3 S.C.R.

SUPREME COURT REPORTS

THE COMMISSIONER OF INCOME-TAX,

BOMBAY

DHARAMDAS HARGOVINDAS. (P. B. GAJENDRAGADKAR, A. K. SARKAR and

K. N. WANCHOO, JJ.)

Income Tax-Income already recehed outside taxable territory- Brought into or received in taxable territory--Liability to tax-If must be first receipt in taxable territory-Income-tax Act, I922 (II of I922). S. 4 (I)(b){iii).

The assessee, resident in British India, had some money in deposit with a concern in Bhavnagar, outside British India. On April 7, r947, he transferred part of it to a concern in Bombay.

He was assessed to tax on this amount under s. 4(1)\b)(iii) of the Income-tax Act. The assessee contended that to attract the application of s. 4(1)(b)(lii) the receipt in the taxable tefritory

must be the first receipt of income.

Held, th•t the assessee was liable to tax on this amount.

Per Gajendragadkar and Wanchoo, JJ.-Where a person, resident in the taxable territories, has already received, outside the taxable territories, any income etc. accruing or arising to him outside 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 thereon. Though for the purposes of cl. (a) of s. 4 the receipt must be the first receipt of income in the taxable territories, for the purposes of cl. (b)(iii) the receiving in the taxable territories need not be the first receipt.

Keshav Mills ltd. v. Commissioner of Income-tax [1953] S.C.R 9 50, referred to.

Per Sarkar, J.-The income could not be said to have been "received" in the taxable territory within the meaning of cl. (b)(iii) as income could be received only once. But it is clear that the assessee "brought into" Bombay that income. It was immaterial in what shape he received the income in Bhavnagar and in what shape he brought it in Bombay.

Keshav Mills Ltd. v. Commissioner of Income-tax [1953] S.C.R. 950, Board of Revenue v. Ripon Press (1923) I.L.R. 46 Mad. 706 and _Sundar Das v. Collector of Gujrat (1922) l.L.R. 3 Lah. 349, applied.

Gresham Life Assurance Society ltd. v. Bishop [1902] A.C. 2 87 and Tennant v. Smith [18<)2] A.C. 150, referred to.

CIVIL APP]jJLLATE JURISDICTION: Civil Appeal No. 240 of 1955.

196r

February 3

r96r Appeal by special leave from the judgment and

C --:-- "order dated September 3, 1953, of the Bombay High ommissioner o1 C

. I R c Income-tax, ourt Ill ncome-tax eierence No. 15 of 1953.

Bombay Hardayal Hardy and D. Gupta, for the appellant.

Dha:mdas G. S. Pathak, S. P: Mehta, S. N. Andley, J.B. Dada- H••govindas chanji, Rameshwar Nath and P. L. Vohra, for the respondent.

1961. February 3. The Judgment of Gajendragadkar and Wanohoo, JJ. was delivered by

Wanehoo J.

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 s. 60(2) 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 s. 4(1) (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 relev. ant 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. 50,000/- 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,

1947, Rs. 50,000/- 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 Mi!ls.

On these facts the Tribunal had come to t.he conclusion that there had been a remittance of the a.ssessee's profits from Bhavnagar to Bombay, namely, Rs. 50,000/- being half of the amounts mentioned a.hove, on account of his share and such remittance was taxable under s. 4(1) (b) (iii). The assessee raised the question with which we a.re 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 a.ssessee 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 a.ssessee disposed of his accumulated income in Bha.vna.ga.r by directing his debtor, the Bha.vnaga.r Mills, to pay an a.mount not to himself but to a third party, namely, the Bombay Mills. According to the High Court, "The result wa.s 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 Bombg.y by him." In this view of the matter, the High Court answered the question referred in the negative.

When the appeal wa.s heard by us on the earlier occasion, the learned .Advocate for the appellant contended that even on the ha.sis on which the High Court had proceeded, pa.mely, that there was only a substitution of one debtor for another, it has to be sa.ro that the money wa.s 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.

Commissioner of

Income-tax,

Bombay v.

Dharamdas Hargovindas

Wanchoo ].

'96r His point was that even assuming that the receipt

Comm-;;:, nerof of the cheque by the Bombay Mills drawn in its Income-tax, favour by the Bhavnagar Mills did not amount to Bombay receipt of moneys by the respondent, as soon as the v.

Bombay Mills credited the amount of it to the respond- Dharamdas ent, there was notionally a receipt of the money by Hargovindas h t e assessee and an advance of it by him to the Bom- Wanchoo J. bay 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 tlie 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 ombay, it was the Bombay Mills' own money. In this view of the matter, according te 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 the Tribunal to submit a further stement 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

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 state. ment 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 Trikamla.l 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 m<mey with the Bhavnagar Mills, he utilised these latter moneys for an advanci> being made by him out of it to the Bombay Mills.

