1. We think that on this reference made under Section 51 of the Indian Income-tax Act, VII of 1918, the assessee, on whose application reference was made by the Board of Revenue, is entitled to be heard first. The Board of Revenue under the section is bound to refer the question on an application made for the purpose by the assessee, and when the question is referred to the High Court, the High Court after hearing the case is to deliver judgment and the judgment so delivered will be sent to the revenue authorities. There is no ruling on the point and we have not been able to ascertain whether there has bean any uniform practice on any similar reference, but having regard to the nature of the reference in this case and how it originated, that is, on the motion of the assessee who is aggrieved by the order of the revenue authorities, we are of opinion that the assessee's pleader ought to be heard first.
2. A. Krishnaswami Ayyar for the assessee. My client is not liable to be assessed. There are various classes of incomes that are liable to be assessed and there are various reasons for taxation under the Act. This class of income, viz., the income from business, is taxable for any one or all of the following reasons: (1) if the business is situate in British India, (2) if the income from such business accrues or arises in British India or is deemed to so accrue or arise, (3) even if the business is situate outside British India, if the income is received in British India, (4) if the foreign business is carried on from British India, i.e., if it is controlled from here. Not one of these reasons exists in the present case. The income from this business is interest on moneys, but such interest is payable in this case only outside British India, for the place where the contracts of. loan are made is outside British India and the place of payment of interest either by express or implied contract is outside British India-Commissioner of Stamps v. Hope  A.C., 476 at p. 481, Rex v. Lovitt  A.C., 212 at p. 218 -compare Section 17, explanation III, Civil Procedure Code (XIV of 1882). The facts alleged in this case, viz., that the principal keeps himself acquainted with the progress of the business and occasionally issues general instructions, do not amount either to carrying on the business from British India or effectively controlling the business from here. This business is done outside British India at; the sole discretion of the local agents. The words 'accrue' or 'arise' in Section 3 show that the income must actually or constructively be received in British India. Mere right to demand from hare, the interest or the remittance of the income, without its actual remittance, into British India does not make the income accrue or arise in India. Reference was made to Stroud's Judicial Dictionary, Murray's Oxford Dictionary, Century Dictionary, Bouvier's Legal Dictionary and Webster's Dictionary for the meaning of the words 'accrue' and 'arise.' Reference was made to Colquhoun v. Brooks (1888) 21 Q.B.D., 52, Colquhoun v. Brooks (1889) 14 App Cas., 493 and Lovell and Christmas, Limited v. Commissioner of Taxes  A.C., 46 and Commissioner of Taxes for New Zealand v. Eastern Extension Australasia and China Telegraph Company  A.C., 526,530, 533. Under the English Income-tax Act and the Finance Act mere residence of a proprietor within the United Kingdom makes him liable to the tax even in respect of income earned elsewhere. The Indian Income-tax Act bases liability to taxation on receipt of income and not on residence. The words 'deemed to arise or accrue' refer to cases such as those mentioned in Sections 6(2) and 8. Reference was made to Section 31 to 33, 3(5), and 11 of the Act and to Chitty's Statutes, Vol. 10, page 152.
3. The wording of the Indian Income-tax Act VI of 1886 is not different from that of the present Act. The revenue authorities for the last thirty years have interpreted it in the way I contend and income such as the one now in question was not taxed; practice under the repealed Act is a good guide for interpreting the new Act; see Oriental Bank Corporation v. Wright (1880) 5 App. Cas., 842 at p. 856 and Mathura Mohan Saha v. Ram Kumar Saha, Chittagong District Board (1916) I.L.R., 43 Calc., 790 at p. 810.
