TMI Blog1937 (4) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... ories of Pierce Leslie and Co., and sold there by Pierce Leslie Co., the selling agents of the assessee. As the sale proceeds are received and retained at Mangalore and a separate staff is maintained by the assessee at Mangalore to attend to the above operations, the Commissioner was of opinion that the assessee was liable to be taxed as one carrying on 'business' and receiving the income or profits thereof in Mangalore. As both Section 4 and Section 6 of the Indian Income Tax Act are qualified by the opening words 'save as hereinafter (otherwise) provided', the point for determination is whether the assessee can claim exemption under the second proviso to Section 4(2) and if so, to what extent. The Commissioner has expressed the opinion that proviso 2 to Section 4(2) has no application here, because the profits of the business are received in Mangalore and the agricultural processes carried on in Mysore are not in themselves a source of income but merely 'an element in the business which produces the income'. In support of this view, he has relied on the decisions in 3 Income Tax Cases 378 and 8 Tax Cases at p. 204; but it must be observed that even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aying emphasis not on the distinction between receipt in money and receipt in kind but between recurring receipts from a business continuously carried on and an occasional receipt of the kind then in question. On the other hand, they refer in the course of their judgment to income being likened to the 'crop of a field'. In CIT v. Maharaja Sir Kameshwar Singh [1933] 1 ITR 94 the Privy Council affirm that 'a receipt in kind may be taxable income'; they only add that what is received in kind should be money's worth. It was admitted before us by Mr. Patanjali Sastri that in respect of the produce of land in British India, the Indian Income Tax Act recognises the receipt of income or rent in kind as receipt or accrual of income; it is difficult to see why as a matter of language, the expressions 'receipt' or 'accrual' of income should not have the same significance when used in connection with the receipt of produce from lands outside British India. In Kirk's case ( supra) the question arose as to the assessment to be levied in New South Wales on a Company which extracted ore from mines owned by it in New South Wales and converted it into a mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned here with any question of double taxation or hardship caused thereby; but we refer to this aspect of the matter only to point out that if for assessment in Mysore, the assessee can in the ordinary sense of words (and not by any fiction of law) be held to have received the income in Mysore, there is no reason why for purposes of the 2nd proviso to Section 4(2) the income should not in this case be help to have arisen or accrued in Mysore. The decision in Port Said Salt Association, In re, AIR 1932 Cal. 626 does not materially help the Referring Officer in this connection. The learned Judges recognised in that case that part of the profits might have been 'earned' elsewhere, but they held that if the whole is 'received' in British India, no portion could escape taxation unless there be a convention to limit the claim of one State against the nationals of others. The 2nd proviso is in a sense the result of such a convention: the case cannot throw light on the interpretation of the scope of that convention. Reliance was also placed by Mr. Sastri on the observation in Jiwandas v. Commissioner of Income tax, Punjab AIR 1929 Lah. 609 to the effect that the place w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pondicherry Ry. Company case [1931] I.L.R. 54 Mad. 691. We may observe at the outset that in the Pondicherry Company's case (supra) , their Lordships were not called upon to decide whether the 'receipt' of income by the company was a receipt in the grammatical sense or in the extended or artificial sense, because the Company's contention was that there was no receipt at all, by or on their behalf in British India and that they received the income only in London. If that decision gives us any guidance at all in the present case, it may well be held that on the facts here, the receipt of the produce in Mysore itself by the assessee's men on the spot will correspond to the receipt by Mr. Rothera in the Pondicherry Company's case (supra) and the assessee's receipt of the income in British India can only be a receipt in the secondary stage, just like the receipt by any Nattukottai Chetty here of profits earned by a business carried on on his behalf in foreign countries. Even apart from this view of the facts, it does not seem to us necessary or reasonable to read clauses (1) and (2) of Section 4 as mutually exclusive. The first clause comprises 'receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. It was contended on his behalf that the whole of the price realised by him by the sale of the Mysore coffee in Mangalore should be excluded, but it was maintained on behalf of the Referring Officer that the assessee is at best only entitled to a deduction of the value of the coffee beans in a raw state in Mysore. The statement of the Commissioner and an affidavit of Mr. Kirkbride, Manager of Pierce Leslie and Co., set out in detail what happens to the beans between the time when they are picked and the time they are actually sold. If the process subsequent to the picking can be regarded as in the nature of manufacture the assessee will on the anology of the rule applicable to tea (see Killing Valley Tea Co. Ltd. v. Secretary of State [1920] 1 ITC 54 , and rule 124 of the rules framed under Section 59 of the Act) be entitled to deduct only the agricultural part of the income. But the affidavit states that in the case of coffee, the process is not in the nature of a 'manufacturing process' but only a 'process ordinarily employed by the cultivator to render the produce fit to be taken to the market' [see Section 2 (1)(b)( ii)]. The learned counsel appearing for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly amount to reading the proviso in Section 4 into the definition of 'agricultural income' when the Legislature had not (as it might well have done) included in that definition income from assessed lands in Indian States. Having regard to the manner in which amendments have been from time to time inserted in the Act, the argument founded on the particular place where an amendment is inserted cannot have the same force here as in the case of a provision which formed part of the original scheme of the Act. As we have already explained Section 4(2) might well have been thought to be the proper place for the insertion of the proviso. On the other hand we have not been shown any reason why the proviso was inserted at all and why it should have been limited to lands paying assessment to an Indian State if it was not the intention to treat the owners of such lands as on the same footing as owners of assessed lands in British India. The policy clearly was to avoid double taxation: not double taxation in the sense of payment of income tax in two places but of taxing a person who in respect of the same subject matter has already paid a reasonably heavy land tax, whether in British I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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