot be said to be income deemed to have accrued or arisen to the assessee from any business operation in India. As interest derived from investment made by the assessee to the Commonwealth Treasury Bonds accrued outside India, it cannot be treated as income falling under the head 'Profits and gains of business." The concept of accrual or arising of income in India, although not dependent upon the receipt of the income in India, is quite distinct and apart from the notion of deemed accrual. The former follows the general principles of law while in the case of the latter the accrual has to be tested against the deeming provisions of section 9. The distinction-has to be kept in view and the one cannot be mix ..... X X X X Extracts X X X X X X X X Extracts X X X X
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