4. The Hon. the Advocate-General for the Revenue Board. The assesses is liable to be taxed. Section 3 is only a general section as to what incomes are taxable; but Section 9 supplements and enlarges the class of taxable businesses. Section 9 speaks of 'any business,' i.e., wherever situate. This income, though not actually remitted into British India, is one that 'accrues' or 'arises' in British India within Section 3 or it is at least one that must be deemed to accrue or arise within that section, as the proprietor has a present right to demand remittance to him of the same. Anything that is payable at present or receivable is something that accrues or arises and actual receipt is not necessary to constitute the income accruing or arising. That is the meaning of the word 'accrue'; see Century Dictionary, Bouvier's Law Lexicon, Colquhoun v. Brooks (1888) 21 Q.B.D., 52 at 59 and Colquhoun v. Brooks (1889) 14 App. Cas., 493 at 511. After the words 'accrues' or 'arises' in Section 3(1) we must understand the words 'to a person.' As what is charged is the income, i.e., excess of receipts over expenses, place of payment by debtors is immaterial, Reference was made to Sections 7, 10(3), 31 to 33 and 14. The business though situate outside British India is carried on in British India, as it is from here that the business is controlled. A business is carried on at a place from which the business is controlled, whether the control is general or special, permanent or occasional--San Paulo Railway Company v. Carter  A.C., 31 at 41, De Beers Consolidated Mines, Limited v. Howe  A.C., 455, 458, Cesena Sulphur Company v. Nicholson (1876) 1 Ex. D., 428, Mitchell v. Egyptian Hotels, Limited  A.C., 1022 at 1037, 1039, and Commissioner of Taxes for New Zealand v. Eastern Extension Australasia and China Telegraph Company  A.C., 526. The Indian Income-tax Act is in pari materia with the New Zealand Act dealt with in the last case; see also Rex v. Lovitt  A.C., 212; Sanders' Income-tax Act, page 206. Practice under old Acts is relevant; but practice under modern Acts is not; see Craies' Statute Law, pages 81, 83 and Trustees of Clyde Navigation v. Laird (1883) 8 A.C., 658, 673. If any further facts are necessary for determining whether the business is one carried on from British India, they can be ascertained under Section 51 from the Revenue Board.
5. A. Krishnaswami Ayyar in reply. Practice is relevant even as regards a re-enacting statute; see Commissioner for Special Purposes of Income tax v. Pemsel  A.C., 531 at 591 and Yewens v. Noakes (1880) 6 Q.B.D., 530 at 535 and Beale's Interpretation of Statutes, 2nd Edition, page 369. English decisions on 'carrying on business' are useless as they do not relate to profits; San Paulo Railway Company v. Carter  A.C., 42. Control is no test.
6. This is a case stated by the Board of Revenue, under Section 51 of the Income-tax Act, VII of 1918, in which the question involved is whether the assessee, a Nattukkottai Chetti, who is the proprietor of a money-lending business, carried on by his agents on his behalf in various places including Saigon, Sodac and Khando situated in French Cochin-China, is liable to be taxed, under the provisions of this Act, in respect of the income of the business, though that income is not received in British India.
7. The learned Advocate-General on behalf of the Crown has based his contention on two grounds; firstly, that the income in question accrued or arose to the assessee in British India, inasmuch as he was entitled to call upon his agents to pay the income to him in British India, and, secondly, that, upon the case stated by the Board, the business the income of which is sought to be taxed must be held to have bean carried on in British India and, therefore, the income of that business is taxable.
8. It will be convenient to dispose of the last contention first. The facts in this connection as submitted are as follows: The entire business operations producing the income was conducted at the places abovementioned outside British India by agents appointed for fixed periods, who use their own discretion in lending money to customers. The only part taken by the proprietor in connection with the business is to acquaint himself with the state of the business abroad and occasionally to issue general instructions. It is impossible for us, on these facts, to hold that the business is one carried on in British India. The learned Advocate-General cited several English rulings in support of his arguments, but, as pointed out by Lord Halsbury in San Paulo Railway Company v. Carter  A.C. 31 [see also per Lord Loreburn in De Been Consolidated Mines, Limited v. Howe  A.C. 455] It is a question of fact where the trade is carried on; at all events, it an inference to be drawn from the facts and circumstances of each case. In that case the railway in Brazil, the earnings of which were sought to be assessed, was owned by a company whose registered office was in England; the business of the company was managed by the directors in England; the directors purchased in England and Bent out to Brazil the materials and plant necessary for the purposes of the railway; and the accounts were kept and the balance sheets and reports were made out in London, where also the meetings were held, and all dividends were declared and paid. On those facts, the learned Lords held that the trade was carried on in England and was, therefore, assessable, under the first clause of schedule D of 5 and 6 Vict., Cap. 35, Section 100. The business here is that of money-lending and the mode of carrying it on is left entirely to the discretion of the agents in the places where the lending operations are conducted. The mere issuing of general instructions occasionally by the proprietor in British India and the fact of his being supplied with information from time to time as to the state of the business would not at all bring the case within the purview of the ruling referred to. As in no sense, in my opinion, could the business in this case be said to be managed and controlled by the proprietor in British India, the statement of Lord Loreburn in De Beers Consolidated Mines, Limited v. Howe  A.C. 455, 'that the real business is carried on where the central management and control actually abides' has no application. On the other hand, the observations of the Privy Council in Lovell and Christmas, Limited v. Commissioner of Taxes  A.C. 46, apply rather closely to the facts of this case. Their Lordships observe.
