P L D 1952 Peshawar 28 (PLP)

MUHAMMAD SHAFI, J.‑The Income‑tax Appellate Tribunal Pakistan has referred the following question to this Court under section 66 (1) of the Income‑tax Act of 1922 :‑ "Whether in the circumstances of the case the dividend income of Rs. 75,000 can be said to have been received by the assessee‑company in British India within the meaning of section 4 (1) read with section 14 (2) (c) of the Act." The facts out of which this reference has arisen have been given in detail in the very able order written by the Tribunal on the 23rd of March 1950. Briefly, they are, that before India was partitioned R. B. Ishar Dass and his relations were the residents of Nawanshehr in the Hazara District, and were running several business concerns, out of which one was the Ramkola Sugar Mills Company, Limited, with Head Office at Nawanshehr, hereinafter referred to as the Assessee Company. The company operated a sugar factory in the United Provinces of Agra and Oudh. R. B. Ishar Dass and ten of his relations were the share‑holders in this Company. The Assessee Company held Rs. 75,000 fully paid up shares of the Mahalakhshmi Sugar Mills at Hamira, a limited Company registered in Kapurthala State, hereinafter called the Foreign Company. R. B. Ishar Dass and some of his relations were the Directors of the Foreign Company. There is a Firm, known as Firm Tirath Ram Shah Ishar Dass, hereinafter called. The Firm, of which the partners are again R. B. Ishar Dass and his relations. The three concerned mentioned above were intimately connected with each other and were in fact owned by the same persons. On 31st October 1942, the Foreign Company declared dividend and a sum of Rs. 75,000 became due to the Assesses Company. On that day the position was that the Assesses Company owed to the Foreign Company a sum of Rs. 78,

897. After this dividend was declared in pursuance of an agreement reached between the Assessee and the Foreign Com panies, the two amounts representing the counter‑claims were set off against each other resulting in a final credit balance of Rs. 3,897 in favour of Foreign Company. The Assessee Company's year of account ended on 31st October 1942, and so it filed a return of the year of assessment 1943‑

44. In the return it showed a net income of Rs. 2,62,400 which included the sum of Rs. 75,000 referred to above. Subsequently, how ever, the Secretary of the Assessee Company ; revised the return, and excluded this sum from the taxable profits. His contention was that this amount was an income, profit or gain accruing or arising to the Assessee Company within an Indian State, and since it was neither received nor deemed to be received in or brought into British India, it could not be assessed to the income‑tax. The Income‑tax Officer, the Appellate Assistant Commissioner of Income‑tax, and the Income‑tax Appellate Tribunal have given their decision against the Assessee Company, and so under these circum stances the question reproduced' in the earlier part of this judgment has been referred to this Court. Section 4 of the Income‑tax Act is the charging section, the relevant portion of which runs as follows :‑ "4 (1) 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 British India in such year by or on behalf of such person ; or (b) if such person is resident in British India during such year‑ (i) accrue or arise or are deemed to accrue or arise to him in British India during such year, or (ii) accrue or arise to him without British India during such year, or (iii) having accrued or arisen to him without British India before the beginning of such year and after the 1st day of April 1933, or are brought into or received in British India during such year." The clause relevant to the present case is clause (b) (i) mentioned above. Where income, profits or gains, have accrued or arisen to any person without British India but in any State, then section 14.(2) (c) comes into play, which is as under :‑ "The tax shall not be payable by an assessee‑ (c) in respect of any income, profits or gains accruing or arising to him within an Indian State, unless such income, profits or gains or received or deemed to be received in or are brought into British India in the previous year by or on behalf of the assessee, or are assessable under section 12‑B or section 42." It is conceded by both the parties that it is not a case c. any income, profits or gains deemed to be received in or having been brought into British India, nor is it a case where such income, profits or gains are assessable under section 12‑B or section

42. There are provisions in the Act, for example sections 16 , (1) (c), 18 (4), 23 (5) (a), 58‑E and 58‑J, where income, profits and gains not actually received in British India have got to be deemed to have been so received. These provisions, however, do not cover the case now under con sideration. It is also not a case in which any income, profits or gains have been brought into British India. All that we have got to determine is whether under the circumstances of the case Rs. 75,000 were received into British India. The Act nowhere defines the word received. Its meaning given in the Chambers Twentieth Century Dictionary is "To take what is offered, to accept." In the Universal Dictionary of the English Language this word has been given the follow ing meaning. "To obtain, get acquire by having anything given, sent, offered etc." In Webster's Dictionary it is given the following meaning, "To take, as something that is offered, given, committed, sent, paid or the like, etc. It cannot be denied that Rs. 75,000 have been earned by the Assessee Company, and if the Assessee Company had not been a debtor to the Foreign Company, the latter would have sent this amount to the former by a dividend warrant or a similar credit instrument either by mail or by hand. In this particular case as per their agreement instead of sending the divident warrant, the method of the payment adopted was that the Assessee Company's indebtedness to the Foreign Company to that extent was cancelled. If any income, profits or gains accrue to a certain person ordinarily residing in British India, without British India, they can be remitted to him in several ways. They can be paid by a draft‑order of one Bank on another, or by sending some realizable assets to British India, or by any other method recognized in the commercial world as appropriate for the transmission of the money. They may further be received by cross entries made in the account‑books, the effect of which would be the virtual receipt of the amount in British India and its application there as an income. In all these cases although the income is not received in specie, yet to say that it is not received at all will be a travesty of judgment. In the case before us, supposing the Foreign Company had come to Nawanshehr and paid Rs. 75,000 to the Assessee Company, but taken the money back and appro priated it towards payment of the debt which was due to it, it would be tantamount to the money received, but then the method adopted would have been unbusiness‑like and certainly very childish and foolish. The parties instead of resorting to the above method of payment represented the income received by appropriate entries in the account‑books. The effect of it, however, was that Rs. 75,000 in the hands of the Assessee Company were released to be dealt with in anyway it liked instead of paying it off to the Foreign Company in discharge of its debt. This amount was thus taken and accepted by the Assessee Company, or it was obtained by the Assessee Company in Nawanshehr by having been offered the Foreign Company. It has been contended on behalf of the Assessee that the effect of the corresponding entries in the books of the two Companies was only the lessening liability of the Assessee Company, and not the actual of the money in British India. This line of argument we confess we have been unable to understand, because if for some reason or another A becomes indebted to B, then no sooner he pays that money to B, his liability to that extent is automatically and necessarily lessened So merely because a payment has the effect of lessening the liability does not mean that payment has not been made or the amount has not been received. The liability of a person is lessened when the amount is paid irrespective of the form that the payment takes ; so our view is that Rs. 75,000 were actually received in Nawanshehr. This view of ours in this particular case is very strongly supported by the entries in the account‑books of the Assessee Company. We are not pre pared to subscribe to the view expressed by the Income‑tax Appellate Tribunal, Pakistan, that the fact that the dividend was brought into the profit and loss account for the purpose of ascertaining the total profits and the sum which should be paid as dividend was not by itself tantamount to receipt of dividend in British India. We are of the opinion that this is a very strong piece of evidence in favour of such receipt of money. The result of the above discussion is that the dividend income of Rs. 75,000 was received by the Assessee Company in British India within the meaning of section 4 (1) read with section 14 (2) of the Act. The question raised is answered in the affirmative. The Assessee Company shall pay the costs of these pro ceedings to the opposite party. Pleader's fee Rs.

200. A. H. Reference answered.