TMI Blog1945 (1) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... d in different ways according as the person is resident in British India or not resident in British India . If the person is resident in British India, the total income includes not only income, profits and gains actually accrued or deemed to accrue in British India but also income accruing or arising to him without British India during the year. Residence in India for the purpose of the Act is defined in Section 4-A, which is one of the sections introduced into the Income-tax Act by the legislation of 1939. Clause (a) of the section defines residence with reference to individuals, clause (b) with reference to undivided families, firms and other associations of persons, and clause (c) with reference to companies. As the appellant is a company, this is the clause relevant to the present case. It provides two tests-(1) whether the control and management of the affairs of the company is situated wholly in British India, or (2) whether its income arising in British India in the year in question exceeds its income arising without British India in that year. The appellant company does not satisfy the first test, because the control and management of its affairs is said to be in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey now stand. It is therefore unnecessary to refer further to this complaint. Relying on some of the decisions interpreting the word residence in the English Income-tax Act, counsel for the appellant contended that the second of the tests adopted in Section 4-A(c) of the Indian Income-tax Act was wholly artificial and unwarranted by established principles and that it had been so framed only as a device to give the Indian Legislature a jurisdiction which it would not otherwise possess. The appellant company, it was said, did not reside here in any of the known senses of the term, and as its income from without British India did not ex-hypothesi accrue here and it was not brought here, it was urged that it was beyond the power of the Indian Legislature to impose a tax on that income. It was argued that the Legislature could only tax persons resident here or income accrued due or received here, and that any attempt to go further would make the Act illegally extra-territorial in its operation. It was contended on behalf of the respondent that even according to the English decisions, the definition of residence in respect of a company was to a certain extent artificial and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it would not otherwise possess. It was only a machinery provision which was adopted as a convenient mode of extending to this class of assessees a particular set of provisions contained in the Act for the calculation of their assessable income. The objection, if any, must be to the imposition of the liability itself and not to the manner in which the provisions imposing such liability have been drafted. Relying upon certain observations in Croft v. Dunphy**, counsel for the appellant contended that the powers conferred on the Indian Legislature by the Constitution Act must be interpreted in the light of the prevailing legislative practice in England. It may be that any particular expression used in a Parliamentary enactment relating to the constitution of a subordinate legislature will carry the connotation which by well-established usage it has acquired in English law or politics; and it may also be that if certain powers have long been understood in England to be incidental to or associated with certain other powers, words conferring the one will be understood as carrying the other as well. But we cannot interpret the observations in Croft v. Dunphy as implying that the Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year he might have resided elsewhere. A person who receives a substantial business income from a country may well be regarded as receiving the protection of its laws and administration in the same degree as a person who resides there or carries on business there; and if a person resident in a country for six months can be taxed even in respect of his foreign income earned, it may be, during the remaining six months, it is difficult to see anything inherently objectionable in adopting the same basis when a person derives more than half his total income from business in a particular country. It is the person who is subjected to taxation in either case and his connection with the taxing country is as substantial in the one case as in the other, to warrant both cases being treated alike. Decisions of the English Courts afford little guidance on this question, in view of the difference in the scheme of taxation between the two countries. But some of the Australian decisions to which reference has been made in the judgment of this Court in Governor-General in Council v. Raleigh Investment Co., Ltd. [1944] F.C.R. 229; 12 I.T.R. 265, afford some guidance. The facts in the Raleigh Inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary to deal with it in some more detail. The following are the facts material to this question. On the 29th January, 1940, Wallace and Company acting on behalf of Wallace Brothers and Co., Ltd., filed the usual return of income, (page 50 of the paper book). This was drawn up in accordance with the pre-existing practice. But as Section 4-A(c) had come into operation by that time, the Income-tax Officer, Companies Circle, by letter dated the 7th February, 1940, called for a statement of the total income of Wallace Brothers and Co., Ltd., to enable me to determine whether the company is resident or non-resident as per Section 4-A(c) of the Income-tax Amendment Act, 1939 , (page 53 of the paper-book). By letter dated the 20th February, 1940, Wallace and Company took exception to this view and stated that they had no copy of the profit and loss account of Wallace Brothers and Co., Ltd.; when the Income-tax Officer insisted on having the information, they re-submitted the return of Wallace Brothers and Co., Ltd., reiterating their contention as to the non-liability of the income arising outside British India of Wallace Brothers and Co., Ltd., but they added, to comply with your req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, the Income-tax Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under this sub-section before assessment is made. These provisions clearly indicate that the matter is more one of administrative convenience than of jurisdiction and that in any event it is not one for adjudication by the Court. The second proviso to clause (3) further enacts that the place of assessment shall not be called in question by an assessee if he has made a return in response to the notice under sub-section (1) of Section 22, or if he has not made such a return, it shall not be called in question after the expiry of the time allowed by the notice for the making of a return. This confirms us in the view that the scheme of the Act does not contemplate an objection as to the place of assessment being raised on an appeal against the assessment after the assessment has been made. As we have already pointed out, the objection was not raised in the present case even before the Appellate Income-tax Officer but only before the Appellate Tribunal. The fact that the Tribunal nevertheless thought fit to allow the question to be raised and even included it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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