TMI Blog1944 (8) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... m and was considered by the Income Tax Officer as profits received from Indore in the first question which arose for consideration was whether the assessee firm were residents in British India. The second question was whether the amount was remitted into British India from Indore, and the third was whether the same was profits or capital. In the reference there was no finding about the assessees being residents in British India. The matter was therefore sent back to the Commissioner for making hid report on that question. By his letter dated 11th February 1944, the Commissioner has sent his finding to the Court with the reasons for his conclusion. His finding is that the assessees during the year of assessment were residents in British India. It was contended on behalf of the assessee that that finding was not warranted, as there was no evidence for the same. After hearing counsel on both sides we decided to raise the additional question whether there was evidence to support that finding. In his letter the Commissioner has relied on the following facts for his conclusion : (1) Registration certificate if the firm which is annexed as Exhibit 4 to his letter. (2) Earlier assessment r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Sweden. In 1925 a committee was appointed to transact more or less administrative business in the United Kingdom, such as dealing with transfers of shares in the United Kingdom, affixing the seal of the company to share and stock certificates, and signing cheques on the London banking account of the company. Since that year no meeting of the company had been held in the United Kingdom, all dividends had been declared in Sweden and no profits had been transmitted to the United Kingdom, except in payment of dividends to the shareholders in the United Kingdom. The annual rent under the lease was also paid to the company in Sweden. It was held that while the business of the company was controlled and managed from Sweden, the company was a person residing in the United Kingdom for the purposes of Income Tax. In Egyptian Delta Land and Investment Co. v. the question of residence of a company came to be considered. It was held that the fact that the company was registered in the United Kingdom, though not the sole deciding factor, was a material fact to be taken into consideration. The assesses relied on Commissioner of Income Tax, Madras v. T. S. Firm, where, in respect of a partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention of assessees was not correct. In the course of discussion it was pointed out that there were telephone calls between Bombay and Indore and it need not be assumed that this business was done by the munim without instructions from Indore. Before leaving this part of the case it must be pointed out that the Commissioner was not right in adopting the attitude of not pointing out to the assessees passages from the evidence of Sir Sarupchand on which he ultimately relied for his conclusion. The question whether a person in a resident in British India or not is a question of fact. In fairness and in law, I think, it is the duty of the authority entrusted with the task of recording its finding, to give every opportunity to the other side to meet the case which the authority thought was in existence. Without giving such opportunity to the assessees it is not proper to rely on any evidence or any fact which he ultimately takes into consideration for arriving at his conclusion. The original order made by the Court when sending back the reference for the Commissioner to record his finding on the question of residence, through inadvertence, was worded so as to suggest that the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structions and credited to the Indore shop. These creditors were paid at Indore the said two sums out of the cash of the Indore firm. In addition to these facts, the Commissioner has pointed out in the reference that on 29th November, 1933, a sum of ₹ 85,000 in currency notes was sent by the Bombay firm to the Indore firm and on 5th February 1934, another sum of ₹ 50,000 was similarly sent from Bombay to Indore. The question is whether in these circumstances the two sums of ₹ 80,000 and ₹ 9,000 are to be treated as profits arising without British India to persons resident in British India and received or brought by them into British India. The question of residence is decided against the assessees. The material question therefore is whether these were received or brought into British India by the assessees. The second question submitted by the Commissioner does not being out the real question between the parties. We settle in thus : Whether the two sums of ₹ 80,000 and ₹ 9,000 being payments made to the two creditors at Indore, as stated in the statement of case by the Commissioner, were, under the circumstances of the case, received in or brou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made out of foreign profits, and as the amount was remitted to the Pudukotah State, and was not remitted to or received in British India, it was not assessable to tax in British India. The material fact to be noticed is that the remittance was to a resident in Pudukotah State by a hundi which was delivered to the individual in the Pudukotah State and cashed by him there. In the course of argument, it was contended that inasmuch as the liability of the assessee to S in British India was reduced by $ 6,290 it must be taken that this money had come into India, but the learned Chief Justice expressly negatived that