John Beaumont, Kt., C.J.
1. This is a reference by the Income-tax Commissioner under Section 66(2) of the Indian Income-tax Act raising a short point. The assessees are a limited company, and in the year of assessment they had certain income amounting to Rs. 18,000 odd, which they received in London. They invested that income, or at any rate the bulk of it, in the purchase of stores and machinery in England, which they then shipped to Bombay, and the question is whether they are liable to pay income-tax on so much of the stores and machinery as represent the income received by them in London, in other words, whether the income received by them in London has been constructively brought into British India. The question turns on the construction of Section 4(2) of the Indian Income-tax Act.
2. That sub-section provides :-
Income, profits and gains accruing or arising without British India to a person resident in British India shall, if they are received in or brought into British India, be deemed to have accrued or arisen in British India and to be income, profits and gains of the year in which they are so received or brought, notwithstanding the fact that they did not so accrue or arise in that year.
The sole question is whether these stores and machinery can be regarded as income brought into British India. There is, in my opinion, no doubt that income received in a foreign country may be brought into India in some form other than that in which it is actually received. Foreign income may be received in sterling or francs or dollars, and may be brought into India in the form of rupees, or income received abroad may be remitted to India by means of a banker's draft. To use Lord Brampton's phrase in the Gresham case, Gresham Life Assurance Society v. Bishop  AC. 287 the income may be received ' in specie or in any form known to the commercial world for the transmission of money from one country or place to another.' But it seems to me that in order to attract income-tax in India what is brought into this country must be income, profits or gains, and if the assessee has converted income received abroad into capital, and then brings that capital to India, he is not bringing into India income, profits or gains. Whether the foreign income has in fact been capitalised or not must be a question of fact in each case. In the present case there is, in my opinion, no doubt that the income was capitalised by the purchase of machinery and stores. It is not suggested that the machinery and stores were brought into this country for the purpose of being sold and the proceeds applied as income. One can easily imagine a case in which an assessee in this country, desirous of bringing into the country foreign income for use as income in India, might convert the foreign income into some form of capital by the purchase of bonds or otherwise, bring the bonds to this country, and then sell them and apply the proceeds as income. In such a case I apprehend the Court would probably hold that what had been brought into this country was in fact income and not capital. But, if the Court comes to the conclusion that in fact what is brought into this country is a capital asset, the fact that that capital asset was acquired out of income in a foreign country is, in my view, irrelevant. The actual question raised by the Commissioner of Income-tax is :-
Whether in the circumstances of the case, the Income-tax Officer has rightly included in the income liable to tax, the amount of Rs. 18,333 on account of interest on sterling securities on the ground that though the said income accrued or arose in England, it was received in or brought into British India within the meaning of Section 3(2) of the Act.
3. In my opinion we should answer that question in the negative. The Commissioner to pay the assessees' costs on the Original Side scale to be taxed by the Taxing Master.
4. I agree, and have nothing to add.