One rule is easily deducible from the decided cases. The trade or business in question in such cases ordinarily consists in making certain classes of contracts and in carrying those contracts into operation with a view to profit; and the rule seems to be that where such contracts, forming as they do the essence of the business or trade, are habitually made, there a trade or business is carried on within the meaning of the Income-tax Acts, so as to render the profits liable to income-tax.
9. It is, therefore, unnecessary to express an opinion on the question whether the income of a business controlled and managed by a person residing in British India, although the actual operations giving rise to the income are carried on, as in this case, outside British India, would be assessable to income-tax.
10. At one time the Advocate-General seemed even to argue that it is Section 9(1) by which the tax payable on account of income derived from business is to be determined. All that it says is:
that the tax shall be payable by the assessee under the head 'Income derived from business' in respect of the profits of any business carried on by him.
and the rest of the section deals with the mode in which such profits shall be computed. If Section 9(1) be taken to furnish the whole test, then Section 3(1) would have to be excluded from consideration in dealing with the income derived from business. But the Advocate-General was not really prepared to go so far; at any rate, there can be no doubt that Section 9(1) must be read along with Section 3(1) and that it is the latter that lays down the test to be applied in determining all incomes assessable to the tax including income derived from business. If a certain income derived from business cannot be said to accrue or arise or to be received in British India, that income would not be assessable by virtue of anything contained in Section 9. In fact, the main argument in this connection has been that the income of a business, which is managed and controlled by the proprietor in British India, accrues or arises in British India within the intendment of law and, because it so accrues or arises, it is taxable.
11. The first part of the argument does not really present any difficulty, for the language of Section 3 seems to be unambiguous. The tax is leviable with reference to the place where the income accrues or arises or is received, and not with reference to the residence of the person who is entitled to the income. This seems to be the entire scheme of the Act and Sections 31 and 33 would appear to be illustrations of that principle. Whatever meaning be attached to the words 'accrue' or 'arise' such as, 'grows' or 'becomes due or payable,' it is impossible to hold that the income in this case could be said to have accrued or arisen in British India. If loans are made and the borrowers reside outside British India, and if accounts are adjusted, the moneys rent are realised with profit or are capable of being realized, and the profits are periodically ascertained and dealt with outside British India, it is impossible to hold that the income of such business accrued or arose in British India.
12. A number of English decisions were discussed before us but it is unnecessary to deal with them in any detail, because the English Statute under consideration in those cases differs in many material respects from the Indian Act. In the English Statute the place of residence of a person is a basis of assessment but it is not so, as pointed out above, in Act VII of 1918. The case of Colquhoun v. Brooks (1888) 21 Q.B.D. 52 : 14 App. Cas. 493 does not lay down any principle of construction which can be of use in this case.
13. Then the learned Advocate-General at one stage of his argument seemed to Contend that the income sought to be assessed should be deemed 'to accrue or arise or to be received in British India under the provisions of this Act,' but this argument is clearly untenable. In the first place, this phrase refers to cases set out in the Act itself [see for instance Section 6(2), Section 8 and none of them have any application to the case under consideration; and in the second place, as I have shown, there is no general rule of law by virtue of which the income sought to be assessed could be said to accrue or arise in British India.
