Appeal No 240 of 1955
732 Appeal by special leave from the judgment and order dated September 3 1953 of the Bombay High Court in Income tax Reference No 15 of 1953
Hardayal Hardy and D Gupta for the appellant
G section Pathak section P Mehta section N Andley J B Dadachanji Rameshwar Nath and P L Vohra for the respondent
February 3
The Judgment of Gajendragadkar and Wanohoo JJ was delivered by WANCHOO J
In this matter by our order made on April 24 1958 we had referred the case back to the Tribunal to submit a further statement of case on certain questions
That statement of case has now been drawn up by the Tribunal and sent to this Court
The matter is now ready for decision
This is an appeal by the Commissioner of Incometax Bombay against the judgment of the High Court at Bombay given on a reference under section 602 of the Income tax Act answering the question referred in the negative
That question was  Whether in any event on the facts found by the Tribunal there was any remittance by the petitioner to Bombay within the meaning of and assessable under section 41 b iii of the Income tax Act
 The assessment year concerned was 1948 49 the accounting year being 2003 Sambat
The facts found may now be stated
At the relevant time Bhavnagar was a ruling State and therefore outside British India
There was a mill there which we shall for brevity call the Bhavnagar Mills
The assessee and his brother Gordhandas had large sums in deposit with the Bhavnagar Mills
These sums were profits earlier earned by the assessee and his brother in Bhavnagar
The amounts deposited belonged to the assessee and his brother in equal shares The Bhavnagar Mills kept an account of these deposits
This account showed that on April 7 1947 a sum of Rs 50000 had been paid out to Harkisondas Ratilal and another sum of the same amount to Dilipkumar Trikamlal
There is another mill in Bombay which we shall call the Bombay Mills
The account of the Bombay Mills showed that on April 3 733 1947 Rs 50000 had been received from each of Harkisondas Ratilal and Dilipkumar Trikamlal
Harkisondas Ratilal and Dilipkumar Trikamlal were the benamidars for the assessee and his brother and the entries indicated that the moneys had been withdrawn from the Bhavnagar Mills by the assessee and his brother and advanced to the Bombay Mills
The assessee and his brother were in full control of both the Bhavnagar Mills and the Bombay Mills
On these facts the Tribunal had come to the conclusion that there had been a remittance of the assessee s profits from Bhavnagar to Bombay namely Rs 50000 being half of the amounts mentioned above on account of his share and such remittance was taxable tinder section 41 b iii
The assessee raised the question with which we are concerned in view of this decision
The High Court held that under the section income is taxable only when it is brought into or received in the taxable territory by the assessee himself and not when it is so brought into or received on behalf of the assessee and that all that the facts found by the Tribunal showed was that the assessee disposed of his accumulated income in Bhavnagar by directing his debtor the Bhavnagar Mills to pay an amount not to himself but to a third party namely the Bombay Mills
According to the High Court   The result was that only one debtor was substituted for another
This did not amount to a receipt of the money by the assessee himself in Bombay or to a bringing of it into Bombay by him
 In this view of the matter the High Court answered the question referred in the negative
When the appeal was heard by us on the earlier occasion the learned Advocate for the appellant contended that even on the basis on which the High Court had proceeded namely that there was only a substitution of one debtor for another it has to be said that the money was received by the assessee himself in Bombay
The contention was that the respondent could not become a creditor of the Bombay Mills unless he advanced the moneys to them
734 His point was that even assuming that the receipt of the cheque by the Bombay Mills drawn in its favour by the Bhavnagar Mills did not amount to receipt of moneys by the respondent as soon as the Bombay Mills credited the amount of it to the respondent there was nationally a receipt of the money by the assessee and an advance of it by him to the Bombay Mills to create the debt
The learned advocate for the assessee said in answer to this contention that there was nothing to show that the agreement for the advance of the money by the assessee to the Bombay Mills had not been made at Bhavnagar
He also said that there was nothing to show as to how the money or the cheque came from Bhavnagar to Bombay and that it might have been that it was agreed between the assessee and the Bombay Mills at Bhavnagar that the money would be deposited in the Bombay Mills to the credit of the assessee and the cheque or the money might have been delivered to the Bombay Mills or its agent at Bhavnagar
His contention was that if such was the case and on the evidence it could not be said that it was not then the notional receipt of the money by the assessee and its advance by him to the Bombay Mills if any would have taken place in Bhavnagar and when the money was thereafter brought to Bombay it was the Bombay Mills  own money
In this view of the matter according to the learned advocate for the assessee the moneys could not be subject to tax under the section
