Alfred Henry Lionel Leach, C.J.
1. This reference will be answered in accordance with the opinion expressed by the Commissioner of Income-tax in his statement of the case. The assessee was a partner in a firm carrying on a money-lending business at Kedah in the Federated Malay States under the vilasam of A. K. R. M. M. K. The senior partner was one Meyappa Chettiar, who was also a partner in a firm of money-lenders doing business at Rangoon under the same vilasam, but the assessee had no interest in the Rangoon firm. The Kedah business resulted in considerable profits being made and it is accepted that in 1931 the assessee's share of these profits amounted to at least Rs. 30,000. In that year a sum of Rs. 30,000 was remitted from Kedah to Meyappa's firm in Rangoon and placed in a suspense account. On the 12th April, 1932, Meyappa caused the money to be transferred to the credit of the assessee's account in the books of the Rangoon firm and then utilised it in discharge of the assessee's indebtedness to the Rangoon firm. At least that is what Meyappa purported to do. The assessee strongly objected to this course, but as the result of mediation which took place in Kedah he eventually agreed to accept the Rs. 30,000 as representing a remittance of his profits from Kedah to Rangoon and to the money being utilised in discharge of his indebtedness to Meyappa's firm there. The assessee gave his consent to this arrangement some time between the 14th February and the 5th April, 1935. The Income-tax authorities say that in these circumstances the Rs. 30,000 should be taken to be a remittance made to British India in 1935, Burma being then part of British India. On this footing the assessee would be liable for income-tax on the amount in respect of the Tamil year 1935-36. The assessee contends, however, that the remittance of profits must be regarded as having been made on the 12th April, 1932, when Meyappa caused the Rs. 30,000 standing in the suspense account to be transferred to the assessee's personal account. If this were the position it would be clear that the assessee would not be liable to be taxed in respect of the Rs. 30,000 because Section 34, as it stood at the time of the assessment, did not allow action to be taken under it where income had escaped taxation for more than a year.
2. While it is true that the money was actually brought into British India in 1931 it cannot be taken as being then a remittance of profits belonging to the assessee. He opposed most strenuously the remittance being treated in this way. But inasmuch as in 1935 he agreed that the money should be regarded as being a remittance of his share of the profits made in Kedah and then allowed it to be used in discharge of his own Indebtedness in British India the position was changed. It then became in reality his money.
3. The case falls within the principle stated by this Court in Subrahmanyam Chettiar v. Commissioner of Income-tax, Madras : (1935)69MLJ844 . There the assessee had a money-lending business-in Tinnevelly in British India and a similar business at Penang in the Federated Malay States. He drew hundis on his Penang branch for the repayment, with interest, of a sum deposited with his Tinnevelly branch by a person who also carried on a money-lending business at Penang. The assessee's Penang branch paid the amounts of the hundis and the relevant entries with regard to the discharge of the debt were made in the Penang and the Tinnevelly books. The profits of the Penang branch were sufficient to cover the remittances. It was held that the amounts of the hundis should be treated as remittances of foreign profits into British India within the meaning of Section 4 (2) of the Indian Income-tax Act, 1922. The same principle was applied by this Court in Commissioner of Income-tax, Madras v. Meyyappa Chettiar : (1940)1MLJ543 .
4. The position in this case may be stated thus. When the money was brought into British India in 1931 it was not brought in as the money of the assessee and only became his when he accepted it in 1935 and allowed his account in Kedah to be debited with the amount. In these circumstances he cannot be allowed to say that it constituted his remittance in 1931.
5. It follows that the reference must be answered against the assessee, who must pay the costs, Rs. 250.