I')6I

Commissioney of Income-tax, Bombay v.

Dharamdas Har govindas

i-vanchoo ].

Commissiomr of

Ineome-tax~

Bt"Oboy

Dlsar.,,.das Hargoviadas

Wancboo ].

As will appear from our earlier order hereinhefore set out, none of the points a.rising in the appeal ha.d 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 ha.d been brought into or received in Bombay by the a.ssessee. The relevant portion of the section is in these terms :-

" 4. (1) Subject to the provisions of this Act, the total income of a.ny previous year of any person includes all income, profits and gains from what. ever source derived which-

(a) are received or are deemed to be received in the ta.xa.ble 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 a.rise to him in the ta.xa.ble territories during such year, or

(ii) accrue or a.rise to him without the taxable territories during such year, or

(iii) having accrued or arisen to him without the taxable territories before the beginning of such year and after the 1st da.y of April, 1933, a.re brought into or received in the taxable territories by him during such year, or

(o) if such person is not resident in the taxable territories during such year, accrue or a.rise or a.re deemed to accrue or a.rise to him in the taxable territories during such year." In the present case we a.re concerned with cl. (b).

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 sub:11ection. The sub-section ma.inly deals with the total income of any previous year which is charge. able to income-tax under s. 3 of the Act. It is divided into three parts. The first pa.rt, which is cl. (a.) provides that a.11 income, profits a.nd 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 cl. (a.) is

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 taxa.ble territories it should not be considered to be income etc. received in such year in the taxable territories: (see Keshav ,'!fills Ltd. v. Commissioner of Income-tax(')). The basis of this decision obviously i11 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 a.rises or is deemed to accrue or arise to him in the taxable territories during such year is chargea.ble to income-tax ; besides, all income etc. which accrues or a.rises 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 with. out the taxable territor.ies before the beginning of such year and after the first day of April 1933 is brought

(l) [1953[5.C.R.950.

zg6z

Commissi01Ur uj

Imom#-111.x,

Boinbay

DharamdM H argovindas

Wandiooj.

738 SUPREME COURT REPOR'rS [1961]

x96x into or received in the taxable territories by him -. -. during such year will be chargeable to income-tax.

Commsssioner of '.I'h' · 1 · 1 t' t t 1 1 is 1s a speCia prov1s1on re a. mg o mcome e c.

';:~:;" which has accrued or arisen not in the previous year v. but in years previous to that though after April 1, Dhar•mdas

1933. This special provision relating to a. person Hargovindas resident in the taxable territories must be distinguished from the provision in cl. (a.) in connection with which IVanclloo J. 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 tax' able territories in the same year. Clause (b)(iii) on the other hand refers to inco:ne 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 case(') thatthe receipt in cl. (a) means the first receipt would not apply to this special provision in cl. (b)(iii).

Mr. Pathak for the respondent however argues that the words in cl. (b)(iii) are the same as in cl. (a), namely, "are received" and therefore the receipt in

cl. (b)(iii) must also be the first receipt. These words however are not terms of a.rt 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 cl. (b)(iii) also they refer only to the first receipt.

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 a.rising 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) [1953) S.C.R. 950.

3 S.C.R.

SUPHEME COURT HEPOR'rS 739

have been received by him outside the taxable territories; but it is urged that cl. (b)(iii) docs not speak of receipt outside the taxable territories but only speaks of incbme etc. having accrued or arisen to him without the taxable territories and that it is possible that though the income etc. might have accrued Jong ago it might not have been received ovn 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 accrned 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" usPd 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. 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 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 has already received without the taxable territories any income etc. accruing or arising to him without the taxable territories

Ig6I

Co1nmissi<mer o_

Income-tax,

Bombay v.

Dharamdas Hargouindas

Wanchoo J.

before the previous year brings that income into or receives that income in the taxable territories he would Commissioner of

Income-tax. be chargeable to income-tax under s. 3. Therefore, for Bombay the purpose of cl. (b){iii) the receiving in the taxable v. territories need not be the first receipt. We shall later Dharamdas consider what will be the effect of this interpretation on Hargovindas the facts of this case.

Wanchoo ].

Then there is cl. {c), which deals with the case of a person resident outside the taxable territories to w horn 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) deal8 with the case of a person who is resident in the taxable territ, ories 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 iucome-tax in addition to what is provided in cl. {a).

Let us now see on the facts of this case whether 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 tbe 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 lyiug 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 \vhich 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 b; rnk, the respondent advanced it to the Bombay Mills :ind the cheque was cashed Qy the Bombay }!ills aud the

money was credited into the account of the respondent's benamidars in the Bombay Mills. There was thus Commissioner of clearly receipt in the previous year of income etc.