14. If we look at the history of this enactment, the case sought to be made on behalf of the Crown appears to be still more untenable. The provision of Act VII of 1918, so far as the present question is concerned, is practically in the same words as that of the Income-tax Act of 1886. There the word 'income' used in the Act is defined as 'income and profits accruing and arising or received in British India' and the present Act says that it shall apply to 'all income if it accrues or arises or is received in British India.' Whether there is any difference intended at all between the phrase 'accrues and arises' and the phrase 'accrues or arises,' it could not reasonably be said that there has been any such change as to affect the question we are dealing with. Act VI of 1886 was in force for more than thirty years before the present Income-tax Act was enacted, and the Advocate-General himself has informed us that, at least before 1915 or 1916 when he was consulted with respect to certain cases of a nature similar to this, the general practice of the Revenue Department was not to assess income of businesses carried on outside British India but the proprietor or proprietors of which resided in British India. We are justified in assuming that the legislature was aware of this practice, and if with that knowledge they repeated in the new enactment the same words on which the practice of the Government was founded, it gives rise to the presumption that they did not want to assess such incomes. If the legislature intended to tax these incomes, and it would have been a very substantial source of public revenue, they could have easily said, as in the English Statute, that income accruing to a person in British India from any business wherever carried on is liable to be assessed,
15. I would hold, therefore, that the income of the business under reference is not liable to be assessed under the provisions of Act VII of 1918.
16. The question referred is of considerable importance. But the considerations, which are really material, can be stated shortly.
17. Respondent has in the French Territory of Saigon a money-lending business conducted by an agent, and (according to the statement in his petition, which is adopted in the case submitted to us) keeps himself acquainted with its progress and occasionally issues general instructions. He however resides in this Presidency and receives no income from Saigon. On these facts is he liable for tax on the profits of this business or, as he contends, will he be so liable, only if and when the profits are remitted to him here?
18. I agree with the learned Chief Justice that the answer to the first of these questions must be in the negative; and to justify that conclusion I refer to the scheme of the Income-tax Act of 1918, under which the case has to be decided. Section 3(1) of that Act runs:
save as hereinafter provided this Act shall apply to all income from whatever source it is derived; if it accrues or arises or is received in British India or is under the provisions of the Act deemed to accrue or arise or to be received in British India.
19. After Sections 3(2) and 4 which specify certain general exclusions not at present material, there is the charging Section 5, in which six classes of income are enumerated with the statement that, save as thereinafter provided, they shall be chargeable in the manner thereinafter appearing; and the ensuing Sections 6 to 11 specify the manner, in which each class is to be assessed, each beginning' The tax shall be payable by an assessee under the head': and then one of the six classes in Section 5 is specified and the manner of assessment appropriate to it is described. Of the remaining provisions only Sections 7, 10(3), 31 and 33 have been relied on and to them I return. The point is at present that Section 3(1) affords a comprehensive definition of income for the purpose of the Act and that this definition is to be regarded as controlling, not as enlarged by, the language subsequently used in classifying the different descriptions of such income and prescribing the method of assessment for each.
20. This is important, because the main argument for the Crown is that the description of one such class in Section 9 'Income derived from business' and the direction to assess such income on 'the profits of any business carried on by' the assessee are either supplementary to or can be substituted for the definition of income in Section 3(1); and that the carrying on of the business in British India, which, for the purpose of argument, may be regarded as established, is sufficient to render respondent chargeable. For the reasons given I am unable to accept that construction, and I therefore turn to the distinct line of argument also attempted, that the income accrued to respondent here with direct and exclusive reference to the wording of Section 33(2), because in the alternative he has carried on here the business in which the income originated, or he was here when his right to the income in his agent's hands elsewhere became enforceable. That argument is not in my opinion tenable in either of these forms with reference to any legitimate interpretation of the word 'accrue' or to the provisions of the Act, which have also been relied on.
21. The primary meaning given for the word in the Oxford Dictionary is 'to arise or spring as a natural growth or result'; in Webster's Dictionary, 'to come by way of increase'; and in Wharton's Law Lexicon 'to grow to or arise.' These, the respondent's profits in Saigon accrued to him in British India, when being in the latter place, he had a right to demand them of his agent in the former; and to show that income is regarded in the Act as accruing, before it is received and when there is only a right to receive it reference has been made to the use of the word 'receivable' in Section 7. There is however a short answer to this. Firstly, this meaning of 'accrue' is excluded by the context in Section 3(1). For it is not the right to demand the profits, which it is proposed to tax, but the profits themselves. And secondly, if the word 'receivable' in Section 7 is interpreted in the light of the provision in Section 15(3) for the method of payment of the tax on interest on securities, the description of income with which Section 7 deals, its use will be seen to Involve recognition, not of any kind of income as existing independently of and before its receipt, but of income, to which liability for the tax attaches at the moment of its receipt, when the tax is to be deducted by the person responsible for its disbursement.
