1. The judgment will govern the decision of both the aforesaid references. They arise out of the same order of the Tribunal. The assessee, S. Inder Singh Gill, is a resident in Uganda (Africa). We are concerned with six assessment years i.e., 1946-47, 1947-48, 1948-49, 1949-50, 1950-51 and 1951-52, the corresponding previous years being the financial years ending with the 31st of March of each year. For these aforesaid years, one Jeevansingh Grewal was treated as the assessee's statutory agent within the meaning of section 43 of the Act. In those assessment, the only income belonging to S. Inder Singh Gill, who is the assessee before us and to whom we would hereafter refer as the assessee, assessed was income from certain Bombay properties. In February, 1955, the Income-tax Officer found that the assessee owned in the taxable territories certain other properties also. He, therefore, with the previous approval of the Commissioner, initiated proceedings under section 34(1) (a) of the Income-tax Act (hereafter referred to as the Act). It is to be noticed that this notice was issued against the assessee himself and not against Jeevansingh Grewal, who had been, in the original assessments, treated the assessee's statutory agent within the meaning of section 43 of the Act. After receiving the notice, the assessee, in due course, filed returns of his income and we are here concerned with the three contentions raised by the assessee.
2. The first contentions raised by the assessee was that he was entitled to have deductions of the allowances permissible under section 9 of the Act in respect of his income from all his properties situate within the taxable territories. In the first assessment, which was made against the statutory agent, this permissible deduction was not given in respect of the Bombay properties. He, therefore, claimed that he should be allowed those deductions in respect of the Bombay properties also. This claim of the assessee was resisted by the revenue on the ground that the assessment in respect of the income from the Bombay properties had become final in the first assessment made against the statutory agent. In a reopened assessment under section 34, assessment relating to the Bombay properties cannot be reopened at the instance of the assessee. The second contention raised by the assessee was that in computing his world income, the tax paid by him to the Uganda Government on this Uganda income should be deducted. This claim of the assessee also was resisted by the revenue. The third contention raised by the assessee was that, during the assessment years, he had paid certain sums to effect an insurance on his life and he claimed exemption from being taxed in respect of hose amounts under sub-section (1) of section 15 of the Act. This claim of the assessee was also resisted by the revenue, and it was contended on behalf of the revenue that the assessee was not entitled to claim benefit under sub-section (1) of section 15 of the ActAct, because the sums paid by way of premia to effect an insurance on his life were not paid not of the total income of the assessee, but were paid out of his foreign income. The Income-tax Officer rejected the first two contentions of the assessee. In respect of the last contention, namely, as regards the benefit under sub-section (1) of section 15, the Income- tax Officer apportioned the said premia account for each year between the assessee's total income and his total world income. The assessee, feeling dissatisfied, took an appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner not only rejected the assessee's contentions, but even deprived the assessee of the proportionate relief allowed by the Income-tax Officer. The assessee took a second appeal before the Tribunal.
3. Before the Tribunal, it was contended that the income from Bombay properties should not have been taken in the assessments at the figure determined in the assessment made on the statutory agent, Jeevansingh Grewal, but should have been re-computed after making certain allowances permissible under section 9 of the Act. Relying on the decision of this court in Commissioner of Income-tax v. A. D. Shroff, the Tribunal rejected this contention. It was also contended that notwithstanding that the life insurance premia was paid out of the assessee's foreign income, the assessee should have been given the benefit under section 15 of the Act. This contention prevailed with the Tribunal. It took the view that to accept the department's contention would amount to read in the section that 'the tax shall not be payable in respect of any sums paid out of his total income by an assessee to effect an insurance'. In the opinion of the Tribunal, there was no warrant for reading the words 'out of his total income' in sub-section (1) of section 15. The Tribunal, therefore, held that, even though the assessee had paid the premia out of his foreign income, he was entitled to get the benefit under section 15 of the Act. In support of the aforesaid conclusion, the Tribunal has given also other reasons besides the one stated above. But it is not necessary to refer to those reasons inasmuch as learned counsel for the assessee did not support the order of the Tribunal on the strength of those reasons. The assessee also contended that the tax paid by him to the Uganda Government on his foreign income should be deducted in determining the assessee's foreign income and in including it in his total world income. This contention also was rejected by the Tribunal. Both the Commissioner of Income-tax as well as there assessee filed applications under section 66(1) of the Act. The Tribunal held that questions of law did arise out of the aforesaid order of the Tribunal. On the application of the Commissioner, the Tribunal has referred the following question in its statement of the case. We will number it as question No. 1 :
'Question No. 1. Whether, in the circumstances of the case, the assessee was entitled to the benefit of section 15(1) of the Income-tax Act in regard to the life insurance premium paid by him ?'