In this position of the arguments then advanced we observed as follows   It seems to us that this contention of the learned advocate for the respondent has to be dealt with before this appeal can be finally disposed of
We therefore think it fit to refer the case back to thaT Tribunal to submit a further statement of case after taking such evidence as may be necessary as to show how the cheque was brought from Bhavnagar to Bombay and what agreement had been made between the parties concerned as a result of which the amount of the cheque was credited in the names 735 of Harkison Ratilal and Dilipkumar Trikamlal in the accounts of the Bombay Mills
The Tribunal will submit its report within four months
In view of this order we refrain from expressing any opinion on any of the points argued at the bar
 It is pursuant to this order that the further statement of case has been submitted by the Tribunal
In its statement of case now submitted the Tribunal found the following facts The Bhavnagar Mills had an account in the Bank of India Limited at one of its Bombay Branches
A cheque book in respect of this account was with the assessee who had power to operate it on behalf of the Bhavnagar Mills
The assessee acting on behalf of the Bhavnagar Mills drew a cheque on the Bhavnagar Mills aforesaid account in the Bank of India Limited on April 3 1947 in favour of self
This was done in Bombay
This cheque was handed over by the assessee to the Bombay Mills in Bombay for being credited in the account of the Bombay Mills in the names of Harkison Ratilal and Dilipkumar Trikamlal which were really the benami names of the assessee and his brother
The Bombay Mills on the same date presented this cheque to another branch of the Bank of India Ltd in Bombay where they had an account for deposit in that account
The actual entries in the books of the different branches of the Bank were made on April 5 1947
The Bombay Mills also made entries in their own books crediting the moneys received on the cheque to Harkison Ratilal and Dilipkumar Trikamlal
The assessee in his turn instructed the Bhavnagar Mills to debit the joint account of himself and his brother with it in the sum of Rs 1 lac as having been paid to Harkison Ratilal and Dilipkumar Trikamlal
This entry was actually made a little later namely on April 7 1947
The facts now found would show that nothing had been done at Bhavnagar
It was also found that as the Bombay Mills needed moneys and the assessee had money with the Bhavnagar Mills he utilised these latter moneys for an advance being made by him out of it to the Bombay Mills 94 736 As will appear from our earlier order hereinbefore set out none of the points arising in the appeal had been decided by us on that occasion
The question that we have to decide is whether on these facts it can be said that income had been brought into or received in Bombay by the assessee
The relevant portion of the section is in these terms   4
1 Subject to the provisions of this Act the total income of any previous year of any person includes all income profits and gains from whatever source derived which a are received or are deemed to be received in the taxable territories in such year by or on behalf of such person or b if such person is resident in the taxable territories during such year i accrue or arise or are deemed to accrue or arise to him in the taxable territories during such year or ii accrue or arise to him without the taxable territories during such year or iiihaving accrued or arisen to him without the taxableterritories before the beginning of such year and after the 1st day of April 1933 are brought into or received in the taxable territories by him during such year or c if such person is not resident in the taxable territories during such year accrue or arise or are deemed to accrue or arise to him in the taxable territories during such year
 In the present case we are concerned with cl
In order however to understand what the words  brought into or received in the taxable territories by him  mean we have to consider the whole scheme of this subjection
The subjection mainly deals with the total income of any previous year which is chargeable to income tax under section 3 of the Act
It is divided into three parts
The first part which is el
a provides that all income profits and gains received or deemed to be received in the taxable territories in such year by or on behalf of such person will be included in the taxable income
So far as el
a is 737 concerned it is immaterial whether the person is resident in the taxable territories or is not resident therein as long as income etc
is received in the taxable territories by or on behalf of such person in the previous year it is liable to be included in the computation of total income
Under this clause therefore it is the receipt in the previous year that is material and the residence of the person to be taxed is immaterial
It has been held under this clause that receipt must be the first receipt in the taxable territories and if income etc
has been received elsewhere in the same year and is then brought into the taxable territories it should not be considered to be income etc
received in such year in the taxable territories see Keshav Mills Ltd vs Commissioner of Income tax The basis of this decision obviously is that cl
a is dealing with the receipt of income etc
in the taxable territories in the year in which it has accrued or arisen and in those circumstances it is the first receipt of such income in the taxable territories that gives rise to liability of the charge of income tax