Income-tax, which had accrued to the respondent outside the tax- Bombay able territories before the previous year and he would Dha;; mdas therefore be chargeable under s. 3 of the Act with Hargovindas respect to this amount. _ The High Court has held that the income would be . Wanchoo f. 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 h:we 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 t.he 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 v. 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 Brit}sh 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. 50,000/- under s. 4(1)(b)(iii) of the Act and the question framed therefore muRt be answered in the ai!irmative. 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.

(r) A.LR. r956 S.C. 634.

Commissioner of I ncometax,

Bombay v.

Dharamdas Hargovi11d1is

Sa.rkar ].

SARKAR, J.-The facts necessary for this appeal are few aml simple. The assessee, who is the respondent in this appeal, was a resident of Bombay. He had certain income in .Bhavnagar, a place without the taxable territories, which he had kept in depPsit with a concern there.

Tbis concern had an account in a bank in Bombay. The assessee, presumably as one of the officers of the concern, could opcrntt' this ac :uunt.

He drew, in Bomb<ty, tL cheque on this account which cheqne 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 there<tfter made entries in its own books of <iccount in respect of the <imount of the cheque in fa your of two persons of the names of Harkison Rati!til <ind Dilipkumar Trikam!al. The Bh<tvnagar concern, in its turn, a few days lator debited the account thi, t the assessee had with it in respect of the deposits, with the amount of the cheque as moneys paid to these two perwns.

These two persons however were only bemtmidars for the assessee. The trans<ictiuns, thcrefow, showed that the assessae had withdrawn the money from the concern at Bhavnagar out of its accnmubted income and advanced it to the concern in Bombav. The Tribunal found it as a fact that the <issesec had utilised in Bombay his income lying at Bhavnagar for making an tidvance 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 Blrnv1rngar was in the joint names of the assessee <ind his brotlier and the advance to' the concern in Bombtiy was really in their joint names. The assessee's share was half of the amount of the cheque and with that shu, re u, lone

we <ire concerned in this c<ise.

On these facts half lhe :1mount of the cheque as representing the asscssee's sh:ue of the accumulated income, was included in his total income, for a.ssessrnent to income-tax for the year 1948-49 uudel' "· 4(1)(\i)(iii) of the lncorne-t ax Act, 1922. Thtit section

:-io fa!' a.~ iR 1naJc-l'inl i:-; in t hc:--;0 t.prn1:-;:

3 S.C.R.

SPPRE~IF. corRT HF.PORTS 74:3

S. 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,-

* * •

(iii) having 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 s. 4(l)(b).

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 Bha.vnagar 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 ' receipt', within the meaning of this clause, at the other place " : Keshav Mills Ltd. v. Commissioner of Income-tax, Bombay (1). No doubt, the observation was made with regard to cl. (a) of s. 4(1).

But I am unable to find any reason why the word should have a different meaning in sub-cl. (iii) of s. 4(l)(b).

On the contrary, the words "brought into" in subcl. (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 Keshat Mills case (1), hold that that word in B 4(l)(a) meant

<• > (1953J s.c.R. 950, 90,.

Connnissionerof

Income-tax,

Bombay v.

Dharamdas Hargovindas

Sarkar].

Commissioner of

Income-lax,

Bombay v.

Dharamdas Hargovindas

Sarkar ].

744,

SUPREME COURT REPORTR [1961]

"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 v. Ripon

Press (1), 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 con text to do, income can be received only once.

As, in the present case, it seems fairly clear that the a.ssessee 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 a.s 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 get 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 v.

Collector of Gujrat (•).

An assessee might, however, change the shape of the income received. Section 4(1) (b)(iii) 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 recflived. Indeed; it has not been contended to t.he contrary. Sub-clause (iii) of s. 4(l)(b) 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) (1923) l.L.R. 46 Mad 706, 7II.

(2) (•922) !.L.R 3 Lah. 349.

the income had assumed, the a.ssessee had it with him all the time as incoue and for the purpose of sub-cl. (iii) it could be brought into the taxable territories in that

shape.

Now what the a.ssessee had done with the income in this case was to put it with a party in Bha.vnagar.

The income then took the shape of a debt dne 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 in_to Bombay. There would have been no doubt that he had brought the income into Bombay. Suppose a.gain, 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 Bha.vnagar 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 fa.ct anything which represents and produces money and is treated as such by businessmen, would be income : see per Lord Lindley in GreslUlm Li/ e Assurance Society Ltd. v. Bishop (1) and per Lord Hals. bury L.C. in Tennant v. Smith('). 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

11) (19<>1) A.C. z87, •96,

(2) (189•] A.C. 150, 156.

COf'9tmissiotur of

Ineo,,, e--ta#.

Bombay

Dha,.amdos Hargovi1'das

s.,~., J.

Commissioner of

Income-ta~,

Bombay v.

Dharamd1Js Ha1govindas

Sarkar ].

SUPREME COURT RFPORTS [1961]

Bombay concern to pay money. Therefore, in my view, the respondent aesessee was liable under s. 4(l)(a), (b)(iii) 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.

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