Leonard Stone, Kt., C.J.
1. This is a reference under Section 66 of the Indian Income-tax Act.
2. The assessee is an undivided Hindu family. The assessment year is 1939-40 and the accounting year is S. Y. 1994. The assessee is a resident but not an ordinary resident and the total assessment was in the sum of Rs. 55,507 of which IRs. 29,310 is the amount of income in dispute. It is admitted that this arose outside British India and was brought into British India during the year of account, but the income did not accrue in the year of account but in the preceding year or years. The point is whether the second proviso of Section 4, Sub-section (I), of the Act qualifies Sub-section (3) of that section. Section 4 is not an artistically drawn up section, and it is necessary to examine the structure of the whole of it in order to understand its full effect bearing in mind that there are three categories of persons, viz. non-residents, persons who are ordinarily residents and persons, who, though residents, are not ordinarily residents. Section 4, Sub-section (7), commences by saying that the total income of any previous year of any person (i.e. all the three categories) includes all income, profits and gains from whatever sources derived which-(then there follow three alternative cases, the first alternative being) (a) are received or are deemed to be received in British India in such year by or on behalf of such person. Case (b) deals with the case in which the person is a resident in British India during such year and the income accrues or arises or is deemed to accrue or arise to him in British India during such year, or accrues or arises to him without British India during such year. Sub-clause (iii) of that Clause (viz. Clause (b) of Section 4(1)) is relevant to the reference before us and runs as follows:-
(iii) having accrued or arisen to him without British India before the beginning of such year and after the 1st day of April, 1933, are brought into or received in British India by him during such year.
Clause (c) of Section 4(1) deals with the case where such person is not resident in British India during such year and the income accrues or arises or is deemed to accrue or arise to him in British India during such year. These clauses are followed by three provisos. From the terms of the first proviso it is clear that it does not operate either upon Clause (a), Clause (b)(i) or Clause (c) because as the proviso itself shows it is to prevent tax being charged in the particular year there mentioned under Sub-clause (ii) and Sub-clause (iii) of Clause (b) at the same time. Leaving for the present the second proviso and passing to the third proviso it is also clear from its terms that that proviso cannot apply either to Clause (a) or to Clause (b)(i) or to Clause (c). Thus it is clear that although the three provisos are so arranged as to come at the end of the substantive part of Sub-section (1), the first and the third provisos apply only where they can be made to fit. With that introduction I now turn to the second proviso which is relevant to this case. It runs as follows:-
Provided further that, in the case of a person not ordinarily resident in British India, income, profits, and gains which accruel or arise to him without British India shall not be so included unless they are derived from a business controlled in or a profession or vocation set up in India or unless they are brought into or received in British India by him during such year.
Clearly therefore this proviso applies to Sub-clause (ii) of Clause (b). The question is as to its application to Sub-clause (iii) of that clause.
3. By Sub-clause (iii) of Clause (b) the total income there is included in the income of a resident person, profits and gains having accrued or arisen to such person without British India before the beginning of the account year and after April 1, 1933, and brought into or received in British India by him during that year. Therefore Sub-clause (iii) catches income which is brought into or received in British India by the assessee during the year. Although grammatically the second proviso must apply to Sub-clause (iii), there can never be a case in which it in fact gives relief to any tax-payer, because under Sub-clause (iii) tax only attaches to a particular type of income, profits and gains, i.e. income, profits and gains brought into or received in British India during such, i.e. the account year, and the benefit given by the second proviso is not to operate in certain events, and one of those events is that if the income, profits and gains are brought into or received in British India during such year (the words used in Sub-clause (iii) of that clause and in the second proviso are similar so that in effect the proviso can only give relief to taxation under Sub-clause (ii) of Clause (b)). The difficulty appears to arise from a too ambitious attempt to make the same proviso to apply to totally different circumstances contained in the sub-clauses to which all three provisos are appended. In my judgment the Appellate Tribunal have not taken a correct view of the matter and the question referred to us must be answered in the negative. The assessee to pay the costs of the reference.
4. The undisputed facts in this reference are that the assessee is an undivided Hindu family, classed as resident under Section 4A(b), but was not ordinarily resident under Section 4B (b) of the Act. It is found by the Tribunal that the sum of Rs. 29,310 in question was income which arose outside British India, but not in the accounting year. It is further found that the said sum was brought into British India in the account year. On these facts the question whether the sum of Rs. 29,310 is liable to be assessed in the assessment year is submitted for the Court's opinion.
