Case: The Commissioner Of Income-Tax, Bombay Vs. Dharamdas Hargovindas

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. (b) (iii) provides is that if any income etc. hand 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 S. 3.In the circumstances, looking to the special provision of cl. (b) (iii) 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 taxable territories earlier than the previous year and may have also been received there. Any other interpretation would really make that part of cl. (b) (iii) 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 reasonable interpretation of cl. (b) (iii) is that if a person resident in the taxable territories who has already received without the taxable territories any income etc. accuring or arising to him without the taxable territories before the previous year brings that income into or receives that income in the taxable territories he would be chargeable to income-tax under S. 3. Therefore, for the purpose of cl. (b) (iii) 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.14. 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 cl. (a).15. Let us now see on the facts of this case where the respondent can be said to have received this sum of Rs. 50,000 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 money was credited into the account of the respondents 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 S. 3 of the Act with respect to this amount.16. 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 cl. (b) (iii) 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 nonetheless make it a receipt by the respondent himself. Reference in this connection may be made to Bipin Lal Kuthiala v. Commissioner of Income-tax, Punjab, (S) AIR 1956 S C 634, where it was held that the money was received by the assessee even though in fact what had 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 income-tax on the sum of Rs. 50,000 under S. 4 (1) (b) (iii) of the Act and the question framed therefore must be answered in the affirmative.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]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) those words could only refer to the first receipt; but it does not follow from this that in the context of cl. (b) (iii) also they refer only to the first receipt.13. Let us see what cl. (b) (iii) is meant to provide for. It will be noticed that cl. (a), cl. (b) (i) and (ii) and cl. (c) deal only with income etc. which has arisen in the previous year while cl. (b) (iii) 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 have been received by him outside the taxable territories; but it is urged that cl. (b) (iii) 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 cl. (b) (iii) 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 cl. (b) (iii) 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. (b) (iii) provides is that if any income etc. hand 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 S. 3.In the circumstances, looking to the special provision of cl. (b) (iii) 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 taxable territories earlier than the previous year and may have also been received there. Any other interpretation would really make that part of cl. (b) (iii) 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 reasonable interpretation of cl. (b) (iii) is that if a person resident in the taxable territories who has already received without the taxable territories any income etc. accuring or arising to him without the taxable territories before the previous year brings that income into or receives that income in the taxable territories he would be chargeable tounder S. 3. Therefore, for the purpose of cl. (b) (iii) 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.14. 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 toif 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 toin addition to what is provided in cl. (a).15. Let us now see on the facts of this case where the respondent can be said to have received this sum of Rs. 50,000 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 money was credited into the account of the respondents 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 S. 3 of the Act with respect to this amount.16. 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 cl. (b) (iii) 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 nonetheless make it a receipt by the respondent himself. Reference in this connection may be made to Bipin Lal Kuthiala v. Commissioner ofPunjab, (S) AIR 1956 S C 634, where it was held that the money was received by the assessee even though in fact what had 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 payon the sum of Rs. 50,000 under S. 4 (1) (b) (iii) of the Act and the question framed therefore must be answered in the affirmative.