TMI Blog1929 (6) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ve as hereinafter provided, this Act shall apply to all income, profits or gains * * * accruing, or received in British India. 3. Ex concesso, no part of the profits in this case has been received in British India; and the question, stripped of all irrelevant details, is thus narrowed down to the following issue: whether a, person residing in British India is liable to be assessed to Income Tax under the Act on any part of the profits derived from the sale in a foreign country of the goods purchased by him in British India, when the profits have neither been received in, nor brought into, British India. It must be remembered that the Indian law bases the liability of a person to taxation on the place where the income (the word income is used in this judgment as a comprehensive term including, not only what is strictly called income, but also profits and gains) accrues or arises or is received, but not on the place of his residence. If the place of accrual or arising or receipt is British India, the income is taxable, otherwise it is not, unless the income, though accruing or arising or received outside British India, is, by a fiction of law, deemed to have accrued or arisen or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cally and is worked up into a form suitable for export to America is not exempt from assessment to Income Tax in British India. It will be observed that that case was decided with reference to Section 33, Sub-section (1), Income Tax Act, 7 of 1918, which Sub-section corresponded to Section 42, Sub-section (1) of the present Act, and enacted a special, provision to the effect that in the case of any person residing out of British India all profits or gains accruing or arising to such parson, whether directly or indirectly, through or from any business connexion in British India, shall be deemed to be income accruing within British India, and shall be chargeable to Income Tax in the name of the agent of any such person, and such agent shall be deemed for all purposes of the Act the assessee in respect of such Income Tax. 8. The decision of the case proceeded upon the fiction introduced by the Statute under which income, though actually accruing out of British India, is deemed to accrue in British India. Far from lending any support to the contention of the learned Counsel, the judgment contains some observations which go against him. As stated by Chatterjee, J., at pp. 11 and 13, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ras High Court in order to establish the proposition that no part of the profits can be held to accrue at the place where the goods are merely purchased. In Board of Revenue v. Ramanadhan Chetty 1919.43 Mad. 75 the rule was laid down that a person residing in British India, who is the proprietor of a money lending business carried on for him outside British India by agents resident there and keeps himself acquainted with the progress of the business and issues general instructions to his agents carrying on the business, is not assessable to Indian Income Tax if the income from such business, is not remitted to British India. This judgment is clearly distinguishable and cannot be of any assistance in the present case. But the decision in Secy. Board of Revenue (Income Tax), Madras v. Madras Export Co. A.I.R. 1923 Mad. 422, has an important bearing upon the question before us. In that case a firm situated in Paris bought raw skins in Madras through an agent who exported them to Paris where they were sold on profit by the firm. A Division Bench of the Madras High Court held that the profits accrued wholly in France and were not therefore, taxable in British India. The principle, upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sub-section (1), Act 7 of 1918 (Section 41, Sub-section (1) of the present Act), the learned Judges would have held that the company in that case was not liable to pay Income Tax in this country. It is to be observed that while the statute has enacted a special rule making a non-resident having business connexion or property in British India liable to Income Tax Act, in respect of the income accruing outside the territorial limits of British India, there is no corresponding provision imposing, a similar liability on a resident who derives income from the sale in a foreign country of the goods purchased by him in British India. We cannot extend the scope of the statute by analogy or place upon it what is called a beneficent or equitable construction in order to prevent a real or supposed anomaly. As observed by Lord Cairns in Partington v. Attorney-General [1869] 4 H.L. 100: 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 Grown seeking to recover the tax, cannot bring the subject w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n lease from the Crown in the colony of New South Wales where it had an office and a manager of the mines. The ore extracted from the mines in New South Wales was treated by the company's plant and converted into a merchantable product in that colony, but the sales of the product were made and the purchase money was received either in London or in Victoria. The company made profits from these business operations, and the question arose whether any part of the profits was assessable to taxation under the New South Wales Land and Income Tax Assessment Act of 1895. Now, Section 15, of that Statute provided that Income Tax was payable in respect of the annual amount of all incomes * * (1) arising or accruing to any person wheresoever residing from any profession, trade * * * carried on in New South Wales; (3) derived from lands of the Crown held under lease or license issued by or on behalf of the Crown; (4) arising or accruing to any person wheresoever residing * * * from any other source whatsoever in New South Wales not included in the preceding Sub-sections. 16. Their Lordships of the Privy Council held that the case came under Sub-section (3) in so far as the income derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed? But in the present case no profits are received by the firm, or exist in this country. 18. The learned Counsel for the Commissioner of Income Tax argues that the purchase of goods is one of the several processes, the combination of which results in profits; and that a part of the profits should, therefore, be attributed to that process. It is, however, conceded by the learned Counsel that, if the assessee did not himself purchase the goods in British India, but asked his agent in the foreign country to order them from a firm in British India, no part of the profits could be assigned to any process performed in British India, and that the whole of the profits would, in that case, be exempt from taxation under the Indian law. On principle there is little or no difference between the two cases. The same remarks would apply to the case of a person who, instead of buying goods in the market, exported his own goods, e.g., the raw produce of his own land, to a foreign country for sale by his agent there. If the mere purchase of goods in British India would have the effect of making British India as the place of the accrual of a part of the profits, the same result could, by a p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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