Appeal Nos
3115 16 of 1980
From the Judgment and Order dated 1561978 of the Bombay High Court in IT Ref
No 458 of 1976
VU Eradi and Suman J Khaitan for Khaitan  Co for the Appellant
section Rajappa for Ms A Subhashini for the Respondent
The Judgment of the Court was delivered by BP JEEVAN REDDY J
Assessee is the appellant
He is aggrieved by the decision of the Bombay High Court in Income Tax Reference No 458 of 1976 answering the following question which was referred to it at his instance against him whether on the facts and in the circumstances of the case the amount of tax paid by Ballarpur on behalf of the assessee in assessment years 1974 75 and 1975 76 is income tax ore under the heading other sources 
The Ballarpur Paper and Straw Board Mills Limited Ballarpur is a public limited company engaged in the manufacture of paper and straw board
It undertook to set up a caustic sodachlorine manufacturing plant at Ballarpur
For this purpose it entered into an agreement with Krebs a French concern for purchase of certain machinery and equipment
There was a second agreement between Ballarpur and Krebs whereunder Krebs undertook to provide services of certain personnel including engineers for setting up the plant at Ballarpur
Krebs in turn entered into an arrangement with a Swiss concern Escher Wyas Eurich for supply of certain machinery and also to make available services of certain personnel
The 30 assessee Emil Webler was one such person provided by the Swiss concern The assessee came to India and worked here in connection with the setting up of the plant
According to the agreement between Ballarpur and Krebs the former undertook to pay salaries and other emoluments to personnel provided by Krebs in accordance with the formula contained in the agreement
Inter alia it was provided that salaries are understood free of any Indian tax or duty 
For the assessment year 1974 75 the assessee appellant was paid a sum of Rs 382481 and for the assessment year 1975 76 a sum of Rs 67200 in addition to daily allowances and other facilities
The assessee contended before the Income Tax Officer that he was not liable to pay tax He also filed returns affirming the said stand
The stand taken by him was negatived whereupon Ballarpur paid the tax of Rs 323400 and Rs 35546 for the said two assessment years respectively
In his assessment orders the ITO treated the said tax amount as a perquisite and added the same to the salary amount received by the assessee
The said addition was questioned by the assessee in appeal before the AAC but without success
The matter was then carried to the Tribunal
The Tribunal too did not agree with the assessee s contention and dismissed his appeal whereupon he obtained the aforesaid reference which as stated above has been answered against him by the Bombay High Court
For a proper appreciation of the question arising herein it is necessary to notice certain factual statements contained in the Statement of the Case
It is stated therein according to this agreement Ballarpur were under an obligation to pay by the device of delegation invoices opened with a bank in France certain amount of salaries at agreed rates to Krebs and Cis
Paris for setting up the plant at the town of Ballapur  
The Tribunal clarified that there was no dispute between the parties that the amounts of Rs 382481 and Rs 67200 paid by Ballarpur through Krebs to the assessee for services rendered by it in the two respective years were taxable under the heading Salary 
It further clarified that there was no dispute between the parties that the relationship of the employer and employee did not exist between Ballarpur and the assessee
The Tribunal held as below 1 Ballarpur was under a legal obligation to pay the tax if any levied on the assessee 2 Ballarpur paid the tax by virtue of such a legal obligation    31 The facts found by the Tribunal thus show that the assessee appellant was paid certain salary free of tax but that the tax payable in that behalf was to be and was in fact paid by Ballarpur
The assessment was made upon the assessee directly
The question is whether the said tax component paid by Ballarptir can be included within the income of the assessee
The first contention of  the learned counsel for the assessee is that the amount paid by Ballarpur by way of tax cannot be treated as income  of assessee at all
His second contention is that the assessee did not receive the said amount and therefore it cannot constitute his income
Indeed the learned counsel sought to argue that Ballarpur was under no obligation to pay the said tax amount relating to the salary amount received by the assessee
We find it difficult to agree with the learned counsel
The definition of income  in clause 24 of Section 2 of the Act is an inclusive definition
It adds several artificial categories to the concept of income but on that account the expression income  does not lose its natural connotation
Indeed it is repeatedly said that it is difficult to define the expression income  in precise terms
Anything which can properly be described as income is taxable under the Act unless of course it is exempted under one or the other provision of the Act
It is from the said angle that we have to examine whether the amount paid by Ballarpur by way of tax on the salary amount received by the assessee can be treated as the income of the assessee