If such income etc
accruing or arising in the previous year has already been received outside the taxable territories it cannot be said to be received again as such in the taxable territories if it is brought from the place where it was received as such into the taxable territories
The second part which is cl
b deals with the case of a person Who is resident in the taxable territories during such year
In his case all income which accrues or arises or is deemed to accrue or arise to him in the taxable territories during such year is chargeable to income tax besides all income etc
which accrues or arises to him without the taxable territories during such year is also chargeable to income tax
Then comes the part with which we are directly concerned and which provides that all income etc
which having accrued or arisen to such person without the taxable territories before the beginning of such year and after the first day of April 1933 is brought 1  738 into or received in the taxable territories by him during such year will be chargeable to income tax
This is a special provision relating to income etc
which has accrued or arisen not in the previous year but in years previous to that though after April 1 1933
This special provision relating to a person resident in the taxable territories must be distinguished from the provision in el
a in connection with which it has been held that the receipt there meant must be the first receipt for cl
a applies irrespective of whether the person is resident in the territories or not to income etc
of the previous year received in the taxable territories in the same year
Clause biii on the other hand refers to income etc
which accrued before the previous year and is brought into or received in the taxable territories in such year by a person resident therein and obviously the considerations which led this Court to hold in Keshav Mills case1 that the receipt in el
a means the first receipt would not apply to this special provision in cl
biii
Mr Pathak for the respondent however argues that the words in cl
biii are the same as in cl
a namely  are received  and therefore the receipt in cl
biii must also be the first receipt
These words however are not terms of art and in our opinion their meaning must receive colour from the context in which they are used
In the context of cl
a these words could only refer to the first receipt but it does not follow from this that in the context of el
biii also they refer only to the first receipt
Let us see what el
biii is meant to provide for
It will be noticed that el
a cl
bi and ii and cl
c deal only with income etc
which has arisen in the previous year while el
biii deals with a special class of cases where a person resident within the taxable territories had income etc
accruing or arising to him without the taxable territories and which he did not bring in the taxable territories as and when it arose but does so many years later
In such a case it stands to reason that the income etc
having arisen to such person may be years before the previous year must 1  739 have been received by him outside the taxable territories  but it is urged that cl
biii does not speak of receipt outside the taxable territories but only speaks of income etc
having accrued or arisen to him without the taxable territories and that it is possible that though the income etc might have accrued long ago it might not have been received even outside the taxable territories
This is theoretically possible but in our opinion it is clear that when el
biii speaks of income etc
having accrued or arisen without the taxable territories it is implicit in it further that such income etc
having accrued or arisen without the taxable territories had already been received there
Considering that el
biii applies to all income having accrued or arisen after the first day of April 1933 that is more than 27 years ago now it does not seem reasonable to hold that the words  having accrued or arisen  used in that clause have no reference to its receipt also outside the taxable territories
It seems to us therefore that what cl
biii provides is that if any income etc had arisen or accrued outside the taxable territories and had been received there sometime before the previous year and if such income etc
is brought into or received in the taxable territories by such person in the previous year it will be liable to be charged under section 3
In the circumstances looking to the special pro
vision of el
biii it would be reasonable to infer that what it contemplates is bringing into or receipt in the taxable territories in the previous year of income etc
which had already accrued or arisen without the tax
able territories earlier than the previous year and may have also been received there
Any other interpretation would really make that part of cl
biii which refers to received in the taxable territories  more or less useless for it is not likely that income having accrued or arisen outside the taxable territories before the previous year should not have been received also outside the taxable territories
Therefore the reason
able interpretation of el
biii is that if a person resident in the taxable territories has already received without the taxable territories any income etc
accruing or arising to him without the taxable territories 740 before the previous year brings that income into or receives that income in the taxable territories he would be chargeable to income tax under section 3
Therefore for the purpose of cl
