Sabyasachi Mukharji, J.
1. This reference arises out of the assessment for the assessment year 1959-60, for which the relevant previous year is the calendar year 1958. The assessee is a resident company. The original assessment' was made on the 30th October, 1959, on a total income of Rs. 12,28,734. This income was subsequently reduced in appeal. Thereafter, the Income-tax Officer found that the profits made by the assessee in the United Kingdom, in so far as they had been exempted under the third proviso to Section 4(1) of the Indian Income-tax Act, 1922, during the assessment years 1939-40 to 1958-59, amounting to Rs. 90,000, had been remitted into India in the previous year. The Income-tax Officer, therefore, reopened the proceedings of the relevant assessment year under Section 34 of the Indian Income-tax Act, 1922. In the course of reassessment proceedings the assessee submitted that the income which had accrued in the United Kingdom during the assessment years 1939-40 to 1958-59 was from interest and dividends, that they were capitalised by the purchase of securities and that after sale the amounts were ultimately brought to India in February, 1958. According to the assessee the sale proceeds of the said investments cannot attract the provision of Section 4(1)(b)(iii) of the Indian Income-tax Act, 1922. The Income-tax Officer negatived the assessee's contention and held that there had been remittances of profit within the meaning of Section 4(1)(b)(iii) of the said Act and included the said sum of Rs. 90,000 in the reassessment made.
2. There was an appeal before the Appellate Assistant Commissioner who held that, inasmuch as the assessee was a resident-assessee, he could not, by investing for the time being his income earned abroad, change its character. The Appellate Assistant Commissioner held that the sum of Rs. 90,000 was correctly taxed under Section 4(1)(b)(iii) of the Indian Income-tax Act, 1922.
3. There was a further appeal before the Tribunal and it was found by the Tribunal that the exempted income at the rate of Rs. 4,500 per annum for each of the assessment years 1939-40 to 1958-59 were available with the assessee unspent and that those sums had been invested in shares and securities during the years 1950 to 1957. These investments were sold in February, 1958, in the United Kingdom and thereafter the moneys representing the sale proceeds were remitted into India. The Tribunal observed that there was no finding of the Income-tax Officer that the investments made by the assessee in the United Kingdom were of a temporary character and were a prelude to remittances of income into India. The Tribunal has also found that the revenue has accepted that the assessee converted his foreign income into shares and securities and held them by way of 'capital assets'. The Tribunal was of the opinion that the investments were not of a purely temporary character and was not a device which had been resorted to for the purpose of avoiding tax. The Tribunal was further of the opinion that the investments were made out of the foreign income and held for some considerable time and thereafter these investments were converted into cash and the sale proceeds of these investments were sent to India. The Tribunal was, therefore, of the opinion that there have been remittances of sale proceeds of capital assets in the facts and circumstances of the case and as such the same would not attract the provision of Section 4(1)(b)(iii) of the Indian Income-tax Act, 1922. The Tribunal, accordingly, held that the sum of Rs. 90,000 was not liable to be included in the assessee's total income.
4. Under Section 66(1) of the Indian Income-tax Act, 1922, the following question has been referred to this court:
'Whether, on the facts and in the circumstances of the case, there was a remittance of profit of Rs. 90,000 and as such it was liable to assessment as representing income, profits and gains brought into or received in India within the meaning of Section 4(1)(b)(iii) of the Indian Income-tax Act, 1922?'
5. Under Section 4(1)(b)(iii) the total income of any previous year of any person includes all income, profits and gains from whatever source derived which if such person is resident in the taxable territories during such year, having accrued or arisen to him without the taxable territories before the beginning of such year and after the 1st day of April, 1933, are brought into or received in the taxable territories by him during such year.