5. The answer depends on the true construction of Section 4. Sub-section (1) of that section provides that subject to the provisions of the Act the total income of any person in any previous year includes all income, profits or gains from whatever source derived. Then follow the three sub-heads under which different incomes are grouped. The first is income received or deemed to be received in British India in such year by or on behalf of such person. This is accepted by counsel on both sides as meaning; ' primarily received,' i.e. received as income in the first stage. This clause will therefore cover income which is received in British India in such year, although it may or may not have arisen or accrued in that year.- The second clause is material to the present discussion. It applies to a person who is ' resident' in British India during, such year. In that clause the income is classified under three heads; (1) which accrues or arises or is deemed to accrue or arise to him in British India during that year. That means that a resident whose income has arisen in British India during that year is to be taxed on such income. (2) Income which has accrued or which has arisen to him without British India during such year. Under this clause all his world income for the accounting year is liable to be taxed under the Act. (3) The income having accrued or arisen to him without British India after April 1, 1933, but before the beginning; of the accounting year, if it is brought into or received in British India by him during such year. Under this third clause his income prior to April 1, 1933, is not to be taxed in British India. Secondly his income of the accounting year is not taxable under this clause. It may be taxable under Clause (b), Sub-clause (ii), The third requisite is that it must be .brought into British India during the accounting year. The next stage to be considered is to what relief a person who is not ordinarily resident within the meaning of Section 4B(6) is entitled. The Legislature has provided relief under the second proviso of Section 4(1). The scheme is this. The taxing authorities ascertain the income of a resident under Section 4(1)(&) under the three classes mentioned above, and then proceed to consider whether he is a person not ordinarily resident in British India. If the answer is in the affirmative they next proceed to consider what income, profits or gain? are included in the total which accrued or arose to him without British India. Having done that they have to delete the items of such income which arose or accrued without British India. The next words are to show what part of that income could be roped in again thereafter. The proviso proceeds to provide that such income has to be excluded unless (1) 'they' are derived from a business controlled in or profession or vocation set up in India. Therefore, if it is ascertained that the income excluded under either of the two heads, viz. 4(1)(b)(ii) and (iii), was income derived from such business or profession or vocation, it should again come into the total income of the assessee. The second contingency is if ' they' (meaning any item of the income excluded under the main part of the proviso) are brought into or received in British India by, him during such year. If so, such income again becomes liable to tax. That, in my opinion, is the plain reading of the proviso.
6. The Tribunal was pressed with the argument that if the proviso is so read, in no case covered by Section 4(1)(b)(iii) a person not ordinarily resident can get relief. In their anxiety to believe that the Legislature contemplated the ground of relief in respect of all income which had accrued without British India, because those are the words used in the proviso-they construed the proviso to mean that if the income had accrued or arisen in the accounting year and was brought into British India during such year, then only, the income was liable to tax. This would involve reading in the proviso the words 'in the year of account' at every place where the words 'income accruing or arising without British India ' occur. In doing so they overlooked the pitfall, that such reading would render the main proviso inapplicable to the income included under Section 4(7)(b)(iii). The pronoun 'they' occurring at two places in the proviso must be read as a substitute for ' income which accrued or arose to him without British India.' If the words ' in the year of account' are to be read in that expression (as held by the Appellate Tribunal), it is clear that the proviso itself will not apply to the income included under Section 4(1)(b)(iii), because in respect of income which had accrued during the year of account the sub-clause does not cover the case. In that view the sum of Rs. 29,310, which will be included in the assessee's income under Section 4(1)(b)(iii), will not be saved by the proviso itself and will continue to be included in his income.
7. There is little doubt that this proviso could have been far better worded. If the intention of the Legislature was to give relief to a person not ordinarily resident in British India in respect of income which arose without British India, only if he did not bring it within British India, nothing would have been more easy than to substitute the words ' without British India ' by ' under Section 4(7)(b)(ii) ' in the proviso in question. Not having done so, and feeling that the words generally used were likely to cover both the income which had accrued or arisen to the person without British India (under the second sub-clause), and also under the third sub-clause, and not desiring to give relief in respect of the income which was taxable under the third sub-clause, they repeated the exact words which were used in the concluding part of the third sub-clause at the end of the proviso. The result is that a person not ordinarily resident in British India gets relief in respect of income which had accrued or arisen to him without British India only in respect of such income as he does not bring within British India. If he brought the income which had accrued after April 1, 1933, his case would be covered by Section 4(1)(b)(i), provided it was income which had' accrued before the beginning of the accounting year. If it was the income which had accrued during the accounting year, his case would be covered by Section 4(1)(b)(ii), and the income would be liable to be assessed only if it was brought into British India; otherwise under the main proviso it was saved.
8. It was pointed out on behalf of the assessee that he was a non-resident altogether for four years before the year of assessment and was not liable to tax under the Act before it was amended in 1939. It was urged that the Legislature could not have intended that such a person was to be taxed because of the definition of a ' person not ordinarily resident' brought in by Section 4(1)(b) of the Act. We are not concerned with the question of policy of the Legislature. The duty of a Court is merely to administer the law as it finds and there is nothing repulsive in the conception of the Legislature thinking of giving relief to a person not ordinarily resident after the commencement of the Act only in respect of income which such person did. not bring into British India. That argument under the circumstances cannot help the assessee.
9. I therefore agree that the answer to the question referred to the Court for its opinion should be in the negative