biii the receiving in the taxable territories need not be the first receipt
We shall later consider what will be the effect of this interpretation on the facts of this case
Then there is cl
c which deals with the case of a person resident outside the taxable territories to whom income etc
has accrued or arisen or is deemed to have accrued or arisen in the taxable territories during the previous year
It will thus be seen that cl
a deals with a person who may or may not be a resident in the taxable territories and makes the income etc
accruing or arising to him in the previous year liable to income tax if it is received or deemed to be received by him in the taxable territories also within the same year  cl
b deals with the case of a person who is resident in the taxable territories and gives a wider definition of the total income and cl
c deals with a person not resident in the taxable territories and makes only such of his income as accrues or arises or is deemed to accrue or arise in the previous year in the taxable territories liable to income tax in addition to what is provided in el
Let us now see on the facts of this case whether the respondent can be said to have received this sum of Rs 50000 in the taxable territories during the previous year
The statement of the case shows that this sum was income etc
of the respondent which accrued to him outside the taxable territories and had been received by him there and deposited in the Bhavnagar Mills in his account
It is also clear from the facts which we have set out already that this money which was lying to the credit of the respondent in the Bhavnagar Mills was received by him by means of a cheque on the Bank of India Ltd Bombay in which the Bhavnagar Mills had an account and on which the respondent had the authority to draw
Having thus drawn the money by a cheque on the said bank the respondent advanced it to the Bombay Mills and the cheque was cashed by the Bombay Mills and the 741 money was credited into the account of the respondent s benamidars in the Bombay Mills
There was thus clearly receipt in the previous year of income etc
which had accrued to the respondent outside the taxable territories before the previous year and he would therefore be chargeable under section 3 of the Act with respect to this amount
The High Court has held that the income would be taxable only when it is brought into or received in the taxable territories by the assessee himself and not when it was so brought or received on behalf of the assessee
The relevant words of el
biii with which we are concerned are these are brought into or received in the taxable territories by him during such year
 We have held that this is a case of receipt by the respondent in the taxable territories it is therefore unnecessary to consider in the present case whether the words  brought into the taxable territories by him  mean that the income must be brought in by the person himself as held by the High Court
This being a case of receipt there can be no doubt that income etc
was received by the respondent and the indirect method employed in this case for receiving the money would none the less make it a receipt by the respondent himself Reference in this connection may be made to Bipin Lal Kuthiala vs Commissioner of Income tax Punjab 1 where it was held that the money was received by the assessee even though in fact what bad happened there was that the assessee directed his debtor in Jubbal which was outside the taxable territories to pay money to his creditor in British India
It was held that in the circumstances there was receipt of income in British India though the method employed was indirect
We are therefore of opinion that the respondent is liable to pay incometax on the sum of Rs 50000 under section 41biii of the Act and the question framed therefore must be answered in the affirmative
The result is that the appeal is allowed and the order of the High Court set aside
The appellant will get the costs of this appeal and in the court below
1 AIR 1956 SC 634
742 SARKAR J
The facts necessary for this appeal are few and simple
The assessee who is the respondent in this appeal was a resident of Bombay
He had certain in come in Bhavnagar a place without the taxable territories which he had kept in deposit with a concern there
This concern had an account in a bank in Bombay
The assessee presumably as one of the officers of the concern could operate this account
He drew in Bombay a cheque on this account which cheque eventually found its way into the account of a concern in Bombay in a bank there and was credited in that account
The Bombay concern thereafter made entries in its own books of account in respect of the amount of the cheque in favour of two persons of the names of Harkison Ratilal and Dilipkumar Trikamlal
The Bhavnagar concern in its turn a few days later debited the account that the assessee had with it in respect of the deposits with the amount of the cheque as moneys paid to these two persons
These two persons however were only benamidars for the assessee
The transactions therefore showed that the assessee had withdrawn the money from the concern at Bhavnagar out of its accumulated income and advanced it to the concern in Bombay
The Tribunal found it as a fact that the assessee had utilised in Bombay his income lying at Bhavnagar for making an advance in Bombay
These transactions took place in April 1947
I have simplified the facts a little for clarity