4. This is Income-tax Reference No. 36 of 1959. On the application made by the assessee, the Tribunal has referred to us the following two questions in its statement of the case. We would remember them as questions Nos. 2 and 3 :
'Question No. 2. Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim that the income from Bombay property as originally assessed in the hands of the statutory agent under section 43 of the Income-tax Act should be recomputed
Question No. 3. Whether, for the purpose of computing the total world income of the assessee as defined in section 2(15) of the Income-tax Act, the income accruing in Uganda has to be reduced by the taxes paid to the Uganda Government in respect of such income ?'
5. We will deal with these questions seriatim. Mr. Joshi contends that the assessee, in order to claim exemption under sub-section (1) of section 15 of the Act, must first establish that the sums paid by him to effect an insurance on his life were paid out of his total income within the meaning of the Act. Unless and until he establishes this fact, he is not entitled to claim the said exemption. He referred us to the decisions reported in Commissioner of Income-tax v. Samnugger Jute Factory Co. Ltd., Commissioner of Income-tax v. National Electrical Industries Ltd. and Commissioner of Income-tax v. N. M. Raiji. On the other hand, it is the contention of Mr. Kolah that there is no warrant for saying that the assessee must establish that the sums paid to effect an insurance on his life were paid out of his total income. Sub-section (1) of section 15 does not in terms say so and it is not open to this court to read the sub-section in that manner. In the alternative, it is his argument that the assessee had been assessed as a non-resident. That being the case, his foreign income also gets included in the assessment and in this view of the matter also he is entitled to exemption under sub-section (1) of the section 15 of the Act. In our opinion, the contention raised on behalf of the revenue is well founded. Sub-section (1) of section 15 is in the following terms :
'15. (1) The tax shall not be payable in respect of any sums paid by an assessee to effect an insurance on the life of the assessee or on the life of a wife or husband of the assessee or in respect of a contract for a deferred annuity on the life of the assessee or on the life of a wife or husband of the assessee, or as a contribution to any provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies.'
6. It is true that the sub-section in terms does not say that the tax shall not be payable in respect of any sums paid by an assessee out of his total income to effect an insurance on the life of the assessee. But, in our view, the language in which the sub-section is couched postulates that the sums exempted under sub-section (1) of section 15 would have been chargeable to tax but for the exemptions provided by the Act. The exemption granted is from charging the said sums to tax. The question of exempting any sum from being charged to taxed arises only when that sum could or would possibly enter the field of that particular taxation.
7. Section 3, which is the charging section, provides that 'where any Central Act enacts that income-tax shall be charged for any year at any rate or rates, tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year of every individual, Hindu undivided family, company and local authority, and of every firm or other association of persons or the partners of the firm or the members of the association individually.' It follows that income-tax is a tax on the categories of persons mentioned in section 3 in relation to their total income of the previous year. Sub-section (15) of section 2 defines the total income in the following terms :
2. '(15) 'Total income' means total amount of income, profits and gains referred to in sub-section (1) of section 4 computed in the manner laid down in this Act.'
8. That sub-section also defines the total world income in the following terms :
''Total world income' includes all income, profits and gains wherever accruing or arising except income to which, under the provisions of sub-section (3) of section 4, this Act does not apply and except any capital gain which is not includible in the total income of an assessee.'
