9911796707
TMI Blog1973 (4) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... lding that there was actually a surplus of $ 1,43,754 by the sale of the two rubber estates after setting off of $ 46,226, the loss sustained by the assessee in the working of the gardens and that in terms of the second proviso to section 4(1) of the Indian Income-tax Act, 1922, the entire sum of $ 1,04,774 brought into or received in the taxable territories are taxable. The assessee appealed to the Appellate Assistant Commisioner contending that there was no profit available for remittance and that having regard to the nature of the business it cannot be said that there was profit on the sales of the estates on the dates of remittances. Agreeing with the assessee's contention, the Appellate Assistant Commissioner held that the remittances were not taxable as there was no surplus available as revenue profits for remittence if the deductions claimed by the assessee had been allowed. He, however, did not accept the assessee's other contention that no amount could be considered as profits on the sale of the estates in the year of account. The revenue took the matter in appeal to the Income-tax Appellate Tribunal contending that the Appellate Assistant Commissioner had gone wrong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t been sold, the assessee could be taxed on such of those profits as computed under the provisions of the Act in the year of account. It is next contended before us on behalf of the assessee that only the remittances from profits accrued prior to the accounting year are taxable under section 4(1)(b)(iii) of the Indian Income-tax Act, 1922, and that the assessee cannot be said to have remitted any part of the profits before the close of the accounting year when alone the profits of the business have to be worked out after allowing for the statutory deductions. The revenue, however, contends that the assessee being a resident but riot ordinarily resident, the income accruing or arising to him outside the taxable territories would be assessable if it is brought into or received in the taxable territories during such year under section 4(1)(b)(ii) read with the second proviso thereto. In Shankar Iranna Gumdel v. Commissioner of Income-tax Chagla C. J., speaking for the Bench, expressed the view that when an assessment is made under section 4(1)(b)(iii) of the Indian Income-tax Act, 1922, it is an assessment on remittance of profits and as such a tax cannot be levied on profits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e remitted in the 'previous year' and therefore, it cannot be stated that the income-tax authorities are precluded by law from considering the true state of affairs by looking into the financial position of the assessees of the years prior to the previous year." Section 4(2), before its amendment in 1939, taxed the remittances of foreign profits notwithstanding that they did not accrue in that year. Section 4(2), before its amendment, was as follows: "4. (2) Income, profits and gains accruing or arising without British India to a person resident in British India shall, if they are received in 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 the first day of April, 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." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come, there is included in the income of a resident person profits and gains having accrued or arisen to such person without British India before the beginning of the account year and after the first of April, 1933, and brought into or received in British India by him during that year. Therefore, sub-clause (iii) catches income which is brought into or received in British India by the assessee during the year. Although grammatically the second proviso must apply to sub-clause (iii) there can never be a case in which it in fact gives relief to any taxpayer because under sub-clause (iii) tax only attaches to a particular type of income, profits and gains, i.e., income, profits and gains brought into or received in British India during such year, i.e., the account year, and the benefit given by the second proviso is not to operate in certain events and one of those events is that if the income, profits and gains are brought into or received in British India during such year (the words used in sub-clause (iii) of that clause and in the second proviso are similar); so that in effect the proviso can only give relief to taxation under sub-clause (ii) of clause (b)." Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of profits the right of a person to a share therein is determined, the question assumes practical importance, for it is only on the right to receive profits or income, profits accrue to that person. If there is no right, no profits will be deemed to have accrued." On a reading of the various clauses in section 4(1) it is clear that section 4(1)(a) in terms is not unlike section 4(1)(b) or (c) confined in its application to any particular category of assessees. Section 4(1)(a) is general and applies to a resident as well as a non-resident person. The second proviso to section 4(1), although it relates to the case of a person not ordinarily resident, indicates that income, profits and gains which accrue or arise to such a person without the taxable territories in the previous year can be included in his total income if they are brought into or received in the taxable territories and become chargeable to tax under section 3 read with section 4(1)(a). The contention of the learned counsel for the assessee is that the income, profits or gains of a resident but not ordinarily resident can be brought to charge only if such income or profits or gains are received in the taxable territo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appreciation of the technical appropriateness of its language. Selborne L. C. said in Caledonian Railway Co. v. North British Railway Co.: "The more literal construction ought not to prevail, if it is opposed to the intentions of the legislature, as apparent by the statute; and if the words are sufficiently flexible to admit of some other construction by which that intention will be better effectuated." The learned counsel for the assessee points out that the fact that clause (iii) imposes a charge on remittance basis only on the past profits alone, it must be assumed that the legislature intended only to tax past profits and not current profits on remittance basis. As pointed out by Commissioners of Inland Revenue v. Dowdall O' Mahoney Co. Ltd., the beliefs or assumptions of those who frame acts of Parliament cannot make the law. Therefore, we have to actually construe the various clauses in section 4(1) in the light of the object of the Act. Undoubtedly the Act imposes a tax on an assessee who is a resident on the income, profits and gains received or accrued to him in the taxable territories during the year of account. It cannot, therefore, be assumed that the legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
