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TMI Blog1953 (12) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ver by a registered firm on 17th March, 1942. For the purpose of this appeal however this circumstance is not material. The case has been dealt with on the assumption that a single assessee carried on business from 10th October, 1941, to 8th November, 1942, the relevant accounting year. According to the accounts of the assessee, during this period the Mysore branch purchased goods from the Bombay head office and the Madras branch of the value of Rs. 2,45,455. The Income-tax Officer estimated these purchases of the Mysore branch in British India at Rs. 3,00,000 and its profits at Rs. 75,000 on the sale of these goods in Mysore. In view of the provisions of Section 42 of the Act half of this profit, i. e., to the extent of Rs. 37,500, was deemed to accrue or arise in British India, because of the business connection of the non-resident branch in British India. It was contended that the assessee being a person resident in India, Section 42 could not be invoked in the case, because that section had application only to cases of non-residents. The Income-tax Tribunal following the decision of the Bombay High Court in Commissioner of Income-tax v. Western India Life Assurance Co. Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er case such agent shall be deemed to be, for all the purposes of this Act, the assessee in respect of such income-tax : Provided that where the person entitled to the income, profits or gains is not resident in the taxable territories, the income-tax so chargeable may be recovered by deduction under any of the provisions of Section 18 and that any arrears of tax may be recovered also in accordance with the provisions of this Act from any assets of the non-resident person which are, or may at any time come within the taxable territories : Provided further that any such agent, or any person who apprehends that he may be assessed as such an agent, may retain out of any money payable by him to such non-resident person a sum equal to his estimated liability under this sub-section, and in the event of any disagreement between the non-resident person and such agent or person as to the amount to be so retained, such agent or person may secure from the Income-tax Officer a certificate stating the amount to be so retained pending final settlement of the liability, and the certificate so obtained shall be his warrant for retaining that amount : Provided further that the amount recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made in its language in 1939 still continued to have application to cases of "non-residents" alone. In order to clarify this matter, by Act XXII of 1947 the marginal note was amended and it now is in these terms :--- Income deemed to accrue or arise within British India." It is significant that the changes made in Section 42 in the year 1939 were consequential to the entire recasting of Section 4 of the Act. Section 4 as it stood prior to 1939 charged income-tax on all income, profits or gains, from whatever source derived, accruing or arising, or received in British India or deemed under the provisions of the Act to accrue, or arise, or to be received in British India. It further provided that the 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. By the amendment in the year 1939, the total income of any previous year of any person was define ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or arising to him within a Part B State, unless such income, profits or gains are received or deemed to be received in or are brought into the taxable territories in the previous year by or on behalf of the assessee, or are assessable under Section 12-B or Section 42." In view of these legislative changes in the provisions of Sections 4, 14 and 42 of the Act, the conclusion is irresistible that the object of recasting Section 42(1) in general terms was to make the definition of "deemed income" given in the section generally applicable to all classes of assessees. This sub-section has been drafted in the widest terms and there is nothing whatsoever in its language to suggest that its operation is confined to non-residents only. Wherever the legislature intended to limit the operation of any part of this section to non-residents alone, it said so in express terms. Sub-section (2) and the latter portion of sub-section (1) expressly concern themselves with the case of non-residents, while sub-sections (1) and (3) are so framed that they cover both residents and non-residents. A Bench of the Bombay High Court in Commissioner of Income-tax v. Western India Life Insurance Co., held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm the sub-section has been recast into two distinct parts, the first of which is not so restricted, and the second part alone, which begins with the words 'and where the person entitled to the income, profits and gains is not resident in British India', is made applicable to non-resident persons, thereby showing that the former part applies to both residents and non-residents. The opening words of the first proviso also point to the same conclusion, for these words would be surplusage if the sub-section as a whole applied only to non-residents. A contrary view has, no doubt, been expressed by a Division Bench of the Bombay High Court in Commissioner of Income-tax v. Western India Life Insurance Co. Ltd. Though reference was made in that case to the alteration in the structure of sub-section (1) its significance, as it seems to me, was not properly appreciated. The facts that the marginal note to the whole section refers to 'non-residents' and that the section itself finds a place in Chapter V headed 'Liability in special cases' were relied upon as supporting the view that sub-section (1) as a whole applies only to non-residents. As pointed out by the Privy Council in Balraj Kunwa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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