Actually the account in the concern at Bhavnagar was in the joint names of the assessee and his brother and the advance to the concern in Bombay was really in their joint names
The assessee s share was half of the amount of the cheque and with that share alone we are concerned in this case
On these facts half the amount of the cheque as representing the assessee s share of the accumulated income was included in his total income for assessment to income tax for the year 1948 49 under section 41biii of the Income tax Act 1922
That section so fair as is material is in these terms 743 section 4
1 Subject to the provisions of this Act the total income of any previous year of any person includes all income profits and gains from whatever source derived which a are received or are deemed to be received in the taxable territories in such year by or on behalf of such person or b if such person is resident in the taxable territories during such year iiihaving accrued or arisen to him without the taxable territories before the beginning of such year and after the 1st day of April 1933 are brought into or received in the taxable territories by him during such year or The only question is whether the assessee can be said to have  brought into  or  received  this income in Bombay within the meaning of sub cl
iii of section 41b
No other objection to the assessment was raised
The respondent first contends that he cannot be said to have  received  the income in Bombay
He contends that on the facts found it must be held that he had already  received  the income in Bhavnagar and he could not  receive  it again in Bombay or anywhere else
It seems to me that this contention is well founded
This Court has held that  Once an amount is received as income any remittance or transmission of the amount to another place does not result in I receipt  within the meaning of this clause at the other place  Keshav Mills Ltd vs Commissioner of Income tax Bombay 1
No doubt the observation was made with regard to el
a of section 41
But I am unable to find any reason why the word should have a different meaning in sub cl
iii of a 41b
On the contrary the words  brought into  in subel
iii would furnish a reason if one was necessary for the view that the word   received  there means received for the first time
I venture to think that this Court did not in Keshav Mills case 1 hold that that word in section 41a meant 1  962 95 744  the first receipt after the accrual of the income  because of anything in the context in which the word occurred but because in the nature of things income can be  received  only once and not more than once and a subsequent dealing with income after it has been received can never be a  receipt  of income
It seems to me that what was said in connection with the Act as it then stood in Board of Revenue vs Ripon Press1 namely that you cannot receive the same sum of money qua income twice over once outside British India and once inside it  expresses the inherent nature of receipt of income and still holds good and unless the context compels a different meaning which I do not find the present context to do income can be received only once
As in the present case it seems fairly clear that the assessee had received the income in Bhavnagar I do not think he can be taxed on it on the basis that he  received  it in Bombay over again
If however the assessee did not  receive  the income in Bombay it seems clear to me that he brought into Bombay that income
He got in Bombay an amount which he had earlier received in Bhavnagar as income for he advanced it to a concern in Bombay and this he could not do if he had not got it
The getting of the income in Bombay may not have been the receipt of it but how could he got it if he did not bring it in  After the assessee received the income in Bhavnagar it remained all the time under his control and that is why he could not receive it again see Sundar Das vs Collector of Gujrat 2
An assessee might however change the shape of the income received
Section 41 biii does not require that in order that income may be brought into the taxable territories it is necessary that the shape of the income should not have been changed since it was first received
Indeed it has not been contended to the contrary
Sub clause iii of section 41b would have completely defeated itself if it required that the income had to be kept in the same shape in which it had been received
Whatever shape 1 Mad
706 711
2 Lah
745 the income had assumed the assessee had it with him all the time as income and for the purpose of sub cl
iii it could be brought into the taxable territories in that shape
Now what the assessee had done with the income in this case was to put it with a party in Bhavnagar
The income then took the shape of a debt due to him
It became a right to receive money or moneys worth
When he had that debt discharged in Bombay he must have had it brought into Bombay
Therefore he had brought the income into Bombay
Suppose he had received the income in the shape of coins and had kept it in his safe at Bhavnagar and brought the coins into Bombay
There would have been no doubt that he had brought the income into Bombay
Suppose again he had put the income originally received by him at Bhavnagar in a bank there and then he obtained a draft from the bank payable in Bombay and brought the draft from Bhavnagar to Bombay and cashed it there
Again there would be little doubt that he had by this process brought the income into Bombay
