1966 PLP 363 (PTD)

4,00,000 Rs. 29‑8‑1945 2,00,000 Rs. 29‑8‑1945 31‑8‑1945 6,00,000 Rs. 17‑10‑1945 2,00,000 Rs. 17‑10‑1945 18‑10‑1945 4,00,000 Rs. 12,00,000 Rs. 28‑4‑1947 4,00,000 Rs. 8‑7‑1947 2,00,000 Rs. 24‑4‑1947 11,500 Rs. 4‑9‑1947 2,00,000 Rs. 4,11, 500

6. The internal vouchers of the assessee for the aforesaid transactions are not available. The Income‑tax Officer, how ever, recollects to have seen a journal slip or voucher made at the time of making the entry in the Quilon books that the sum drawn from Calicut was Calicut profits. The assessee, how ever, denies existence of such slip or vouchers.

7. In the assessment proceedings of the aforesaid two years, 1122 M. E. and 1124 M. E., the Income‑tax Officer assessed the aforesaid amounts of Rs. 12,00,000 and Rs. 4,11,50() withdrawn from the Calicut bank account into its Trivandrum bank account as foreign profits remitted into the taxable territories under section 4 (1) (a) of the Travancore Act, in his orders copies whereof are annexed hereunto as Annexures "B‑1" and "B‑2" and form part of the case, ignoring the following con tentions raised by the assessee in its letters dated July 1, 1947 and July 22, 1947, copies whereof are collectively annexed hereunto as Annexure "C" and form part of the case: (a) The remittances into Trivandrum constitute only capital as the amounts were intended for a specific purpose of remittances to London and had been only channelled through Trivandrum; (b) Alternatively, if the remittances are to be assessed, the remittances out of Travancore to London and elsewhere too have to be deducted as a set‑off.

8. The assessee thereupon appealed to the Appellate Assistant Commissioner against both the aforesaid assessments. For the purposes of these appeals, it was accepted that there were undistributed profits available for remittance at the begin ning of each of these years in excess of the aforesaid remit tances. The contentions and arguments in this appeal, in addition to repeating those urged before the Income‑tax Officer as above, are as follows: (i) The Indian profit had already been received first in India and secondly received in Travancore cannot be taxed as remittances. (ii) The Indian profit could not be treated as having been remitted to Trivandrum as the money has simply passed through Trivandrum; (iii) The agent's principal office at Quilon who drew the cheques on the Imperial Bank of India, Calicut, and in favour of the Imperial Bank of India, Trivandrum, had really no control over the funds that were eventually made available only to the latter as between the two banks; the Trivandrum Bank only recouped itself from out of the proceeds of the cheques of the assessee it held at that time; (iv) The moneys had been remitted by the Trivandrum bank first and thereby created a liability against the assessment in the first instance. It was only this liability that was dis charged by the cheques in question; the cheques on Calicut bank given to it amounted only to the discharge of such liability due to the bank. Discharge of liabilities does not amount to remittances as held in Multanchand Johurmul v. Commissioner of Income‑tax (1930) 5 I T C 154, Commissioner of Income‑tax v. Murugappa Chettiar (1940) 8 1 T R 297 and Sarupchand Hukumchand, In re. (1945) 13 I T R 245.

9. The Appellate Assistant Commissioner rejected each one of the aforesaid contentions and held in the following words reproduced from his order for 1122 M. E. that the remittances were remittances of profits assessable under section 4(1)(a) of the Travancore Income‑tax Act: "What actually happened appears to be that the company made large remittances to London from Trivandrum in the course of the year out of the funds of its Quilon office and the Quilon office in its capacity as the head and con trolling office of company in India directed its Calicut office to remit the sum of Rs. 12,00,000 in question. The cheques for the sum of Rs. 12,00,000 drawn or the Imperial Bank of India, Calicut, and in favour of the Imperial Bank of India, Trivandrum, should therefore be interpreted to mean that the Trivandrum Imperial Bank was directed to collect from its Calicut office the above sum and credit the same to the current account of the company's Quilon office with the result that the said sum of‑Rs. 12,00,000 got merged in the general )'ands of the Quilon office." A copy of the Appellate Assistant Commissioner's orders for 1122 M. E. and 1124 M. E. are annexed hereunto as Annexures "D‑1" and "D‑2" and form part of the case.

10. The assessee thereupon appealed to the Tribunal for both the aforesaid years on grounds of appeal, copies whereof are annexed hereunto as Annexures "E‑1" and "E‑2" and form part of the case. These grounds challenged the various conclusions of the Appellate Assistant Commissioner. Later the following additional ground was also filed: "The Appellate Assistant Commissioner as well as the Income -tax Officer ought to have held that the remittances from Calicut to Trivandrum were to meet the cost of production of the Indian estates paid for in Travancore and that there fore the remittances did not represent any profits as the state ment filed herewith will clearly show." In support of this additional ground, certain statements prepared by Messrs Fraser and Ross in further amplification of the facts set out in paragraph 4 supra were also filed in the course of arguments. Copies of these are collectively annexed hereunto as Annexure "F" and form part of the case.

11. The Tribunal admitted the aforesaid additional ground it dismissed both the appeals holding that the amounts had been rightly assessed as remittances of foreign profits. A copy of the Tribunal's order is annexed hereunto as Annexure "G" and forms part of the case.

12. From out of the aforesaid facts, the only question of law that arises is: "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. P. K. Kurien, G. Balagangadharan Nair, K. Sukumaran and K. A. Nayar for the Assessee. G. Rama lyer for the Commissioner. 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 account ing periods concerned are the twelve months ended on March 31, 1946, and March 31, 1948, respectively. The question referred is: "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 own 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, 1946, 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 follows: "4. (I) 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‑tax ((1953) 23 I T R 230). " . 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 subse quent 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. Commis sioner of Income‑tax (1931) L R 58 I A 239 and in Com missioner of Income‑tax v. S. L. Mathias (1939) 7 I T R 48 (P C) 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 the 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 reasons: (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 is: Was the amount brought into Travancore? As pointed out in Haji Muhammad Usman & Sons v. Commissioner of Income- tax ((1954) 25 I T R 252, 256). "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 re presented 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 thing 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 o f a period prior to April 1, 1947, it will certainly be taxable under section 4 (l)(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 follows: "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 subsection (5) of section 66 of the Indian Income‑tax Act, 1922.