Alfred Henry Lionel Leach, C.J.
1. The assessee in this case is the manager of a Hindu undivided family residing at Kanadukathan in the Ramnad District. The family derives income from property and business in money-lending at Kanadukathan and also at Okkan in Burma and Klang and Malacca in the Federated Malay States. For the year of assessment 1936-37, the petitioner returned a loss of Rs. 13,828. The Income-tax Officer, having examined the accounts and considered the evidence produced in support of the return, assessed the family on an income of Rs. 14,651 which was subsequently reduced by the Assistant Commissioner to Rs. 10,833. The assessee was dissatisfied with the assessment and asked the Commissioner to refer certain questions of law to this Court for decision under Section 66 (2) of the Indian Income-tax Act (XI of 1922). In accordance with his request, the Commissioner of Income-tax has referred to this Court the following questions:
(1) Was there any material before the Assistant Commissioner to justify his conclusion that the headquarter profits could not properly be deduced from the headquarter accounts and that an estimate was therefore necessary.
(2) Whether on a proper construction of Section 4 (2) the following sums were rightly included in the petitioner's total income, namely,
(a) $. 5,165 being the amount credited to the folio of K.S. P.L. S.T.
(b) $. 6,290 being the amount debited to the M.V.K. account.
(c) Rs. 1,000 being the amount utilised for the purchase of shares in the Udumalpet Sri Venkatesa Mills Ltd.
2. The assessee is now content to have the first question answered in the affirmative. He has also given up his contentions with regard to the sum of $. 5,165, referred to in Clause (a) and the sum of Rs. 1,000 referred in Clause (c) of the second question. He has confined his case entirely to the question whether the $. 6,290 referred to in Clause (b) of the second question should have been included in the total income of the family.
3. The aduthal at the Malacca branch of the assessee's family business is one M.V.K. Palaniappa, whose mother, M.V.K. Sigappi Achi, resides in a village in the state of Pudukotta, which is outside British India. In order to defray his marriage expenses, he borrowed Rs. 10,000 from the Malacca branch and remitted the amount to his mother in Pudukotta. The Income-tax Officer refused to accept the statement of the assessee that this remittance represented a loan to the aduthal, but the statement was accepted by the Assistant Commissioner on appeal. On the 9th February 1936, the sum of $. 5,000 was remitted from Malacca to Sigappi Achi. This remittance was made by a hundi drawn by the M.C.T.M. Banking Corporation Ltd., of Kaulalampur on its branch at Pudukotta. On 23 March, 1936 a further sum of $. 1,290 was remitted to Sigappi Achi in the same way. These two sums of $. 5,000 and $. 1,290 make up the $. 6,290 now in dispute. The Income-tax authorities have held that these monies represent remittances from the Malacca branch out of the profits made there during the account year 1935-36 and they maintain that the $. 6,290 must be taxed on that footing. Their contention is based on the fact that Sigappi Achi had deposited with the assessee a sum of Rs. 19,692, which was utilised by the Okkan branch of the business and was credited to her in the books of that branch. In the year of account Burma was part of British India. It is said that inasmuch as the liability of the assessee to Sigappi Achi has been reduced by $. 6,290, it must be taken that this money has come into British India.
4. This contention cannot be accepted. It is true that these remittances were paid for from out of the profits which had accrued to the Malacca branch; but the moneys were never received in British India. They were paid direct to Sigappi Achi in Pudukottah and it is not suggested that Sigappi Achi transferred the money to the assessee in British India. Unless profits made abroad are received in British India there can be no question of taxation here. It seems to me that the decision in Multanchand Johurmull v. Commissioner of Income-tax, Bengal (1930) S I.T.C. 154 : I.L.R. 58 Cal. 999, is directly in point. Mr. K.V. Sesha Aiyangar on behalf of the Commissioner of Income-tax, has suggested that the case is governed by the decision of this Court in L.C.T. S. P. Subramanian Chettiar v. Commissioner of Income-tax, Madras (1935) 9 I.T.C. 47 : 69 M.L.J. 844 but the facts in that case were entirely different from the facts of the present case. There the creditor and the debtor both resided in British India and the creditor was paid by a hundi delivered to him in British India. Sigappi Achi was paid by a hundi delivered to her outside British India and cashed by her outside British India and the money never came to British India. For these reasons, I consider that the $. 6,290 was wrongly included in the assessee's total income and I would answer the reference in that sense.
5. As this opinion is shared by my learned brothers there will be an order for costs in favour of the assessee for Rs. 250. There will also be a refund of the deposit.
6. I agree.
Krishnaswami Aiyangar, J.
7. I agree.