9. The total income of an assessee thus is the total income within the meaning of sub-section (1) so section 4 of the Act. When we turn to sub-section (1) of section 4, we find that it first says that, 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. It then divides the assessee into two categories - a person who is a resident in the taxable territories and a person who is not a resident in the taxable territories. Income received or deemed to be received in the taxable territories both of a resident as well as of a non-resident assessee enters his total income. In the case of a resident, in addition to the aforesaid income, income accruing to him in the taxable territories as well accruing to him outside the taxable territories is included in his total income. Such, however, is not the case of a non-resident. In addition to the income received in the taxable territories, the other income added to his total income is only is only income accruing or arising or deemed to accrue or arise to him in the taxable territories during the previous year. The difference thus in short is that practically all his world income enters the total income of a resident assessee. In the case of a non-resident assessee, however, his entire world income does not enter his total income. His total income is confined only to the income received by him in the taxable territories and the income accruing to him or deemed to be accruing to him in the taxable territories. Apart from the exclusions and exemptions provided in the Act, there are the two respective fields of taxation in their widest amplitude. Sub-section (3) of section 4 provides that any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them. It then enumerates 22 classes of income, profits and gains, which, according to those provisions, are not included in the total income of an assessee. The phraseology used in sub-section (3) of section 4 indicates that when the legislature intended that a particular class of income should not at all enter the total income, it has in terms said so. Sections 5 and 5A refer to the Income-tax authorities. Section 6 enumerates the six heads or sources of income. Sections 7 to 12 provide the manner in which the income from these heads is to be computed after allowing certain deductions and section 12B relates to capital gains. Section 13 provides that income, profits and gains shall be computed, for the purposes of section 10 (business) and section 12 (other sources) in accordance with the method of accounting regularly employed by the assessee. Section 14 relates to exemptions of a general nature. It would be pertinent to note that the exemption provided in section 14 is an exemption from tax on a particular kind of income or part thereof of an assessee and not an exclusion of that income from his total income. The exemptions provided in sections 15, 15A, 15B and 15C are special cases of exemptions from tax. The opening clause of all these sections is identical and that is : 'The tax shall not be payable'. Section 15, as already stated, relates to exemption from tax of sums paid by an assessee to effect an insurance on his life or certain other lives or paid as contributions to any provident fund. Section 16 deals with computation of total income. The heading of section 16 'Exemptions and exclusions in determining the total income' is misleading. The section in fact provides what sums are to be included or excluded in determining the total income. Sub-section 1(a) of section 16, inter alia, provides that the sums exempted under section 15 are to be included in the total income of the assessee. These provisions of sub-section (1) (a) of section 16 which say that the sums exempted from taxation under section 15 are to be included in the total income show that the sums exempted have the character and quality of being included with reference to the total income of an assessee. It would, therefore, logically follow that, when an exemption or relief is claimed under section 15(1) in respect of any sum, it must be shown that the said sum bears the character and quality of being included in the total income of the assessee, with reference to which the tax is levied. Foreign income of a non-resident assessee does not enter his total income.
10. In Commissioner of Income-tax v. Samnugger Jute Factory Co. Ltd. the assessee had made contributions to the Gandhi National Memorial Fund out of his income other than his income of the previous year, in respect of which he was assessed. He claimed exemption under section 15B of the Act. The claim was opposed by the department on the ground that the contributions to the charities were not made by the assessee out of his total income of the relevant year and, therefore, the assessee was not entitled to the exemption. The assessee's contention prevailed with the Tribunal. The findings of the Tribunal were that amounts were really paid by the assessee and that it was not necessary that the amounts should have been paid out of the income of the previous year relevant to the assessment. The Tribunal, however, referred the matter to the High Court under section 66(1) of the Act. The conclusions of the Tribunal were not accepted. In overrunning the view taken by the Tribunal, Chakravartti C.J., at page 272, observed :
'Section 15B belongs to a series of sections which deal with exemptions from tax. The introductory words in each one of those sections are : 'The tax shall not be payable by assessee, etc.' That language contrast noticeably with the language of section 4(3) of the Act which says that income, profits or gains, falling within certain classes shall not be included in the total income of the person receiving them. It is thus clear that while sums to which section 4(3) applies are not to be brought into the computation at all and are not to be treated as a part of the assessable income those to which the exemption sections apply are only sums in respect of which no tax is payable, although the income represented by them is assessable income. It is but common sense that sums in respect of which an exemption from tax is granted must be sums which would be liable to taxation but for the exemption. Exemption from tax in respect of sums not assessable to tax at all is something wholly meaningless. That the sums, in respect of which exemptions are provided for by section 14 onwards, are and must be parts of the assessable income of the assessee, is placed beyond doubt by the provisions of section 16(1) (a) of the Act, which lays down how the total income is to be computed.'
