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TMI Blog1978 (2) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Ordinance, 1943 (XVI of 1943), shall be deemed to be income for the purposes of the Indian Income-tax Act, 1922, and shall, notwithstanding the provisions of section 34 of that Act, be treated as income of the previous year which constitutes or includes the chargeable accounting period in respect of which the said sum is repayable: Provided that any such sum repaid in respect of any profits which are also assessable to excess profits tax under the law in force in the United Kingdom shall be treated, for the purpose of assessment to income-tax and super-tax, as income of the previous year during which the repayment is made." Sub-section (14) of s. 11 of the said Act was as follows: Section 11(14) " Where under the provisions of sub-section (2) of section 12 of the Excess Profits Tax Act, 1940 (XV of 1940), excess profits tax payable under the law in force in the United Kingdom has been deducted in computing for the purposes of income-tax and super-tax the profits and gains of any business, the amount of any repayment under subsection (1) of section 28 of the Finance Act, 1941 (4 5 Geo 6 c. 30), as amended by section 37 of the Finance Act, 1942 (5 6 Geo 6 c. 21), in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... still the refund can be taxed under the 1961 Act only if it is taxable thereunder. The proviso to section 11 which specifically refer to the U. K. refunds provides only for its being treated as income in the year of receipt. It does not provide for the said amount being treated as income accruing or arising in India. The locus of the income has thus to be ascertained. The refund arose under a statute in the U.K. and was due and payable there. It thus accrued and arose there. The foreign income of a non-resident is not taxable in India. The assessee is a non-resident and the income accrued abroad. It cannot, therefore, be taxed by reference to section 11 of the Finance Act, 1946, or the Income-tax Act, 1961." In the premises, under s. 256(1) of the I.T. Act, 1961, the following question has been referred to this court : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the post-war E.P.T. refund received by the assessee in the United Kingdom was not liable to be included in the assessable income of the assessee by reference to section 11 of the Finance Act, 1946, or the Income-tax Act, 1961, for the assessment year 1963-64 ?" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company or during the year the control and management of its affairs should have been situated in the taxable territories. It was, therefore, urged that though sub-s. (14) of s. 11 had made the receipt in question to be the income and had made that receipt assessable to income-tax or super-tax, the sub-section had not made the further provision that such income should be deemed to have accrued or arisen in India. Our attention was drawn to the relevant provisions of s. 5 and s. 9 of the I.T. Act, 1961, and it was submitted that under s. 9 of the Act, for a non-resident company, a receipt would not be taxable unless such income or receipt could be considered to have arisen or accrued in India or deemed to have arisen or accrued in India. It was submitted that sub-s. (14) of s. 11 had not made further deeming provision that such income should be deemed to have arisen or accrued in India and in the case of a non-resident company, without such further deeming provision, the amount could not be taxable. In this connection, reliance was placed on the theory that the deeming provision should be strictly construed and fictions in statute should be limited to the particular purpose for whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the accounting year ended on 31st October, 1946, the assessee obtained in the United Kingdom repayment under s. 28(1) of the English Finance Act, 1941, of a certain amount out of the excess profits tax paid there. The question was whether in the assessment year 1947-48 the amount repaid could be included in the taxable profits of the assessee and could also be taken into consideration for determining their residence under s. 4A(c)(b) of the Indian I.T. Act, 1922. It was held by the Division Bench of this court that the amount repaid was income of the assessee and was liable to be assessed under the Indian I.T. Act, 1922, during the assessment year 1947-48 by virtue of s. 11(14) of the Finance Act, 1946, and, the amount could not be treated as income arising in India, and, therefore, could not be taken into consideration for the purpose of determining the residence of the assessee-company under s. 4A(c)(b) of the Act. Chief Justice Chakravartti referred to the purpose of sub-s. (14) of s. 11 and observed that the section was obviously enacted to meet the case where the assessee, having paid some excess profits tax in the United Kingdom, had an equivalent sum removed from his taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as received, the Indian section was expressed in far stronger language and said that it should be for the purpose of assessment to income-tax and super-tax and be treated as income of the previous year during which the repayment was made. The learned Chief justice, therefore, came to the conclusion that the effect of sub-s. (14) of s. 11 was to make the amount of repayment not only income but also the assessable income in India. The said decision was approved by the Supreme Court in the case of McGregor and Balfour Ltd. v. CIT [1959] 36 ITR 65 where Hidayatullah J. (as his Lordship then was), observed at page 71 of the report as follows : "Mr. Mitra for the company contends that no doubt the amount may be treated as 'income' for the purposes of the Indian Income-tax Act, but the department is still under a duty to prove that the company is liable to tax at all. According to him, this will have to be treated as income received outside the taxable territory, because if the fiction. contemplated its being treated as 'within the taxable territory ', it would have said so specifically. In our opinion, this submission cannot be accepted. That this would have been taxable income but f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a particular provision but in this case no particular provision of the Indian I.T. Act, 1922, has been re-enacted under the I.T. Act, 1961, under which the receipt in question was sought to be made taxable. This question also, in our opinion, is without substance because when the section says " any provision ", it means any or all provisions of the Act. This argument is also concluded by the decision of this court as well as the Supreme Court. Reliance in this connection may be placed on the observation of the Division Bench of this court in the case of Ram Prosad Ramnarain v. Bejoy Kumar Sadhukhan, AIR 1966 Cal 488, where with reference to s. 8 of the General Clauses Act, 1897, the court held that any reference to the Limitation Act, 1908, after its repeal should be read as reference to the Limitation Act, 1963, in the City Civil Courts Act, 1953. In the case of New Central jute Mills Co. Ltd. v. Assistant Collector of Central Excise, AIR 1971 SC 454, the Supreme Court held that on the repeal of the Sea Customs Act reference to the Sea Customs Act in the Central Excises and Salt Act, 1944, should be read as reference to the provisions of the Customs Act, 1962. This contention, o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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