It cannot be overlooked that the said amount is nothing but a tax upon the salary received by the assessee
By virtue of the obligation undertaken by Ballarpur to pay tax on the salary received by the assessee among others it paid the said tax
The said payment is therefore for and on behalf of the assessee
It is not a gratuitous payment
But for the said agreement and but for the said payment the said tax amount would have been liable to be paid by the assessee himself He could not have received the salary which he did but for the said payment of tax
The obligation placed upon Ballarpur by virtue of Section 195 of the Income Tax Act cannot also be ignored in this context
It would be unrealistic to say that the said payment had no integral connection with the salary received by the assessee
We are therefore of the opinion that the High Court and the authorities under the Act were right in holding that the said tax amount is liable to be included in the income of the assessee during the said two assessment years
The question then arises under which head of income should the said 32 income be placed
Inasmuch as the assessee is not an employee of Ballarpur which made the payment it cannot be brought within the purview of Section 17 of the Act
It must necessarily be placed under sub section 1 of Section 56 income from other sources 
According to the said sub section income of every kind which is not to be included from the total income under the Act shall be chargeable to income tax under the head income from other sources  if it is not chargeable to income tax under any of the other heads specified in Section 14 Items A to E
It is not the case of the assessee that any provision of the Act exempts the said income from the liability to tax The learned counsel for the assessee appellant relied upon certain decisions in support of his contention
The first is the decision of this court in NA Modi vs SAL Narayana Rao SC
An advocate was appointed as a Judge
He received certain income after his appointment as a Judge in lieu of the professional service rendered by him before his appointment
The question was whether the said amount is taxable
It was held that it was not in view of the provisions of the Act as it then stood
The basis for the said decision is that the assessee therein cannot be said to be carrying on the profession of an advocate at the time he received the said income
We are unable to see how the said decision helps the assessee herein
Indeed in the said decision this court emphasised that the question whether an income falls under one head or the other has to be decided according to the common notion of practical men inasmuch as the Act does not provide any guidance in the matter
It was observed that the heads of income must be decided on the nature of income by applying practical common notions and not by reference to the assessee s treatment of income
The application of said test does not certainly help the assessee herein
The second decision cited is of the Bombay High Court in CLT
Bombay vs Smt
TP Sidhwa The question was whether the income from property received by an assessee of which he is not the owner can be taxed as income  from other sources 
It was held that it cannot be so taxed
We do not see any anology between the facts and principle of that case and those of this case
Here the integral connection between the salary received by the assessee and the tax payable thereon paid by Ballarpur in pursuance of a legal obligation cannot be overlooked
The third case cited is in Mrs Sheela Kaushish vs CIT Delhi 131 ITR 435 33 SC
In this case it was held that determination of annual value under Section 23 of the Income Tax Act 1961 should be done by taking the standard rent as the basis even where the assessee is receiving rent higher than the standard rent
Again we must say we see no relevance of the said principle of this case to the facts of this case
For the above reasons the appeals fail and are dismissed
No costs
VPR Appeals dismissed


Summary:
The appellant carried on business in England and in India
For the previous years it paid excess profits tax in both countries and it obtained deduction of the amounts so paid from its profits and gains for the purposes of the Indian Income tax Act
In the assessment year 1947 48 it obtained a repayment of RS
231009 out of the excess profits tax paid in England
The Income tax authorities acting under section 1114 Indian Finance Act 1946 included this amount received in England in the taxable profits of the appellant
The appellant contended that the repayment not being within the taxable territory it could not be taxed
Held that the amount received as repayment of the excess profits tax was rightly taxed
Under section 1114 the amount of repayment was deemed to be income  for purposes of the Indian Income tax Act and that  income  was to be treated as the income for the previous year during which the repayment was made
Section 1114 created a liability irrespective of the considerations arising from the general provisions of the income tax law
The distinction between incomes within and without taxable territories was made unnecessary by section 1114
Eglinton Silica Brick Co Ltd vs Maryian 1924 9 Tax Cas 92 A  W Nesbitt Ltd vs Mitchell 1926  Tax Cas 217 and Kirke s Trustees vs The Commissioners of lnland Revenue  applied