This reference under section 66(1) of the Indian Income-tax Act, 1922, arises out of the consolidated order of the Income-tax Appellate Tribunal, Bombay, in Income-tax Appeal No. 7208, 7209, and 7210 of 1950-51.
2. The assessee, Baxiram Rodmal, is a Hindu undivided family with its head office in Akola and a branch office in Adilabad in the Hyderabad State. In making assessments for the assessment years 1945-46, 1948-49 and 1949-50, the Income-tax Officer included respectively Rs. 76,886, Rs. 1,77,715 and Rs. 1,83,780 as profits of Adilabad branch remitted to British India. The sum of Rs. 76,886 added to the assessees income for the assessment year 1945-46 included Rs. 9,989 which was the profit for the assessment for the assessment year 1948-49 included Rs. 76,906 which was the profit for that assessment year. The assessment year 1949-50 represented the assessees profit earned in Adilabad in that very year. The Tribunal directed the Income-tax Officer to delete the amount of Rs. 9,989 from the assessment year 1945-46 and to include it in the assessment for the year following the year of remittance for the assessment year 1948-49 and the inclusion thereof in the assessment for the assessment year 1949-50.
3. On the objection of the Commissioner of Income-tax to the exclusion of the above mentioned amounts from assessment for the assessment years 1945-46 and 1948-49, the Tribunal has referred the following question of law, viz., "Whether in the circumstances of the case, the direction of the Tribunal to exclude from the income remitted to British India the income earned by the assessee in the relevant year of account is in accordance with law." 4. The original assessment for the assessment year 1945-46 was made on March 24, 1947. There was also an order under section 35 of the Indian Income-tax Act, which was passed on August 25, 1947. In the original assessment, as well as the assessment under section 35, the question of including remittances of the assessee from Adilabad to British India was not considered. A notice under section 34 as amended by Act XLVIII of 1948 was accordingly issued on February 15, 1950, and a revised assessment was made on July 17, 1950, in which the sum of Rs. 76,886 was included as profits remitted to British India. The Tribunal upheld the revised assessment after excluding the amount of Rs. 9,989 as stated above.
5. On the objection of the assessee that section 34 as amended by Act XLVIII of 1948 could not be applied retrospectively, the Tribunal has referred the following question of law, viz., "Whether in the circumstances of the case section 34 of the Indian Income-tax Act, as amended by Act XLVIII of 1948, was rightly invoked." 6. Taking up the first question, the relevant provision is section 4(1)(b)(iii) of the Indian Income-tax Act, which is reproduced below : "4. (1) Subject to the provision of this Act, the total income of any previous year of any person includes all income, profits, and gains from whatever source derived which - (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 April 1, 1933, are brought into or received in the taxable territories by him, during such year." This section comes after section 3 with subjects to tax the total income of the year previous of the year of assessment. This is the previous year which is obviously contemplated in section 4. As held by their Lordships of the Privy Council in Maharaja of Pithapuram v.Commissioner of Income-tax, the subject of charge under the Indian Income-tax Act, in direct contrast to the English Taxing Acts, is not the income of the year of assessment but the income of the previous year. If, therefore, the income, profits an gains brought into or received in British Indian did not accrue or arise during the previous year and accrued or arose in the year of assessment, they cannot be taxed under section 4, even though they were brought into or received in British India in the year of assessment. We accordingly answer the first question in the affirmative.
7. Coming to the second question, it was doubtless held in Calcutta Discount Co. v. Income-tax Officer, that section 34 of the Indian Income-tax Act, as amended by Act XLVIII of 1948, had no retrospective operation beyond March 30, 1948. In appeal from this decision which was by a single Judge, it has been held by a Division Bench of the High Court in Income-tax Officer v. Calcutta Discount Co., that the plain effect of the substitution of the new section 34 with effect from March 30, 1948, is that from that date the Income-tax Act is to be read as including the new section as part thereof and if it is to be so read, the further effect of the express language of the section is that so far as cases coming within clause (a) of sub-clause (1) are concerned, all assessment years ending within eight years from March 30, 1948, and from subsequent dated are within its purview and it will apply to them, provided the notice contemplated is given within such eight years, and that what is not within the purview of the section is an assessment year which ended before eight years from March 30, 1948. The same view will apply to cases coming within clause (b) of sub-section (I) of section 34, subject only to the modification that 4 years will be substituted in place of 8 years. We are in respectful agreement with this view. The matter, however, is now covered by section 31 of the Indian Income-tax (Amendment) Act, 1953 (XXV of 1953). We accordingly answer the second question in the affirmative.
8. The reference is answered as above. In view of the partial success and failure of the parties, there shall be no order as to costs.