GROVER J. - Both the Income-tax References Nos. 19 and 21 of 1960 shall stand disposed of by this judgment.
The assessee is an individual and derives income from various sources including business in textile goods. The present references arise out of the assessments relating to the year 1946-47, the period of accounting being 13th April, 1945, to 24 April, 1946, and the year 1947-48, the accounting period being 25th April 1946, to 31st March, 1947. It is common ground that then assessee originally belonged to Amritsar but had been residing and doing business in Srinagar, Kashmir State, for a long time. He was running a business in Amritsar also but that was closed on 23rd April, 1946. A house was purchased in the name of his wife at Amritsar in the year 1944. His wife died in January, 1946. For the purposes of assessment the Income-tax authorities held that 'he was a resident but not ordinarily resident' in terms of sections 4A and 4B of the Income-tax Act. As a result of the determination of his status the income arising or accruing during the accounting periods in Kashmir was included in the total income of the assessee for the purpose of rate subject to certain statutory deduction. The question common to both the references is whether no the facts and circumstances of the case the status of the assessee had been correctly taken to be that of resident but not ordinarily resident with the consequential inclusion of the income arising in the Kashmir State in the total income of the assessee for the purpose of rate.
The second question relates to the assessment for the year 1947-48 and it arose in this manner. In the facts stated by the Income-tax Appellate Tribunal it a set out that the textile goods were purchased by the assessee from various parties in India through commission agents in Amritsar and Bombay. For the purpose of payment for the purchases made in the Indian taxable territories, the assessee, with the concurrence of his constituents, used to send money by drafts or telegraphic transfers in favour of the commission agents through whom the goods were purchased. According to the order of the Income-tax officer dated 29th June, 1951 which formed a part of the statement of the case, the profits estimated to be available for remittances into British India amounted to Rs. 1,20,000. The remittances, however, into what was known as British India were much more, e.g. Rs. 2,00,000 sent by telegraphic transfer transfers to Messrs. Balu Ram Jagat Ram, partly for purchase of goods from them and partly '(i) for payment to other parties in India, (ii) for investment in the new business styled Messrs. Kotu Mal Nand Lal started in Amritsar in 1948 and (iii) Rs. 30,299 remaining in credit for the assessee even as far late as 23rd March, 1949'. It was held that the entire available profits of Rs. 1,20,000 were remitted to British India and were assessable as such. Before the Appellate Assistant Commissioner it was contended that these remittances were payments against purchase of goods made from the British Indian parties for the Srinagar business. It was also sought to be argued before him that the amounts accumulating in the assessees accounts were not remittances of profits but sale proceeds, of the goods purchased from the merchants or for making further purchases in future. The Appellate Assistant Commissioner found that the remittances during the accounting year were more than Rs. 4,90,000 but the profits earned in the Kashmir State were Rs. 2,54,500. After deducting from that a sum of Rs. 2,40,500. After deducting from that a sum of Rs. 14,500 as expenses, he arrived at the net figure of the past profits at Rs. 2,40,000 which were more than that covered by the remittances during the accounting year. He thus directed the inclusion of the sum of Rs. 2,40,000 in place of Rs. 1,20,000 in the assessment of the profits. Before the Income-tax Appellate tribunal the only contention raised on this point was that these monies were sent by the Srinagar office directly to certain arhatias at Amritsar who used to make purchases on behalf of the assessee. This argument was rejected as futile as the Tribunal was of the view that such receipts by the arhatias amounted to constructive remittances. The second question, therefore, is as follows :
'Whether the receipt of money in the taxable territories by way of drafts and telegraphic transfers by the commission agents of the assessee for the purchase of goods constituted constructive remittances of profits which could be taxed in terms of section 4(1) (b) (iii).'