11. The other two decisions to which reference was made by Mr. Joshi do not directly relate to the question which we have to consider. We do not, therefore, consider it necessary to refer to them here. Mr. Kolah, in argument, said that the decision in Commissioner of Income-tax v. Samnugger Jute Factory Co. Ltd. has no application to the facts of the case inasmuch as the sums paid by the assessee by way of premia were paid out of the income of the previous year and not out of the income other than the income of the previous year. We are unable to accept this argument of Mr. Kolah. The decision of the learned Chief Justice turned on the fact that the exemption claimed was in respect of a sum which did not form part of the assessable income of the assessee. Whether it was paid out of the income other than of the previous year or was paid out of the income not assessable at all would not affect the ratio of the decision. For the purposes of the case, it is not necessary to decide and to avoid possible prejudice to such assessee who pays life insurance premia out of the income excluded under section 4(3) we do not propose to decide that the sums exempted from tax under sub-section (1) so section 15 are and must be parts of the assessable income of the assessee. It is sufficient to say that the assessee must at least establish that the sums in respect of which he claims exemption from tax under sub-section (1) of section 15 have or bear the quality of entering the field of taxation, in its widest amplitude, apart from the exclusions and exemptions provided in the various sections of the Act.
12. Mr. Kolah referred us to a decision in Raja Shri. Sailendra Narayan Bhanja Deo v. Commission of Income-tax. That decision is hardly of any assistance to the assessee. In that case, the assessee claimed exemption under section 15B of the Act in respect of certain donations of Rs. 10,000 made by him to charitable institutions. It was found that the assessee's agricultural income amounted to Rs. 5,00,000 and non-agricultural income amounted to Rs. 91,000. The account books maintained, however, in respect of both these incomes were composite accounts and the said sum of Rs. 10,000 was debited in these books. It was held by the income-tax authorities as well as the Tribunal that, as there was no proof that the contribution was made solely from out of non-agricultural income, the assessee was allowed exemption to the extent of Rs. 1,754 being the proportionate amount between the agricultural and non-agricultural income. The question referred to the High Court was 'whether, in the circumstance of the case, the assessee was entitled to a rebate on the entire sum of Rs. 10,000 paid to an institution approved under section 15B of the Indian Income-tax Act and not on Rs. 1,754 deemed to be the proportionate amount paid out of non-agricultural income'. In the High Court, the assessee filed an affidavit stating that he had made various donations amounting to Rs. 74,000 and that the donation of Rs. 10,000 in respect of which is claimed exemption was paid out of non-agricultural income, whereas the other donations amounting to Rs. 64,000 were made out of agricultural income. On reading the decision, it appears, that the case of the assessee that the donation of Rs. 10,000 was made out of non-agricultural income had been accepted by the High Court. At page 100 of the report, it is observed :
'The assessee claimed a rebate on the charity made to an approved institution in a sum of Rs. 10,000. By making that the claim before the income-tax department, he clearly indicated that he paid Rs. 10,000 from out of the non-agricultural income. There is nothing absurd in this. It is quite reasonable that if the non-agricultural income is Rs. 91,000, the assessee can pay Rs. 10,000 out of it towards charity to an approved institution and in the affidavit filed before us also he clearly stated that this charity was paid out of the non-agricultural income.' The income was of that year. The fact accepted was that charity was paid out of this non-agricultural income. That being the position, it is clear that the exemption claimed related to an amount which formed part of the total income of the assessee in that case. We also find it difficult to accept the other argument of Mr. Kolah that the foreign income of non-resident assessee enters assessment and, therefore, exemption should be granted under sub-section (1) of section 15 even if the premia had been paid out of the foreign income. We have not come across any provision of law nor was any pointed out to us which would go to show that the foreign income of a non-resident assessee enters the assessment for the purposes of determination of the amount of Income-tax, unless he opts to throw it in his total income. It is an admitted position that the assessee had not exercised the said option offered to non-resident assessee under section 17 of the Act. It is true that as a result of the legal fiction enacted in that section foreign income of non-resident assesses has relevance in the matter of determination of the amount of super-tax payable by him and, in that sense, it may be said to have entered his assessment, but that is altogether a different matter. The said legal fiction cannot be carried any further and can have no relevance in construing section 15(1) of the Act. In our opinion, therefore, in the circumstances of the case, the assessee was not entitled to the benefit under sub-section (1) of section 15 of the Act in regard to the life insurance premia paid by him.
