CHAGLA, J. - The assessee in this case had an income of 65,064 dollars in the accounting year 1938-39 which accrued to her in Hongkong. She was taxed on this income on the accrual basis and conformably to the third proviso of Rs. 4,500. In the accounting year 1939-40 her foreign income which accrued to her in Hongkong was 48,847 dollars and in that year also she was exempted to the extent of Rs. 4,500. In the year 1940-41 she brought into British India 260,169 dollars which included the sum of Rs. 9,000 which had been exempted as I have mentioned before. The taxing authorities contend that this sum of Rs. 9,000 is liable to tax and the assessee, on the other hand contends that she having been once exempted, this amount is not liable to tax. The answer to this question depends upon a proper construction of the third proviso to Section 4 (1) of the Income-tax Act. This proviso lays down that if in any year the amount of income accruing or arising without British India exceeds the amount brought into British India in that year there shall not be included in the assessment of the income of that year so much of such excess as does not exceed four thousand five hundred rupees. Now the scheme of Section 4 is this. As far as foreign income is concerned it taxes all foreign income of an ordinary resident wherever it arises or accrues. Before the amending Act of 1939 was passed, a resident in British India was not liable to tax with regard to his foreign income unless that foreign income was brought into British India. The whole basis of taxation was changed by the amending Act and a resident of British India became liable to pay tax on his total income. Sub-clause (iii) of Section 4 (1) (b) undoubtedly provides for cases of unremitted foreign income between the 1st of April 1933 and the 31st of March 1938. As these incomes were not liable to tax merely on the accrual basis, they were made subject to tax under sub-clause (iii) of Section 4 (1) (b) when they were remitted to British India. After the 31st March, 1938, this question would not arise except with regard to this sum of Rs. 4,500 with which I shall presently deal because all foreign income has been made subject to tax whether it is remitted to British India or not. Now Sir Jamshedji Kanga contends that the third proviso to Section 4 (1) gives total exemption to an assessee with regard to this sum Rs. 4,500. He says that once it is exempted it cannot be subjected to tax although the nature of that income might change. Mr. Setalvads answer is that the language of the proviso is clear and the only exemption that it affords to the assessee is that this sum of Rs. 4,500 shall not be included in the assessment of the particular year and this sum of Rs. 4,500 would escape taxation so long as it is not brought into British India; but if it is brought into British India, then it would attract the provisions of Section 4 (1) (b), sub-clause (iii), of the Act. It is necessary to consider the language of some of the other sections of the Act where a total exemption is given to the assessee. For instance, Section 4 sub-clause (3), provides that certain kinds of income enumerated in that sub-clause shall not be included in the total income of the person receiving them. That clearly is a total exemption. Again, Section 14 (1) provides that the tax shall not be payable by an assessee in respect of certain amounts mentioned in that section. Again, Section 15 (1) also provides that the tax shall not be payable in respect of the sums mentioned in that section; and the new Section 15A, which refers to earned income also provides that the tax shall not be payable. Sir Jamshedji Kanga relies on Section 3 of the Act which charges to tax the total income of every assessee, and Sir Jamshedji argues that this sum of Rs. 4,500 was included in the total income of the assessee in the relevant period and that having been included in the total income, it attracted the application of Section 3 and it cannot be taxed again. The fallacy underlying that argument is that although the sum of Rs. 4,500 was included in the total income it never bore any tax. It was never charged to tax because it was excluded from assessment by reason of the third proviso to Section 4 (1) of the Act. Assessment is one thing; taxation is entirely different. Although it went through all the process of assessment laid down in the Act in fact it was not taxed and therefore, when it fell under Section 4 (1) (b), sub-clause (ii), it could not be said of this amount that it had already been subject to tax and therefore, it would be contrary to all fundamental principles on which taxing statutes are passed that it should be subject to tax again.
The High Court of Madras construing this very proviso has taken the same view for which Mr. Setalvad is contending. In commissioner of Income-tax Madras v. RM. AR. AR. RM. Arunachalam Chettiar, a Bench of that court consisting of Sir Lionel Leach Chief Justice and Mr. Justice Patanjali Sastri took the view that the third proviso to Section 4 (1) did not control sub-clause (iii) of Section 4 (1) (b) and that if this exempted income which accrued outside British India was brought into British India it would be subject to tax under that sub-clause. We feel that the con struction of the proviso is not quite free from doubt and difficulty; but we have always followed that principle that as far as possible on an All-India statute this Court should not differ from a decision of another High Court unless there are overriding reasons for doing so. In this particular case we see no reason why we should differ from a decision of the Madras High Court on a construction of this proviso to Section 4 (1) of the Act.
Therefore we answer the question in the negative. The assessee must pay the costs of the Commissioner.
Reference answered in the negative.