As regards the first question, it will not be out of place to mention that at a previous stage by an order dated 21st August, 1956, the Tribunal had directed the Appellate Assistant Commissioner to submit a report because the assessees case before it was that the house in Amritsar was not his property but had been purchased in the name of his wife and, therefore, it could not be presumed that he had maintained a dwelling house for himself at Amritsar. The assessees case before the tribunal was that his house was let out to others and had not been maintained by him an as the tribunal found that no opportunity was given to him to prove that it was not in his possession during the relevant accounting period, a direction was made as above. The Appellate Assistant Commissioner in his report referred to the affidavit which had been filed by the assessee dated 5th November, 1956. In that affidavit he had again re-asserted his claim that the house in the name of his wife was not his dwelling place and that he had not done any business at least during the accounting period relevant to the assessment year 1947-48. The assessee was examined on oath on 12th November, 1956 and the observation of the appellate Assistant commissioner is that the assessee showed little regard for truth in his statement. Mention was made of the facts which gave rise to that inference. He had stated before the Income-tax Appellate Tribunal that the building in his wifes name had been let out to some tenants but in his statement he had to admit that it was infact not let out to anybody. It was further observed that he had not produced the books of account of the Amritsar during the relevant period he had stated 'I might have come for a day or two but I do not remember.' The Appellate Assistant Commissioner proceeded to refer to the Kashmir file of the assessee containing letters suggesting that he was usually at Amritsar. Illustration was given of the remarks of the Income-tax officer making the assessment in Srinagar in October, 1944. The Appellate Assistant Commissioner then referred to the following facts :
'(a) The assessee was not in a position to prove that the building was purchased out of the funds belonging to his wife;
(b) he had to admit that the building was not let out to anybody but remained vacant before his wifes death in 1946 and after that;
(c) it was stated by the assessee that electricity bills in respect of this building were paid by those who used it;
(d) it was admitted by the assessee that municipal taxes in connection with the building were paid from the rents he received from his other buildings; and
(e) in the return of income-tax submitted for earlier years (1945-46 an 1944-45) the assessees authorised representative had admitted in the statement filed with the return that the assessee was using one of his own houses for his residence and, therefore, there was no income from that house'.
The Tribunal in its order dated 23rd January, 1957, considered that the reasons which the Appellate Assistant Commissioner had mentioned in his report for coming to the conclusion that the assessee was 'a resident but not ordinarily resident' were perfectly sound and there was no reason to disturb that conclusion.
Mr. Faqir Chand Mittal for the assessee has in the first instance made two prayers before us. One is for admission of additional evidence under Order XLI, rule 27, of the Code of civil Procedure, and certain assessment orders of the department for periods prior to an subsequent to the assessment years in question are sought to be admitted into evidence. The other prayer is contained in a petition under section 66(4) of the Income-tax Act for referring the case back to the Appellate Tribunal to make certain additions to the statement of the case insuch manner as may be directed by this court. It is submitted that the house at Amritsar which had been purchased by the assessees wife had been inherited by her six daughters who were married and that in a certain litigation which was decided on 31st October, 1960, it had been found by the trial court that the property belonged to the assessees wife and being her stridhana it had devolved on her daughters. We are informed that the decision in the aforesaid suit is the subject matter of an appeal which is pending in this court. In Zoraster and Co. v. Commissioner of Income-tax their Lordship had indicated the limits to the exercise of jurisdiction of the High Court under section 66(4). The jurisdiction being advisory it is confined '(a) to the facts on the record and/or found by the Tribunal and (b) the question which would arise from the Tribunal order'. It has been laid down that it is not open to the High Court to order a fresh enquiry into the new case with a view to amplifying the record nor was it open to decide a question of law which did not arise out of the tribunal order. It was further made clear that the supplemental statement should not open the door to fresh evidence. Mr. Mittal has not been able to satisfy us how any additional evidence can be admitted under Order XLI, rule 27 or any supplemental statement can be called for in the presence of the clear limits set by the Supreme Court to the exercise of jurisdiction under section 66(4). Thus these prayers must be declined.
There is no dispute about the assessee having himself admitted that he did come to stay at Amritsar during the assessment year 1947-48 and the only question is whether on the facts found it can be held that the assessee maintains or has maintained for him a dwelling place in the taxable territories within the meaning of sub-clause (ii) of section 4A(a). Mr. Mittal has relied a great deal on the decision in Zackariah Sahib v. Commissioner of Income-tax. In that case, the assessee, a Muhammadan merchant, used to carry on business in Ceylon and usually resided there. His parents lived in town in the Madras presidency in a house owned by his mother. The assessees wife some times lived with his parents and sometimes with her parents. The assessee was remitting monies now and then to this parents for their maintenance. He visited British India during the years of account and stayed with his parents in their house. It was observed by Viswanatha Sastri that the expression 'maintains a dwelling place' 'connotes the idea that the assessee owns or has taken on rent or on a mortgage with possession a dwelling house which he can legally and as of right occupy, if he is so minded, during his visit to British India.' In Commissioner of Income-tax v. Fulabhai Khodabhai