contention. He pointed out that the money was paid out of the profits of Mallaca branch but they were never received in British India. They were paid to S in Pudukotah State and it was not suggested that S transferred the money to the assessee in British India. He stated, Unless profits made abroad are received in British India there can be no question of taxation here. He relied on In re Multanchand Johur Mal cited above. Counsel for the Commissioner relied in that case on L. C. T. S. P. Subramaniam Chettiar v. Commissioner of Income Tax, Madras. In that case the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee took a promissory note. In the year of account the decree which the assessee had in the meanwhile obtained on the promissory note was satisfied by the debtor giving to the assessee in British India jewels worth a certain amount and an assignment of a decree obtained by a third person against the assessees brother-in-law for a larger amount. These amounts were credited to the assessees head-quarters accounts towards the debt due by M. The Income Tax authorities held that the transaction amounted to a receipt by the assessee of these two sums in British India and made an assessment on that footing. That was a converse case of a debtor paying in British India debt which was due outside. The payment was in the shape of jewels and a money decree which was executable in British India. It seems to me clear that the case does not help the Commissioner. In that case tangible assets were received in British India, and therefore, although they were not received in cash, the commissioners contention of the amount being received in British India was rightly upheld. Mr. Setalvad further relied on Narayana Chettiar v. Commissioner of Income Tax, Madras. In that case the assessee was a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount must be considered as received in British India. On the other hand, our High Court in Commissioner of Income Tax, Bombay v. New India Assurance Co., Ltd. has decided that receipt of the amount is a material factor to be considered, and the fact that it is shown as income in the books in British India and action taken by assessee on the footing of that income does not amount to receipt of the amount in British India. In that case the assessee company which had investments in England and United States of America showed in its balance sheet two items which the company had earned by way of interest and dividends on the investments so made. They brought these two amounts to their account in British India, and in making up the account of the total profits included these two items and arrived at a total. On the footing of that total the company declared a dividend. It was argued that as the amount was brought into the balance sheet and as on the footing of that money being so included in the profits the company had declared a dividend, the company should be considered as having brought this money into British India. The contention was negatived by the Court. In the course of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of costs we order that the Commissioner should three-fourths of the costs of this reference throughout. The costs of the hearing and of the application, which were received by the judgment delivered on 21st September 1942, are made costs in the reference. CHAGLA, J. - I agree. In order to attract the application of sub-section (2) of Section 4 before it was amended in 1939 two conditions have got to be satisfied : (1) that income, profits or gains accruing or arising out of British India must be a person resident in British India, and (2) they must be received in or brought into British India. Now with regard to the first question of residence the Commissioner has found that the assessees were during the relevant year resident in British India. That is a finding of fact and the question is whether that finding could be justified on evidence placed before him. In the case before us the assessees are not individuals but a firm, and it has been laid down that in the case of a firm the residence is where the central management and control of the firm abide. To use the language of Lord Loreburn the firm cannot as in the case of an individual eat or sleep but it does keep a ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tish India in specie. They may be brought into British India either in cash or in the shape of assets which are reliable. There is not a single case cited before us which goes to show that the Court has ever held that although no profits were received in British India in specie or in the form of tangible assets, on the theory of constructive remittance the assessee was made liable. The principle of the two cases relied upon by the assessees, In re Multanchand Johurmal and Commissioner of Income Tax, Madras v. Murugappa Chettiar is clear, namely, as the profits were never received in British India the assessee was not liable. If one turned to the cases relied on by the Commissioner, one would find in L. C. T. S. P. Subramanyam Chettiar v. Commissioner of Income Tax, Madras, the debt was discharged by payment of a hundi which must be considered a realisable asset, because a hundi is negotiable and can be cashed in British India. In Manickam Chettiar v. Commissioner of Income Tax, Madras, we had a case of a degree which was assigned and jewellery which was given to the assessee. The learned Judges in that case specifically stated that these were realisable assets received 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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