It is well known that though income in income tax law is generally contemplated in terms of money it may be conceived in other forms
In fact anything which represents and produces money and is treated as such by businessmen would be income see per Lord Lindley in Gresham Life Assurance Society Ltd vs Bishop 1 and per Lord Halsbury LC in Tennant vs Smith 2
If the bringing of the bank draft would be bringing of income I am unable to see why the bringing of a right to receive the money would not be bringing of income when that right has been exercised and turned into moneys worth
Such a right would be based on a promise by the debtor to pay and though verbal would be considered by businessmen to represent money
The assessee in Bombay used that right and obtained moneys worth
He accepted the Bhavnagar concern s cheque in Bombay gave it a pro tanto discharge for the debt owing by it to him
He used the cheque in acquiring a new asset namely a promise by the 1  296 2   156
746 Bombay concern to pay money
Therefore in my view the respondent assessee was liable under section 41a biii to be taxed ON the amount of the cheque as income which he had brought into the taxable territories
I would hence allow the appeal and answer the question referred in the affirmative
Appeal allowed


Summary:
Lands in four villages forming part of the Cis Sutlej jagir were compulsorily acquired under the East Punjab Acquisition and Requisition ofImmovable Property Temporary Powers Act 1948
At the time of the acquisition A was the holder of the jagir
Possession over one of the villages had been given to 677 A s wife G in lieu of maintenance under a consent decree
The matter of payment of compensation was referred to an arbitrator
A claimed that he was entitled to the entire compensation amount as he was the present holder of the jagir
A s son S claimed that the lands acquired were inalienable that A merely had a life interest therein and that the compensation money should be deposited out of which A should get only the interest for his life
G claimed that she was entitled to the entire compensation in respect of the lands over which she was in possession
All the claimants claimed interest on the compensation amount from the date of taking of possession to the date of payment of compensation
The arbitrator held i the acquired lands were inalienable and A merely had a life interest thereiq ii S was entitled to a share in the compensation awarded iii the amount of compensation for the first three villages should not be deposited but should be divided between A and S in the proportion of 34th to 14th iv the compensation for the fourth village should be deposited and the interest thereof be paid to G and after the death of G the amount be divided between A and S half and half and v the claimants were not entitled to any interest on the amount of compensation
On appeal the High Court confirmed the awards in toto
The claimants appealed to the Supreme Court by special leave
Held that the acquired lands formed part of a Cis Sutlej Jagir which was inalienable that A was merely a limited owner thereof and was not entitled to the entire amount of compensation and that the reversioners were also entitled to a share therein
The compensation amount could not be permanently deposited leaving the parties the right to enjoy only its income
Even if the equitable principle of section 32 Land Acquisition Act 1894 was applied it would not justify the permanent investment of the compensation amount
Section 321b was intended to be applied provisionally for short periods where other lands had to be purchased out of the compensation money but were not immediately available and the money had to be invested as an interim measure till such lands were available
It was fair to divide the compensation money in respect of the first three villages half and half between A and section In deciding the question of apportionment on equitable grounds it was relevant and material to take into account the facts that no part of the amount paid to A would reach the reversioners that S himself had a son and that the reversionary interest had to be safeguarded
Shri Somashekhar Swami vs Bapusaheb Narayanrao Patil AIR  K C Banerjee Official Receive In re AIR 1928 Cal
402 Mt Gangi vs Santu AIR 1929 Lah 736 and Special Deputy Collector Ramnad vs Rajah of Ramnad AIR 1935 Mad 215 referred to
Held further that the claimants were entitled to interest at 4 per annum on the compensation amount from the date when possession was taken by the State to the late on which it deposited 678 or paid the amount of compensation to the claimants  The provision in section 5e of the 1048 Act which made section 231 of the Land Acquisition Act 1894 applicable did not exclude the application of SS 28 and 34 of the latter Act which dealt with the payment of interest
On general principles the act of taking possession of immovable property generally implied an agreement to pay interest on the value of the property  the right to receive interest took the place of the right to retain possession
The application of this rule was not excluded by section 5 of the 1948 Act
Even under the Interest Act 1839 the power to award interest on equitable grounds was expressly saved by the proviso to section 1
Swift  Co vs Board of Trade  Birch vs joy  and Inglewood Pulp and Paper Co Ltd vs New Brunswick Electric Power Commission  applied
Surjan Singh vs The East Punjab Government AIR 1957 Punj
265 approved
Seth Thawardas Pherumal vs The Union of India and Nachiappa Chettiar vs Subramaniain Chettiar   referred to