Case: Commissioner Of Income-Tax, Madhya Pradesh Vs. Lady Kanchanbai

Officer assessed the assessee on the basis that the " previous year" in respect of the concerned sources ended on Diwali of 1949. That decision was affirmed by the Appellate Assistant Commissioner but the Income-tax Appellate Tribunal reversed the finding of the Income-tax Officer and the Appellate Assistant Commissioner and agreed with the stand taken by the assessee. Thereafter a reference was made to the High Court of Madhya Pradesh under Section 66 (1) of the Act at the instance of the Commissioner of Income-tax but the High Court agreed with the view taken by the tribunal. Hence this appeal.3. The question for our consideration is whether the view taken by the High Court is correct? In order to decide that question, it is necessary to find out the true scope of Section 2 (11) (i) (a) of the Act, which provision defines the term " previous year" thus:" " Previous year" means-(i) in respect of any separate source of income, profits and gains -(a) the twelve months ending on 31st day of March, next preceding the year for which the assessment is to be made, or, if the accounts of the assessee have been made up to a date within the said twelve months in respect of a year ending on any date other than the said 31st day of March, then, at the option of the assessee, the year ending on the date to which his accounts have been so made up:Provided that where in respect of a particular source of income, profits and gains, an assessee has once been assessed . . . . . . . . . he shall not, in respect of that source or, as the case may be, business, profession or vocation, exercise the option given by this sub-clause so as to vary the meaning of the expression " previous year" as then applicable to him except with the consent of the Income-tax Officer and upon such conditions as the Income-tax Officer may think fit to impose." (Emphasis herein is ours).4. From the above provision, it is clear that in respect of any separate source of income, profits or gains, unless the assessee had made a choice in accordance with 2nd part of Section 2 (11) (i) (a), the twelve months ending on 31st day of March next the preceding year for which the assessment is made is the " previous year".5. Therefore all that we have to see is whether the assessees income, profits or gains in respect of the businesses in Madhya Bharat had been assessed previously. If they had not been previously assessed then the assessees case comes within the first part of Sec. 2 (11) (i) (a). In that event his return was in accordance with law. Therefore we have first to see what is meant by source of income" in Section 2 (11) (i) (a) of the Act and then proceed to consider whether those sources of income had " once been assessed".6. It is necessary to note that Sec. 2 (11) (i) (a) does not refer to the income of the assessee generally but to his " separate sources of income, profits and gains". Hence it is possible for an assessee to have a different " previous year" for each " separate source of income, profits and gains" as held by the Madras High Court in Commr. of Income-tax. Savumiamurthy, (1946) 14 ITR 185 = (AIR 1947 Mad 147 ).In Rhodesia Metals Ltd. v. Commr. of Taxes, (1941) 9 ITR (Supp) 45, the Judicial Committee observed that " source" means not a legal concept but which a practical man would regard as a real source of income. There is hardly any room for doubt, nor was it contended otherwise - that the business of the assessee in Madhya Bharat constituted a separate source or sources. Hence all that we have to see is whether the income accuring from those businesses had " once been assessed under the Act.7. This takes us to the question what exactly is the meaning of the expressions "assessed and "assessee in the proviso to Section 2 (11) (i) (a).The words "assessed", "assessment" and "assessee" have different meaning in different contexts. As observed by Judicial Committee, in Commr. of Income-tax, Bombay v. Khemchand Ramdas, (1938) 6 ITR 414 = (AIR 1938 PC 175 ) the word "assessment" is used in the Act as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the procedure laid down in the Act for imposing liability upon the tax payer. Similarly the word "assessee connotes different meanings in different contexts - see Badridas Daga v. Commr. of Income-tax Central and United Provinces, (1949) 17 ITR 209 = (AIR 1949 PC 159 ).8. It is true that for the purpose of finding out the total "world income" of the assessee, the income derived by the assessee from its businesses outside the taxable territories had been taken into consideration in the past. That was done only for the purpose of determining the rate at which the assessees income should be assessed. No tax was imposed on the income from those businesses. In other words, the income derived by the assessee from the businesses carried on by it in territories outside the "taxable territories" was not brought to tax under the Act.The expression that "where in respect of a particular source of income, profits and gains" in the proviso to Section 2 (11) (i) (a) means the income from a particular source which has been brought to tax under the Act and not which has been taken into consideration for computing the total world income of the assessee. In the context the word "assessee in the proviso to Section 2 (11) (i) (a) refers to the person whose income, profits or gains, in respect of a particular source had been once assessed to tax. The word " assessed" in that proviso means subject to levy or imposition of tax not computed.

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

Explanation:
0[ds]4. From the above provision, it is clear that in respect of any separate source of income, profits or gains, unless the assessee had made a choice in accordance with 2nd part of Section 2 (11) (i) (a), the twelve months ending on 31st day of March next the preceding year for which the assessment is made is the " previous year".It is necessary to note that Sec. 2 (11) (i) (a) does not refer to the income of the assessee generally but to his " separate sources of income, profits and gains". Hence it is possible for an assessee to have a different " previous year" for each " separate source of income, profits and gains" as held by the Madras High Court in Commr. of Income-tax. Savumiamurthy, (1946) 14 ITR 185   = (AIR 1947 Mad 147  ).In Rhodesia Metals Ltd. v. Commr. of Taxes, (1941) 9 ITR (Supp) 45, the Judicial Committee observed that " source" means not a legal concept but which a practical man would regard as a real source of income. There is hardly any room for doubt, nor was it contended otherwise - that the business of the assessee in Madhya Bharat constituted a separate source or sources. Hence all that we have to see is whether the income accuring from those businesses had " once been assessed under the Act.7. This takes us to the question what exactly is the meaning of the expressions "assessed and "assessee in the proviso to Section 2 (11) (i) (a).The words "assessed", "assessment" and "assessee" have different meaning in different contexts. As observed by Judicial Committee, in Commr. of Income-tax, Bombay v. Khemchand Ramdas, (1938) 6 ITR 414   = (AIR 1938 PC 175  ) the word "assessment" is used in the Act as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the procedure laid down in the Act for imposing liability upon the tax payer. Similarly the word "assessee connotes different meanings in different contexts - see Badridas Daga v. Commr. of Income-tax Central and United Provinces, (1949) 17 ITR 209 = (AIR 1949 PC 159  ).8. It is true that for the purpose of finding out the total "world income" of the assessee, the income derived by the assessee from its businesses outside the taxable territories had been taken into consideration in the past. That was done only for the purpose of determining the rate at which the assessees income should be assessed. No tax was imposed on the income from those businesses. In other words, the income derived by the assessee from the businesses carried on by it in territories outside the "taxable territories" was not brought to tax under the Act.The expression that "where in respect of a particular source of income, profits and gains" in the proviso to Section 2 (11) (i) (a) means the income from a particular source which has been brought to tax under the Act and not which has been taken into consideration for computing the total world income of the assessee. In the context the word "assessee in the proviso to Section 2 (11) (i) (a) refers to the person whose income, profits or gains, in respect of a particular source had been once assessed to tax. The word " assessed" in that proviso means subject to levy or imposition of tax not computed.