TMI Blog1956 (5) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... be sufficient to meet the capital levy. Needless to say that the sellers had sold the shares at a considerable profit. On or about 10th March, 1954, the Income-tax Officer, Companies, District II, Calcutta, served on the petitioner a notice under section 46(5A) of the Indian Income-tax Act stating that a total sum of ₹ 3,97,230-1-0 was due from the Clive Investment Trust Co. Ltd. on account of income-tax and corporation tax and required the petitioner to pay any sums held by it on account of the said assessee, or payable to it. The petitioner has paid the sum of ₹ 1,48,812-8-0 and ₹ 1,822-7-0 to the Income-tax Authorities. The latter sum appears to be by way of interest. The managing agents of the petitioners were thereupon directed to furnish particulars of the transaction which they did. On 15th March, 1955, the Income-tax Officer, Companies, District II, Calcutta, wrote to the petitioner that the tax recoverable on the transaction under section 18 (3A) was ₹ 2,27,540-15-0, whereas the petitioners had deducted and paid over only ₹ 1,48,812-8-0. It was, therefore, directed under section 18(7) of the Indian Income-tax Act, to make payment of the balan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dispute. The records of the assessment were called for and I have looked into them. A copy of the assessment order has been furnished to me and parties do not object to its being put on the record. It appears from the assessment order which is dated 9th March, 1953, that Messrs. Clive Investment Trust Co. (in liquidation) has been assessed for the year 1948-49 on the footing that it was resident and ordinarily resident within the taxable territories . As a matter of fact it is the balance of tax payable on this assessment order that is being realised from the petitioner. There is one other matter with reference to this assessment order which is important in this case. The dealings in shares which resulted in a profit, including the dealings with the petitioner, have been treated as part of the business of the company and as business income and not as capital gain. It has been stated that the company systematically dealt in shares, therefore, the income could not be treated as capital gain. The company was an investment company and change of investment was a normal step. From this assessment order two points emerge. Firstly, that the company is a resident company although it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all to, more than two years. He argued that let us suppose the transaction had taken place early in the year. It might be that during the rest of the year the assessee would acquire the status of a resident although at the time of the transaction he was non-resident. How is the matter to be determined in that case ? From this he argues that under section 18(3B), residence should mean physical residence. He says that thus construed, the matter could be easily determined, and anybody paying moneys would at once be knowing as to whether it was being paid to a resident or a non-resident. In my opinion, there are two difficulties in accepting this construction. Firstly, I am not aware that it is permissible to interpret a statute in this fashion. Where there is virtually a definition clause one must assume that words so defined are used in the same sense throughout the statute, unless there are indications specifically to the contrary. Where a word in the statute is defined, it is not permissible to ascribe to it a different meaning, even if it be the dictionary meaning. The only exception would be where the meaning, if interpreted according to the definition clause, gives rise to any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a part of the tax due on the same order of assessment, attempt to realise moneys from third parties on the footing that the company is non-resident. This is neither just nor reasonable. Since the Clive Investment Trust Co. Ltd. is a resident, the impugned order cannot clearly be supported. If the company is resident, then there is no scope for the application of section 18(3B). Mr. Mitter has taken a second point which is more debatable. He argues that under section 18(3B), even if the Investment Trust Co. was a person non-resident, in order to make his client liable, it must relate to any other sum chargeable under the provisions of this Act. He says that the amount that his clients had paid to the Investment Trust Company represented the price of certain shares and not as such chargeable to tax. He argues as follows: The Investment Trust Company deals in shares. It buys and sells, hundreds or even thousands of shares, in the open market. Can it be said that every purchaser paying over moneys as price of shares was making payment of a sum which was chargeable under the provisions of this Act ? According to Mr. Mitter, this constitutes an item of trading receipt and as su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received became chargeable to tax under section 3 of the Act. Applying this test it would seem that although payment for a particular bunch of shares may be one of a number of items in the company's business, nevertheless if ultimately the company made a profit, it could be said that the profit was embedded in each transaction or item, and was thus chargeable. The next point taken is that the petitioner had a right of appeal and consequently there was an alternative legal remedy and as such an application for certiorari did not lie. Mr. Mitter says that no appeal lies, whereas Mr. Meyer argues that an appeal would lie under section 30 (1A) of the Income-tax Act. That provision runs as follows: Any person having, in accordance with the provisions of sub-section (3B) of section 18, read with sub-section (6) of that section, deducted and paid tax in respect of any sum chargeable under this Act other than interest who denies his liability to make such deduction may appeal to the Appellate Assistant Commissioner to be declared not liable to make such deduction. Mr. Mitter says that his client cannot come within this section because it has not deducted and paid tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I might also cite a case in which the Supreme Court interfered although the error of law was not apparent at all. See Raj Krushna v. Binod Kanungo [1954] S.C.R. 913. The position, therefore, is that an error of law can be corrected if the error is patent on the face of the record. It is somewhat difficult to see how an error of law could be an error not patent on the face of the record. I suppose what it means is that if a point of law is dependent on disputed questions of fact, then, if the facts are not patent, the error in law cannot be corrected. What then is the position here? If it was not an admitted fact that the company was taxed as resident during the year in dispute, then Mr. Meyer's contention would have been of some weight. The application of section 18(3B) would then be dependent on a question of fact in dispute. Mr. Meyer has however not disputed the fact that there has been an assessment on the footing of the company being a resident. In fact, a copy of the assessment order has been placed on record by consent of parties. The whole point turns round the method of construing the word non-resident in that section. According to Mr. Meyer it means one thing an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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