6. The question that requires consideration in this reference is whether this sum of Rs. 90,000 was income, profits or gains and was brought into the taxable territories by the resident-assessee. In the case of Commissioner of Income-tax v. Ahmedabad Advance Mills Ltd.,  8 I.T.R 95 (P.C.) the Privy Council was considering the case of assessees who were the owners of sterling bonds of the Government of India the interest on which was payable in England. The assessees received the said interest in England in the year 1935-36 on these securities to the extent of Rs. 18,333. They had invested that income in the purchase of certain mill stores and machinery in England and brought the articles purchased to British India in the assessment year 1936-37 and employed them for the purposes of their mills. They were assessed to income-tax in British India in respect of this sum of Rs. 18,333 on the ground that the income in question was brought to British India within the meaning of Section 4(2) of the Indian Income-tax Act. It was held by the Judicial Committee confirming the decision of the Bombay High Court that the income was not received in or brought into British India within the meaning of Section 4(2) of the Indian Income-tax Act, and the assessees were not, accordingly, liable to pay income-tax on this amount. At page 97, Lord Romer, expressing the opinion of the Judicial Committee, observed as follows:
'What the Act charges with tax is income and nothing but income,whether that income accrues or arises or is received in British India or isdeemed so to arise or accrue or be received by reason of being brought intoBritish India. But if income arising or accruing without British India isspent or otherwise so dealt with that it ceases to be income instead of beingbrought into British India, it is not, in their Lordships' judgment, chargeable under the Act, merely because the thing upon which it has beenexpended or into which it has been turned is subsequently brought there.
It is not necessary, of course, in order to attract tax that income received abroad should be brought into India in the exact form in which it has been received.'
7. Again at page 99 his Lordship observed as follows :
'But these things can in no sense be described as income; and it is only income that can be taxed under the Indian Income-tax Act. '
8. In the case of Commissioner of Income-tax v. J. M. Muhammed Ismail Rowther,  8 I.T.R. 150 (Mad.) the assessee who was a resident in British India carried on a business in partnership in Saigon (outside British India). At the end of the year 1935-36, the assessee had profits in Saigon to the extent of $59,290. In 1936-37, he remitted $39,834 from Saigon to Mysore and then purchased Mysore Government Bonds of the face value of Rs. 60,000 for Rs. 69,416. For two months the bonds remained in the custody of the Bank of Mysore but in January, 1937, the assessee caused them to be sent to the Madras branch of the Imperial Bank of India for safe custody and subsequently on the security of the bonds obtained an overdraft of Rs. 33,000. The income-tax authorities considered that there was a remittance of foreign profits to British India to the extent of Rs. 60,000. It was held by the Madras High Court that the investment of moneys remitted to Mysore by the assessee was a conversion of profits into capital. The fact that the assessee had deposited the bonds as security for an overdraft did not change their character. In these circumstances, their Lordships of the Madras High Court held that there was no material to justify the conclusion arrived at by the income-tax authorities.
9. Mr. B. L. Pal, learned counsel for the revenue, contended before us that there was no evidence of any positive purpose for conversion of the income into capital assets and subsequent sale thereof. According to him, on the sale of these capital assets, the sale proceeds resumed their original character, namely, the character of income and when the sale proceeds were received in India, according to him, it was income that was received in India. The question here is whether income after it has been capitalised, if there is sale of the said capital, is income or it represents the sale proceeds of capital. It is important in this connection to reiterate that the Tribunal has found that this investment into capital assets and subsequent sale were not resorted to by the assessee as a device for the purpose of remittances of the moneys to India without running the risk of being taxed.
10. Mr. B. L. Pal relied on the decision in Walsh v. Randall,  23 T.C. 55 (K.B.). There what happened was that the assessee who was resident and ordinarily resident in the United Kingdom had two sources of income, dividends on investments in India (assessable to income-tax on the full amount arising in India) and his share of profits as a sleeping partner in a firm carrying on business in Calcutta (assessable to income-tax by reference to the sums remitted to the United Kingdom). The income from both these sources was paid into his bank account in Calcutta. The assessee desired to make a gift to a hospital in England and in November, 1934, instructed his bankers in India to sell out an investment in India which had been purchased out of the accumulated income from the partnership and place the proceeds to his current account, to forward a draft for 10,000 in favour of the hospital to him in England and to debit his account in India with the amount. The assessee duly received the draft and handed it over to the secretary of the hospital. Of the sum of 10,000, an amount of 2,200 was agreed to have come out of income already charged to tax in the United Kingdom. On appeal against an assessment to income-tax, the assessee contended that the balance, 7,800, of the sum of 10,000 was a part of the proceeds of the sale of an investment, and, therefore, was a remittance out of capital and not out of income. The assessee further contended that when the draft was received in the United Kingdom it was not income to which he was entitled. The General Commissioners held that the gift was from income, whether capitalised or not in India, and that so far as it had not already borne tax it was liable to bear tax on coming into the United Kingdom. They accordingly confirmed the assessment. It was held by Wrottesley J. that the remittance was a remittance of income and that the appellant had been correctly assessed in respect thereof as the person 'entitled to' the income when it reached the United Kingdom.
