Source of income controls taxability: commission for Indian services accrued in British India despite receipt abroad.

Commission payable to an employee for services rendered in British India was held to accrue or arise in British India, even though it was received in the United Kingdom while the employee was on leave. The Court distinguished "accruing or arising" from "received" and held that the place of receipt does not determine the source of income. Reading the service agreement with the charging scheme, the commission was treated as remuneration dependent on work done in Indian tea estates and on the profits of those estates. On that basis, the income's source was British India and it was taxable there under Section 4(1) of the Indian Income-tax Act, 1922.

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Issues: Whether commission earned by an employee in British India for services rendered there, but received in the United Kingdom while on leave, accrued or arose in British India within the meaning of Section 4(1) of the Indian Income-tax Act, 1922.

Analysis: The commission was payable under a service agreement requiring the employee to serve only in British India and to earn the remuneration by work done in the Indian tea estates. The Court held that the expressions "accruing or arising" are distinct from "received" and that the place of receipt does not control where the income has its source. Reading the agreement with the charging scheme of the Act, the commission was treated as remuneration dependent on services rendered in India and on the profits of the Indian estates. On that basis, the place from which the income sprang was British India, and the issue was essentially one of fact to be decided on the real nature of the employment and the source of the remuneration.

Conclusion: The commission accrued or arose in British India and was taxable there under Section 4(1) of the Indian Income-tax Act, 1922.

Ratio Decidendi: Income accrues or arises where it has its source of growth, and not merely where it is actually received, when the remuneration is dependent on services rendered and profits generated in British India.

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