13. As regards the second question, Mr. Kolah contends that under section 9 of the Act, the assessee was entitled to exclusions of certain amounts from the computation of his income from Bombay properties. The first assessment was made not on him, but on Jeevansingh Grewal, who was treated by the department as the assessee's statutory agent. Had the department reopened the assessment against Jeevansingh Grewal by giving a notice within a period of two years as provided under the second proviso to section 34, it may perhaps have been pen to the department to say that the assessment in respect of the Bombay property had become final. But the Income-tax Officer has not reopened the assessment against Jeevansingh Grewal. On the other hand, the assessment has been reopened against the assessee. The income of his property has never been taxed in his hands at any time before he was served with a notice under section 34 of the Act. The assessment, therefore, is the first and fresh assessment of his income. He is, therefore, not bound by the determination of the income of Bombay property in the assessment against his statutory agent, Jeevansingh Grewal. The assessee in the first assessment and the assessee in the reassessment are two different persons. Mr. Joshi, on the other hand, contends that the first assessment was on the income of the assessee. The assessment which is reopened also is in respect of the income of the assessee. The scope so reassessment under section 34 is a limited scope. It is an assessment only in respect of the income that has escaped assessment. The first assessment which relates to the income which had been disclosed has already become final and in the reopened assessment under section 34 it is not open to the assessee to agitate that the income which had already been computed be recomputed. He referred us to the decisions in Commissioner of Income-tax v. A. D. Shroff (in particular at page 292), Anglo-French Textile Co. Ltd. v. Commissioner of Income-tax (No. 4) and Madhavjee Theocracy v. Commissioner of Income-tax. Section 34 relates to the powers of the Income-tax Officer to assess or reassess an assessee in certain circumstance if he has reason to believe that income, profits and gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed. The scope of this section was considered by a Full Bench of the Calcutta High court in Satyendra Mohen Roy Choudhury v. Commissioner of Income-tax. At page 451 of the report, Rankin C.J., who delivered the judgment of the court, observed :
'On this footing I am unable to say that the language of section 34 points to an intention to give to the assessee a right to reopen the whole assessment before being rendered liable to further tax. It is not for the court to determine whether the administrative inconvenience entailed by such a right would be much or little, or whether it would afford any sufficient reason for refusing to the assessee a right to reopen the whole matter. Nor is it for the court to consider whether there is any real unjustice or inconvenience in refusing this right to an assessee who has fails to make a return. Such considerations are questions of policy and debatable as such. As a matter of the true construction of this section it appears to me that if the legislature had meant to say that if in any case it appears to the Income-tax Officer that an assessee has been assessed upon too low a figure or at too low a rate, the Income-tax Officer may issue a fresh notice under section 22(2) and may proceed to reassess such assessee afresh, the language employed would have been noticeably different from that which we find in the present section.'
14. The ratio of the said decision of the Full Bench of this court in High Court was accepted by a Division Bench of this court in Madhavjee Damodar Thackersay v. Commissioner of Income-tax. At page 458, the learned Chief Justice observed :
'... I agree with the views there expressed, viz., that under section 34 of the Act it is income which has escaped assessment which can be subsequently charged and that it is to open to an assessee, when charged in that way to reopen the whole assessment and seek to be allowed credit in respect of some item which has been over-assessed but on the other hand it is open for an assessee to show that income alleged to have escaped assessment has in truth and in facts not escaped assessment but has been brought in under some in appropriate head.'