22. Some attempt has been made to support this argument by reference to English decisions. But it is useless to deal with them at length in view of the material differences between the wording of the Act before us and that of the English statute in question in Colquhoun v. Brooks (1889) 14 App. Cas. 493, and of the New Zealand Statute in Commissioner of Taxes for New Zealand v. Eastern Extension Australasia and China Telegraph Company  A.C., 526, and Lovell and Christmas, Limited v. Commissioners of Taxes  A.C. 46. My conclusion is that; respondent has not been shown to be liable for assessment; and that disposes of the main question raised by the case submitted to us.
23. It does not however dispose of the subsidiary question, which the learned Advocate-General has also argued, whether respondent carries on business in British India within the meaning of the Act. A decision on that question has been unnecessary, because, even on the assumption that it should be answered in the affirmative, a conclusion in favour of respondent's liability cannot be reached. If we had had to decide it, we should have had to call for much more definite information as to the facts than we have been given; and I am constrained to express my doubts whether a question, which is so largely one of fact with reference to the method of carrying on the business of a particular assessee, is in any substantial degree one with reference to the interpretation of the Act, which we can deal with to advantage under Section 51.
Seshagiri Ayyar, J.
24. The undisputed facts are these. The principal (he is a minor) resides in Kanadukathan in the Madura district. He carries on the business of money-lending in and out of British India. Some of the places are within the British Empire, though outside British India, others are in foreign territory subject to the rule of Prance, Holland, etc. The trade in question is in Saigon which is outside the Empire. The point of agreement in all these businesses is that they are owned by a principal residing in British India and are worked by agents residing outside. On these facts the question for our opinion is whether the income from the trade in Saigon is assessable to income-tax in British India. It is assumed and not disputed that that income has not been transmitted to the principal in India.
25. The question has been very elaborately argued. I shall in the main content myself with an examination of the statute law, because case-law is not likely to help us much. Before doing that, I wish to draw attention to some well-recognized principles bearing on the theory of legislation regarding income-tax. It is pointed out in Bar's International Law that
It is the principle of domicile that regulates the levy of Income-tax.
This is certainly the rule in most of the systems and that it should be so is perhaps to some extent accounted for by the fact that attempts to levy and to collect income-tax in a foreign country would very frequently encounter insurmountable difficulties.
27. The same principle has been a little more clearly stated in Wharton's Conflict of Laws, Volume I, Section 80(a). That learned author says:
The power of taxation of any state is, of necessity, limited to persons, property or business within its territorial jurisdiction.
28. He further on states:
that the principle is so fundamental that it has been declared that an act of state legislature in violation thereof would be as much a nullity as if in conflict with the most explicit constitutional inhibition.
29. The situs of personal property for the purposes of taxation is therefore of the utmost importance in determining the limitations of the taxing power and the principles which should control the exercise of that power. He also refers to another maxim 'Mobilia sequntur personam' and concludes that legislatures should adopt either the one or the other and that the comity of nations can be preserved only if there is a clear understanding on this question. The English Income-tax Acts appear to have been based on the first of these principles, Lord Herschell in Colquhoun v. Brooks (1889) 14 App. Cas. 493 says:
the Income-tax Acts, however, themselves impose a territorial limit; either that from which the taxable income is derived must be situate in the United Kingdom or the person whose income is to be taxed must be resident there.
30. The same principle is traceable in the provisions of the Indian Income-tax Act. There is no reason for imputing to the Indian Legislature an intention to depart from the principle which has been so well recognized in England. One other observation preliminary to the examination of the sections may be made, and that relates to the rule of construction of all Income-tax enactments. In Partington v. The Attorney-General (1869) L.R. 4 H.L. 100, Lord Cairns stated the rule thus:
As I understand the principle of all fiscal legislation, it is this. If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law the subject is free, however apparently within the spirit of the law the case might otherwise appear to be. In other words, if there be admissible, in any statute, what is called an equitable construction certainly such a construction is not admissible in a taxing statute where you should simply adhere to the words of the statute.
31. In Coltness Iron Company v. Black (188 App Cas. 315 Lord Blackburn stated the same rule somewhat differently. The noble Lord said:
No tax can be imposed on the subject without words in an Act of Parliament clearly showing an intention to lay a burden on him. But when that intention is sufficiently shown it is not open to speculate on what would be the fairest and most equitable mode of levying that tax.
