M.S. Menon C.J. - This is a reference by the Income-tax Appellate Tribunal, Madras Bench, under section 66(1) of the Indian Income-tax Act, 1922. The reference relates to the assessment years 1122 M.E. and 1124 M.E. The accounting periods concerned are the twelve months ended on March 31, 1946, and March 31, 1948, respectively.
The question referred i :
'Whether the sum of Rs. 12 lakhs and Rs. 4,11,500 are assessable as remittances of foreign profits under section 4(1)(a) of the Travancore Act for the assessment years, 1122 M.E. and 1124 M.E.?'
The question does not pose the whole of the controversy. It is common ground that we should consider the impact of section 4(1)(b)(iii) as well. The assessee is a public limited company incorporated in England and having its registered office in London. It was 'resident and ordinarily resident' in the State of Travancore.
The assessee owns tea, rubber and cardamom estates; 11 of its 32 estates were in British India.
The agents and secretaries of the assessee are Messrs. Harrisons and Crossfield Limited. Their principal office is at Quilon in the State of Travancore.
The assessee had an account with the Imperial Bank of India, both at Calicut in British India and at Trivandrum in the State of Travancore. During the year ended March 31, 1964, the assessee drew five cheques on the Imperial Bank of India, Calicut, and handed them over to the Imperial Bank of India, Trivandrum. The Imperial Bank of India, Trivandrum, credited the amounts covered by the cheques - Rs. 12 lakhs - in the account of the assessee with that branch.
The relevant portion of section 4 of the Travancore Income-tax Act, 1121, reads as follow :
'4. (1) Subject to the provisions of this Act, the total income of any previous year of any person includes all income, profits and gains from whatever source derived which -
(a) are received or are deemed to be received in Travancore in such year by or on behalf of such person, or
(b) if such person is resident in Travancore during such year, - ...
(iii) having accrued or arisen to him without Travancore before the beginning of such year are brought into or received in Travancore by him during such year.'
This section corresponds to section 4 of the Indian Income-tax Act, 1922.
The first contention of the department is that the Rs. 12 lakhs should be considered as profits received in the Travancore State and hence assessable under section 4(1)(a) of the Act. This is a contention which we cannot accept.
What was brought into the Travancore State was the profit which the assessee had already received in British India. As pointed out by the Supreme Court in Keshav Mills Ltd. v. Commissioner of Income-ta :
'... the words used in section 4(1)(a) relate to the first receipt after the accrual of the income. Once it is received by the party entitled to it, in respect of any subsequent dealing with the said amount it cannot be said to be received as income on that occasion. The receipt of income refers to the first occasion when the recipient gets the money under his own control. Once an amount is received as income, any remittance or transmission of the amount to another place does not result in receipt, within the meaning of this clause at the other place. This was definitely established by the Privy Council in Pondicherry Railway Co. v. Commissioner of Income-tax and in Commissioner of Income-tax v. S.L. Mathias. If, therefore, the income, profits or gains have been once received by the assessee even though outside British India, they do not become chargeable by reason of the moneys having been brought into British India, because what is chargeable is the first receipt of the moneys and not a subsequent dealing by the assessee with the said amount. In that event they are brought by the assessee as his own moneys which he has already received and had control over and they cease to enjoy the character of income, profits or gains.'
The next contention of the department is that the Rs. 12 lakhs is assessable under section 4(1)(b)(iii) of the Act. According to the assessee that provision is not attracted for two reason :
(1) The amount was intended to be transferred to London and was as a matter of fact so transferred; and
(2) The assessee has transferred more than Rs. 12 lakhs from the State of Travancore to British India during the year concerned.
Both the reasons are untenable. The only question i : Was the amount brought into Travancore? As pointed out in Haji Mohammad Usman & Sons v. Commissioner of Income-ta :
'The purpose for which money was brought into British India is not material for purposes of taxation under the Act if it initially accrued or arose as income, profits or gains. It is not disputed in the present case that the money represented profits which accrued to the assessee in Sanawad. This condition being fulfilled, it would become taxable in British India provided that it can be deemed to be brought into British India within the meaning of sections 4(1) and 14(2) of the Act. Nor do we think that the words brought into, per se, connote any permanent retention in British India. The term bring has been defined in Chambers Twentieth Century Dictionary, as to fetch; to carry; to procure; to occasion; to draw or lead. It is similarly defined in other dictionaries also. The term, therefore, denotes only a physical act of shifting a things from one place to another. The words brought into are not qualified or limited under the Act and have, therefore, no reference to the purpose for which the money is brought into British India or to the period for which it is intended to be retained in British India. To read into them any such qualification or limitation would be to ignore the plain words of the statute, which, in fiscal enactments, is not permissible.'
This does not mean, however, that the whole of the Rs. 12 lakhs brought into Travancore from British India is Taxable under section 4(1)(b)(iii) of the Act. In order to be taxable under section 4(1)(b)(iii) the profit must have accrued or arisen before April 1, 1945. The opening balance for the accounting period April 1, 1945, to March 31, 1946, at Calicut was only Rs. 5,50,464. That amount and not the whole of Rs. 12 lakhs can hence attract the tax.
The assessee has not established that the opening balance does not represent profits. We hold that the said balance - Rs. 5,50,464 - is taxable under section 4(1)(b)(iii) of the Act and that the balance - Rs. 6,49,536 - is not so taxable.
A cheque for Rs. 4 lakhs was drawn on the Imperial Bank of India, Calicut, on April 28, 1947, and handed over to the Imperial Bank of India, Trivandrum. The Imperial Bank of India, Trivandrum, credited the amount covered by the cheque in the account of the assessee with that branch. The amount, as in the case of the five cheques already mentioned, was intended for remittance to London and was so remitted.
If the amount represents profits of a period prior to April 1, 1947, it will certainly be taxable under section 4(1)(b)(iii) of the Act. The assessee has not established that such is not the case. It has to be noted that the cheque was issued within less than a month of the beginning of the accounting period for the assessment year 1124 M.E. We hold that the said sum of Rs. 4 lakhs will attract the tax.
The only further point that has to be decided relates to a sum of Rs. 11,500. There is no separate consideration of this amount by the Income-tax Appellate Tribunal probably because no separate argument was advanced regarding that sum.
The assessment order deals with the amount as follow :
'The sum of Rs. 11,500 represents the money equivalent of a cheque issued by Malayalam Calicut to H. & C., Calicut, for which H. & C., Quilon, issued a cheque in favour of Malayalam Plantations Ltd., Quilon.'
We are not satisfied that the amount will not attract the tax under section 4(1)(b)(iii) of the Act.
The reference is answered as stated in paragraphs 13, 15 and 17 above. No costs.
A copy of this judgment under the seal of the High Court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal as required by sub-section (5) of section 66 of the Indian Income-tax Act, 1922.