15. The view has again been reiterated in another Division Bench case in Commissioner of Income-tax v. A. D. Shroff. Mr. Kolah, in his argument, stated that he had no quarrel with the principle, but the principle would come into play only when the assessee in the first assessment and the assessee in the reopened assessment is one and the same person, as there was in those decisions. In the present case, the assessee is not the same. According to Mr. Kolah, the assessee before us, namely, S. Inder Singh Gill, was not the assessee in the first assessment at all. On the other hand, the assessee in the first assessment was Jeevansingh Grewal. The present assessee could not have agitated against the assessment order in the first assessment; he could not have taken an appeal against the order of assessment. In these circumstances, it cannot be said that the first assessment had become final and conclusive against him. It is indeed true that the assessee on record in the first assessment was Jeevansingh Grewal and the assessee in the reopened assessment is S. Inder Singh Gill, the assessee before us. But that does not mean that S. Inder Singh Gill was not the assessee within the meaning of the Act in respect of the income assessed in the first assessment or that he could not have, by way of an appeal, agitated against the order made in the first assessment. It cannot be disputed that the first assessment was made in respect of the income S. Inder Singh Gill, which could be brought to tax under the Indian Income-tax Act. It is an admitted position that S. Inder Singh Gill is a non-resident within the meaning of the Act. In these circumstances, it was open to the income-tax authorities, under sections 42 and 43 of the Act, to serve a notice on Jeevansingh Grewal of their intention of treating him as the agent of S. Inder Singh Gill and treating him as an assessee. The regularity of this action has at no time been challenged. The assessment made against Jeevansingh Grewal, therefore, was an assessment in respect of the income of S. Inder Singh Gill. Sub-section (2) of section 2, which defines an assessee, reads :
''Assessee' means a person by whom income-tax or any other sum of money is payable under this Act, and includes every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the loss sustained by him or of the amount of refund due to him.'
16. In the definition, thus, two categories of persons are included in the term 'assessee'; a person by whom income-tax is payable under the Act is an assessee; similarly a person in respect of whom any proceedings under the Act are taken is also an assessee. We have already referred to section 3, which is the charging section. That section imposes income-tax upon a person in respect of his income. It is now beyond dispute that the liability to pay tax arises by virtue of this charging section and it arises at the close of the year. It is not dependent on the quantification of the amount of tax by an Income-tax Officer in the income-tax proceedings. In Wallace Brothers and Co. Ltd. v. Commissioner of Income-tax, the Privy Council stated :
'Second, the rate of tax for the year of assessment may be fixed after the close of the previous year and the assessment will necessarily be made after the close of that year. But the liability to tax arises by virtue of the charging section alone, and it arises not later than the close of the previous year, though quantification of the amount payable is postponed.'
17. The assessee, therefore, was a person within the meaning of the Act, who was liable to pay tax, though the amount of tax payable by him was not ascertained in the assessment proceedings. A right of appeal against the order of the Income-tax Officer is conferred on an assessee under section 30 of the Act. The right is not limited to an assessee on record only. In our opinion, therefore, the assessee could have appealed against the first assessment order. It cannot, therefore, be said that he had no right or could not have in any manner agitated against the first assessment order. In our opinion, therefore, the first assessment order had equally become final against the assessee though the assessee on record was Jeevansingh Grewal. The principle in the aforesaid decisions, therefore, would equally be applicable to the facts of the present case. In our opinion, therefore, the assessee was not entitled to claim reopening of the computation of income of his Bombay property.
18. As regards the third question, the Tribunal, in rejecting the contention of the assessee, has observed :
'We are not aware of any commercial practice or principle which lays down that tax paid by one on one's income is a proper deduction in determining one's income for the purpose of taxation.'
19. No good reason has been shown to us to differ from the conclusion to which the Tribunal has reached.
20. For the reasons stated above, our answer to all the three questions is in the negative. The assessee shall pay the costs of the revenue of both the references.
21. Questions answered in the negative.