32. Bearing the above two considerations in mind--the one which is a guide to the principle of legislation and the other which is a guide to the construction of the language of the statute--I shall proceed to examine the sections of Act VII of 1918 and see whether the contention of the Board of Revenue is sustainable.
33. It was not seriously disputed by the learned Advocate-General that Section 3, Clause (1), is the governing section in regard to income-tax. The scheme of the Act seems to be this. There is first a general provision as to the locale of the income which is to be taxed. That is contained in Section 3, Clause (1). There are two parts of that clause. The first part deals with income actually accruing or arising or received in British India. The second introduces a fiction by which certain incomes are deemed to have accrued, arisen or received in British India. The same section in Clause (2) gives various classes of incomes exempted from the payment of tax. Section 4 exempts agricultural income. In Section 5 an enumeration of the classes of income referred to in Section 3, class (1) is made and six categories are mentioned. From Section 6 up to Section 11 the mode of assessing income from the various heads tabled in Section 5 is elaborated. The case we are dealing with comes under Section 9 to which I shall advert later on. Sections 12 to 14 deal with the exemptions of a peculiar character. These sections exhaust Chapter I. Chapter II deals with the deductions of assessment with which we are not concerned. Chapter III deals with the procedure for what is known as summary assessment, with respect to a particular class of income. Then comes Chapter IV which was much commented upon during the argument. The scheme of this part of the Act is to amplify the principle stated in Section 3, Clause (1). It is intended to affect two classes of persons--persons who are not sui juris but who are resident in British India and carry on business through an agent or guardian or the Court of Wards, and persons sui juris who are not resident in British India but who conduct their business in British India through an agent. This is really another illustration of the second clause of Section 3(1). It states a notional rule of law, the object aimed at being that the owner of the income should not escape liability either because he is not sui juris or because he is not a resident in British India, provided he receives the benefit of transactions in British India through somebody who represents him. The other chapters of the Act are not material and I shall not deal with them.
34. There is one section however on which a preliminary argument was addressed to us and it is as well that I should say a word about it.
35. The reference was made under Section 51 to the High Court. It was not disputed that the reference was rendered necessary by the request of the assessee that in case the Board of Revenue did not agree with his view of the case, the matter should be placed before the High Court for their opinion. The learned Advocate-General contended that the Board of Revenue should have the right to begin the argument on the reference. Mr. Krishnaswami Ayyar contended that his client the assessee was really in the position of the plaintiff and that he was entitled to begin. In my opinion the contention of the learned vakil for the assessee is right. It is his case that was referred and it was at his Instance that the reference was made. It is he that challenged the action of the Board, and although the letter has come from the Board of Revenue, it is as if he had preferred an appeal to the High Court against the conclusion of the Board of Revenue. In my opinion therefore, the Advocate-General as representing the Board was not entitled to be heard first. But this is only by the way. I now come back to the discussion of the merits of the respective contentions.
36. If my analysis of the Act is right, it follows that our answer must depend upon the meaning we attach to the words,
to all income from whatever source it is derived if it accrues or arises or is received in British India.
37. Reading both parts of Section 3(1) together, the income should either actually or notionally accrue, arise or be received in British India. Various definitions of the words 'accrues or arises' were placed before us. In Murray's Oxford Dictionary the words 'accrues and arises,' are regarded as synonymous. In the Century Dictionary the word accrue is defined to mean 'to become a present or enforceable right to demand.' Stroud defines arising in the United Kingdom 'as' coming into the person's hands in the United Kingdom. To my mind, all these definitions contemplate actual receipt of income and not an income which may at some future time pass into the hands of the person resident in British India. In a given year a particular sum of money may be remitted from foreign parts; that income would be taxable. But if that is retained in the hands of the agent for adjustment in the foreign country or for further employment there, can it be said that the income has accrued to the principal in British India? The learned Advocate-General argued that the second part of Section 3(1) made it clear that the income in the hands of the agent is income in the hands of the principal; and he referred to Sections 31 and 33 for this proposition. It seems to me that these two sections are inconsistent with the contention advanced. I have already referred to the nature of these two sections. Now I shall examine once again Section 33 on which so much stress was laid by the Advocate-General. There are two parts of it. One relates to 'profits or gains accruing or arising to such a person whether directly or indirectly through or from any business connection in British India; and the other to what 'shall be deemed to be income accruing or arising within British India.' The object of this section, as I understand it, is to observe the comity of nations which directs that all nations in enacting fiscal laws should as far as possible put a territorial limit to the operation of the fiscal enactment. In other words they should only tax property in situ. It is with that object, this section enacts that the income which is transmittable to a person outside British India shall be deemed to be income arising in British India if the non-resident foreigner has business in British India and transacts that business in British India through an agent. The object is secured by taxing the income made in British India before it leaves British India. Whether this theory may not result in the imposition of a double tax where the principal resides within the Empire, but outside British India it is unnecessary for us to consider: also whether it would not conflict with the laws of other nations where the principal resides in a foreign territory. What is material is that this section introduces a fiction of law as regards a non-resident principal, in order that income due to him may be regarded as accruing or arising in British India.