Patel Chagla C.J. expressed the view that the vital fact in determining such matter is not the ownership of the property but the right of the assessee to reside in a building which is ready and fit for occupation and which is intended to be used by him as a home. The building or a portion of the building must be available to him and must be at his disposal and he must be in a position to go and occupy it without permission or leave of any one. In the Bombay case there was nothing to show that the assessee had set apart any portion of the house as his dwelling place in the event of his coming over to India but on the other hand he had allowed his father to use the house as his own dwelling place and there was also nothing to show that the father had maintained the house or any part of it as a dwelling place for his son and not as dwelling place for himself and it was held that the assessee had not maintained or maintained for him the house which had been gifted to him as a dwelling place in India and was, therefore, not a resident in India. The facts in both the Madras and the Bombay cases were quite different and they do not help the present assessees case. Mr. Mittal has sought to proceed on the premises that the house at Amritsar belonged to the assessees wife, whereas the finding of the income-tax authorities was that it was his property, though it had been purchased in the name of his wife. If the house did not belong to anybody else, the only question that remained was whether it had been maintained as a dwelling house by the assessee. On that point, according to the summary of facts, which has already been set out, given in the report of the Appellate Assistant Commissioner dated 22nd November, 1956, the house had not remained vacant as was the case of the assessee at one time before the Tribunal. If it had not remained vacant, then it was open to the income-tax authorities to infer that it had been kept for the purposes of the assessees residence. Whenever he visited Amritsar. He had consequently a right to live there and it was available to him whenever he wished to live in it as a home. The test laid down by Chagla C.J. that the assessee should have a right to reside in the building which is ready and fit for occupation and which is intended to be used as a home was a fully satisfied as it was not the case of the assessee that anyone else was living there who could hinder or impede his occupation as of right. It was for the income-tax authorities to come to the conclusion on the facts and circumstances of this case whether the house could be said to belong to his wife or whether it was property which the assessee was keeping available for his own use whenever he visited Amritsar. Indeed, after what is stated in the order of the Tribunal dated 21st August 1956, this was the only matter on which investigation had to be made by the Appellate Assistant Commissioner and the assessees own argument was confined to the question that the house was not in his possession during the relevant accounting period. Such matters as have been raised before us with regard to the house being really the property of the assessees wife do not appear to have been agitated before the Tribunal at that stage. In this situation the assessee cannot now be heard to make out a case based on the assumption that the house was really the property of his wife and after her death it were her daughters who would be entitled to possession and not the assessee and it should be presumed that the assessee could not stay there as of right.
Mr. Mittal has laid a good deal of emphasis on the other facts on which the Appellate Assistant Commissioner relied in his report dated 22nd November, 1956, which seemed to show that he was under the impression that the assessee was carrying on his business during the accounting period at Amritsar. This, according to Mr. Mittal, was admittedly incorrect as the Amritsar business has been closed on 23rd April, 1946. It appears that the Appellate Assistant Commissioner was mentioning the entire background in respect of the assessees visits to Amritsar but his real decision seemed to be based on the other facts which were relevant for the purpose of deciding the point. It is clear that the other facts which were mentioned by the Appellate Assistant Commissioner were sufficient to give rise to the inference that the house in question had been maintained by the assessee as a dwelling place in Amritsar. The question, therefore, in both the references must be answered against the assessee and in favour of the Commissioner of Income-tax.
On the second question, the submission of Mr. Mittal is that the assessee used to purchase goods from the taxable territories and with the concurrence of the and under instructions from the constituents the money used to be sent by drafts or telegraphic transfers to them. In these circumstances, according to him, the payment was made in Srinagar and not in the taxable territories, with the result that no money out of the profits earned by him in Srinagar was either brought into or received in the taxable territories during the relevant accounting period. It is pointed out that according to section 4(1) (b) (iii) read with the second proviso, unless it was established that any part of the income, profits or gains which accrued outside the taxable territories was brought into or received in those territories, that could not be included in the total income of the assessee. On behalf of the assessee reliance has been mainly placed on Commissioner of Income-tax v. Ogale Glass Works Ltd. There, the engagement of the Government was to make payment for the goods which were manufactured in Aundh State and were sent from there by cheques which were drawn in Delhi and were cleared in Bombay. They were received by the assessee in Aundh by post. It was found that according to the course of business usage in general the parties must have intended that the cheques should be sent by post which was the usual normal agency for transmission of such articles and they were in fact received by the assessee by post. Apart from the implication of an agreement arising from such business usage the assessee expressly requested the Government to remit the amounts of the bills by cheques. This amounted in effect to an express request by the assessee to sent the cheques by post. It was held that the posting of the cheques in Delhi in law amounted to payment in Delhi and that the monies had been received by the assessee in British India within the meaning of section 4(1) (a) of