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TMI Blog1930 (1) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1928. The principal and interest were both payable at Calcutta, the former between 1955 and 1960, and the latter half-yearly at four and a half per cent, per annum. The Promissory Note was then assigned to the assessee by the bank and was duly endorsed in his favour. It was also " enfaced "- as it is called-by a direction that the interest was payable at Hyderabad (Deccan), This enfacement was effected under certain statutory rules framed by virtue of the Indian Securities Act 1920. It had the effect of making the interest thenceforth payable at the Hyderabad Residency Treasury, which, though an office of the Government of India, has now been expressly found by the Commissioner to be situate outside British India. No point has been taken that the date of enfacement, viz., August 7, 1928, is prior to that of the Promissory Note itself. Admittedly, Exhibit P is only a specimen, as the original Promissory Notes have since been sold by the assessee and parted with. So I pass that by. Accordingly, we have to deal with a case where at the material dates the debt was contracted in British India, and the principal was repayable in British India, but the interim interest on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dover Railway Co. (No. 1 (1866) L.R. 2 C. A 201. And indeed in this very Clause 4(1), we have the earlier words " income...from whatever source derived." 7. Now the interest we have to deal with clearly arose or sprang from principal moneys invested in British India and repayable in British India. Its amount was calculated as a percentage on those principal moneys, and its source was those principal moneys. And if this interest had also been payable in British India, then normally it would have been caught by Section 4(1) as being " received " there, quite apart from any other words. But the argument of the assessee to be successful must take this vital step, viz., that because the interest was in fact payable outside British India, and received outside British India, therefore it did net accrue or arise in British India. In my judgment that argument is unsound. It in effect confines the words " accruing or arising " to " payable ", and inheres the fact that income payable in British India is normally caught by the word " received ". It also ignores what I have already mentioned as to the origin or source of the interest. In short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell, which I have had the advantage of reading. 10. In the result I would hold that the income in question being interest on a security and debt of the Government of India issued and contracted in British India and repayable there, accrued or arose in British India within the meaning of Section 4(1) of the Act, notwithstanding that it was actually payable and paid outside British India. I would, therefore, uphold the opinion of the Commissioner, and answer the questions submitted to us as follows, viz., (1) The interest in question is income accruing or arising in British India within the meaning of Section 4(1) of the Act. (2) The said interest is liable to be assessed to Spartan. I would also direct the assessee to pay the Commissioner's costs of this reference, to be taxed by the Taxing Master on the Original Side scale. C.P. Blackwell, J. 11. The answers to the questions submitted on this reference depend upon the meaning to be attributed to the words in Section 4(1) of the Indian Income Tax Act 1922 " income, F profits or gains, as described or comprised in Section 6, from whatever x source derived, accruing or arising, or received in British India." 12. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion Mr. Brooks undoubtedly had the right to receive the profits in Australia, where they were made, as well as the right to bring them to England, if he choae. These, words of the Lord Justice cannot, therefore, in my opinion, be relied upon as an expression of opinion that profits or gains do not arise or accrue in the place where they are made. 17. Turning to the Indian authorities to which our attention was drawn, not much assistance can, in my opinion, be derived from them, the facts in each case being so different from those in the present. There are, however, certain passages in some of the judgments in those cases, to which I will briefly refer, which appear to me to be opposed to the contentions raised on behalf of the assessee in the present case. 18. In Board of Revenue, Madras v. Mamanadhan Chetty ILR (1919) Mad. 75 Abdur Rahim, Offg. Chief Justice, said at page 81 with reference to Section 3(1) of the Indian Income Tax Act of 1918 (which corresponds in substance with Section 4(1) of the present Act) :-" The tax is leviable with reference to the place where the income accrues or arises or is received and not, with reference to the residence of the person who i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue upon, or arising from, that loan accrues or arises in British India. 19. But even if this interest accrues or arises in British India, must there still be a right to receive it in British India in order to render the payee liable to Income Tax and super-tax ? I think not. This class of income falls within the second head mentioned in Section 6 of the present Act, namely, " Interest on Securities", Section 8 provides as to this class of income as follows:-" The tax shall be payable by an assessee under the head ' Interest on Securities' in respect of the interest receivable by him on any security of the Government of India or of a Local Government,.." The word used here is " receivable ". It is not confined to interest which is receivable in British India. Accordingly, in my opinion, the tax is payable upon this interest, which I hold to accrue or arise in British India, notwithstanding that the assessee has no right to receive it in British India, and that it is receivable at a place outside British India. 20. I would, therefore, answer the questions submitted as follows :-(1) The interest accrues or arises in British India and (2) The sai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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