11. It is to be observed however that there the court was concerned with assessment under Schedule D of the English Income Tax Act and the appropriate rule applicable was Rule 2 of Case V which provided that:
'The tax in respect of income arising from possessions out of the United Kingdom shall he computed on the full amount of the actual sums annually received in the United Kingdom from remittances payable in the United Kingdom.'
12. It is to be observed that the language of Rule 2 of Case V is different from Section 4(i)(b)(iii) of the Indian Income-tax Act, 1922, with which we are concerned. Further Wrottesley J. observed at page 61:
'The fact is that if a man resides here he cannot, by investing for the time being his income abroad, change its character vis-a-vis the income-tax collector.'
13. What the position, therefore, would have been if the assessee had made the investment not for the time being and if he had acquired assets of a different nature than by investment in the bank, did not fall for consideration by the court in that case.
14. The next case relied on by Mr. Pal was the decision of the Madras High Court in Commissioner of Income-tax v. Rm. Al. Ct. Annamalai Chettiar,  13 I.T.R. 171 (Mad.).
15. There, 'the assessee, a Nattukottai Chettiar, carrying on moneylending business in the Federated Malay States, instructed in the year of account his bank at Kuala Lumpur to remit to its British Indian branch a sum of Rs. 8,000 which the bank in British India was to hold as a fixed deposit of the assessee, repayable at the end of twelve months. The money which the assessee paid into the bank at Kuala Lumpur represented profits which the assessee had made at the Federated Malay States. When the deposit matured the amount was paid to the Assessee in British India. In those circumstances, it was held that the sum of Rs. 8,000 must be treated as profits of the assessee's business outside British India brought into British India by him in the year of account. It has to be observed that in that case the investment had been of a temporary character and was made for the purpose of remittance.
16. In the instant case before us the following facts have been found by the Tribunal:
(1) The investments were made for a number of years, namely, 1950 to 1957.
(2) The investments were not of a temporary character.
(3) The foreign income had been converted into shares and the Tribunal observes at page 13 of the paper book that 'the revenue has accepted that the assessee converted his foreign income into shares and securities and held them by way of 'capital assets'.'
(4) The investment had not been resorted to as a device for the purpose of avoiding tax.
17. In these circumstances, it appears to us that the unassessed foreign profits had been capitalised when they were invested in the purchase of these shares and securities. The shares and securities represented capital. The sale proceeds of the said shares and securities are realisation of capital and cannot be termed as income.
18. As Lord Romer has observed in the judgment referred to hereinbefore, the foreign income after it has been spent or has been so dealt with that it ceased to remain income, then the thing upon which or into which it has been turned cannot be chargeable as income even if it is subsequently brought into India.
19. If the investment was not a device for avoidance of tax for remittance of money to India then whether there was any other positive purpose in making the investment or the subsequent sale thereof is, in our opinion, not a relevant consideration.
20. In the case of A. Lakshmanan v. Commissioner of Income-tax,  53 I.T.R. 780 (Mad.) the assessee lived in the Fiji Islands from 1922 to 1948. During part of that time he had an independent business and he had acquired properties.
21. Subsequent to his return, the properties were sold and the sale proceeds remitted to India in the accounting years 1949-50, 1951-52 and 1952-53. The Income-tax Officer sought to assess these amounts as remittances out of business profits. The assessee claimed that the profits earned abroad had been converted into capital and the amounts remitted were sale proceeds of capital assets and hence not assessable. The Tribunal had held that the capitalisation of foreign profits was only of a passing nature and there was no effective capitalisation of the income. On a reference, the Madras High Court held, on the facts, that the assessee had capitalised whatever surplus income was in his hands in the foreign country and as such there was no material upon which the Tribunal could reach the conclusion that the capitalisation was not effective or that it was only of a passing nature. In these circumstances, the amount received was capital in nature and hence not assessable. At page 784 of the said judgment their Lordships of the Madras High Court observed :
' . . . . unless there was a device by reason of the alteration of the shape of the income to enable it to be brought into British India, what was really capitalised could not be regarded as income.'
22. In our view the answer to the question must, in the premises, be in the negative. The Commissioner of Income-tax will pay the costs of this reference to the assessee.
Sankar Prasad Mitra, J.
23. I agree.