the Act. Mr. Mittal has pressed into service the ratio of the decision, namely, that where money is remitted by means of a negotiable instrument to the persons to whom it is due in the taxable territories and if either it can be expressly inferred from the conduct of the parties or it is implicit in their dealings that the money should be remitted to them by post, this being their desire and request, then the post office becomes merely the agent of the payees and the payment must be deemed to have been made at the place where the cheques or the drafts were posted. In Commissioner of Income-tax v. Patney and Co. their Lordships while reiterating and reaffirming their former decision in Ogales case made it quite clear that in the absence of any request by the creditor, the post office cannot be constituted as an agent of the creditor, but if it is shown that the creditor authorised the debtor either expressly or impliedly to sent a cheque by post, the property in the cheque passed to the creditor as soon as it was posted. The difficulty in Mr. Mittals way is that according to the statement of facts by the Tribunal the textile goods were purchased by the assessee from various parties in India through commission agents in Amritsar and Bombay. For the purpose of payment for these purchases the assessee with the concurrence of his constituents used to sent money by drafts or telegraphic transfers but these were being sent to the commission agents through whom the goods had been purchased. It is quite obvious from this that the drafts were not sent nor were the telegraphic transfers made in favour of the parties from whom the goods had been purchased and between whom and the assessee the relationship of creditor and debtor existed. The money was being remitted by drafts or telegraphic transfers to the commission agents and it would seem from the manner in which the case was put before the income-tax authorities that the dealings of the assessee himself were with the commission agents or arhatias who used to make purchases from different parties on behalf of the assessee. There is nothing to indicate that the dealings between the assessee and his arhatias are those of principal to principal. The rule in Ogales case cannot, therefore, be made applicable here. Mr. Mittal has relied a great deal on what is stated in the order of the Income-tax Officer dated 29th June, 1951, to which reference has been made before, that part of the money sent by telegraphic transfers to Messrs. Balu Ram Jagat Ram of Bombay was for purchase of goods from them. This according to him would be covered by Ogales case but it has been pointed out on behalf of the respondent that this position was abandoned before the Tribunal presumably for the reason that the actual remittances which were made were in the region of nearly 5 lakhs of rupees out of which the Appellate Assistant Commissioner found that the sum representing the net available profit which had been remitted amounted to Rs. 2,40,000. The suggestion is that any payment made to Messrs. Balu Ram Jagat Ram for purchase of goods from them may have been out of the balance amount of remittances which exceeded the sum of Rs. 2,40,000 and which were out of capital or other funds of the assessee which have not been included while computing his total income. Be that as it may, the fact remains that the only contention advanced before the Tribunal was that the remittances had been made to certain arhatias in Amritsar alone and not Bombay who used to make purchases on behalf of the assessee. The assessee must be confined to the case as it was put before the Tribunal and cannot be allowed to travel beyond it. Even in the statement of the case it is nowhere mentioned, apart from the order of the Income-tax Officer, that any payments were made directly to those constituents from whom the goods were purchased from the taxable territories out of the profits from the Srinagar business.
The learned counsel for the respondent has relied on Subramanyam Chettiar v. Commissioner of Income-tax, where the question was whether a certain sum paid by the Penang Firm at Penang to a creditor of the Tinnevelly firm could be treated as a remittance of foreign profits in British India. The trustee of a patasala at Kunnakudi deposited certain on money-lending business outside India at Penang, Rangoon and Thonze. When he applied for repayment of the money the petitioner before the Madras Bench issued two hundis on his Penang shop for the amount due with interest. The Penang shop paid these amounts in October, 1931. The transactions relating to the discharge of the debt and the payments were recorded in the Penang folio of the Tinnevelly books and in the Tinnevelly folio of the Penang books. The petitioner did not dispute before the Income-tax Officer that the profits in Penang were sufficient to cover the remittances. The Madras Bench held that discharge of a debt by issuing hundis was well known in commercial circles. In these circumstances the debt remained an Indian debt and it was discharged by the issue of a hundi in India. The facts in this case were different and, therefore, it cannot afford much assistance in deciding the question referred to us. On principle and authority it may be that where the assessee owes a debt in India and under his instructions the debt is paid outside India to the creditor by the assessees agent from income which had accrued abroad to the assessee the foreign income is not to be regarded as having been received or brought into the taxable territories but if the assessee utilizes in the taxable territories monies available to him outside those territories it can legitimately be said that the amounts are either brought or are received in the taxable territories by the assessee. As has already been pointed out, the remittances by the assessee from Srinagar were made to arhatias (commission agents) in the taxable territories who used to make purchases on behalf of the assessee. Since the moneys were remitted to them for being disbursed or paid to those parties by whom the goods were supplied to the assessee at Srinagar the Tribunal was right in holding that they amounted to constructive remittances in the taxable territories. The second question consequently is also answered against the assessee and in favour of the Commissioner of Income-tax. Both the references are answered accordingly. The assessee shall have to pay the cost of the respondent which we assess at Rs. 250 for each reference.
DULAT J. - agree.
Reference answered accordingly.