38. A significant omission by the legislature is almost fatal to the contention of the learned Advocate-General. Whereas the income received by an agent in British India on behalf of a foreign principal has bean nationally described as income accruing or arising in British India, the converse, namely, of income belonging to a resident principal which has been received out of British India by an agent is not similarly brought under a legal fiction. The obvious principle which guided the legislature was that the tax should be imposed only on what is actually received or made in British India. I must therefore hold that the learned Advocate-General's contention that the second clause of Section 3(1) affects the receipt of income by the agent in Saigon is not sustainable.
39. Then it was attempted to argue that Section 9 is comprehensive enough and it should not be fettered by reference to Section 3. I do not think this contention is admissible at all. I shall say, only a few words on the meaning to be attached to the words 'in any business carried on' in Section 9. But even supposing that we come to the conclusion that the principal residing in Kanadukathan was carrying on business in Saigon, it will still have to be established that the income accrued or arose in British India, if it is to be taxed.
40. Now I shall deal with the contention put forward that the business was carried on in British India. The fact mentioned in the order of reference do not justify us in holding that the business in Saigon was controlled by the principal residing in Kanadukathan. As has been said in some cases, these are not facts which would enable us to hold that the brain was in Kanadukathan which directed the operations in Saigon. Mr. Krishnaswami Ayyar drew our attention to the difference between business being carried on and profits being received, as observed in San Paulo Railway Company v. Garter  A.C. 31. The language employed by some of the noble Lords in that case was very strongly relied on by the learned Advocate-General. The observations of Lord Davey who subsequently explained the position in Commissioners of Taxation v. Kirk  A.C. 588 do not support the view that by giving general instructions the business is carried on in the country from which these instructions issue. Moreover, the facts in De Beers Consolidated Mines, Limited v. Howe  A.C. 455 and in Cesena Sulphur Company v. Nicholson (1876) 1 Ex. D. 428 and in Mitchell v. Egyptian Hotels, Limited  A.C. 1022 were different from the facts on which we have been asked to give our opinion. I do not therefore think any good will be served by discussing these cases. In my opinion the facts to which our attention has been drawn are not specific enough to enable us to say that the business was really carried on in British India. There is only one other remark that need be made. It was elicited in the course of the argument that until the year 1914 or 1915 no income-tax was levied in respect of foreign trades of principals residing in British India. The old Act of 1886 was repealed in 1918. So, for about 30 years at least, the executive Government in India did not levy income-tax upon business of this kind. Mr. Krishnaswami Ayyar relied on this practice and quoted Commissioner for Special Purposes of Income-tax v. Pemsel  A.C. 531 and Yewens v. Noakes (1880) 6 Q.B.D. 530 as enunciating that the practice under a repealed enactment can be looked into for construing the later enactment. Whatever may be the weight we may attach to it, it seems to me that Courts will not be acting wrongly in referring to the practice in construing the Act. However, I do not invoke the aid of this practice, as in my opinion there is nothing in the Act which on the face of it imposes a duty upon income of this kind. As I started by saying, unless the words are clear, a fiscal enactment should not be construed as imposing a tax by implication. For these reasons I am of opinion that the assessee is not taxable.
41. The Court.--We fix the assessee's Vakil's fee at Rs. 250; and his costs will be paid by Government within three months from this date.