Prior inclusion for rate purposes is not a prior assessment of the income source under the 1922 Income-tax Act.

Income from a source in non-taxable territory, when earlier included only in total world income for rate purposes, is not treated as a prior assessment of that source under the proviso to section 2(11)(i)(a) of the Income-tax Act, 1922. The proviso must be read with the words referring to a particular source of income, profits and gains, so the relevant assessment is one made on that source for inclusion in total income. Use of such income merely to fix the rate on total world income does not amount to assessment of the source. On that construction, the assessee was not barred from choosing the financial year ending 31 March 1950 as the previous year for assessment year 1950-51.

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Issues: Whether the assessee, in respect of income from a source in non-taxable territories that had earlier been included only in the total world income for rate purposes, had "once been assessed" within the meaning of the proviso to section 2(11)(i)(a) of the Income-tax Act, 1922, so as to be barred from opting for the financial year ending 31 March 1950 as the previous year for assessment year 1950-51.

Analysis: The expression "an assessee has once been assessed" in the proviso had to be read with the opening words "in respect of a particular source of income, profits and gains". On that construction, the relevant assessment had to be an assessment of the income of that source for inclusion in the total income. The Act treats assessment as being on total income under section 23(1), and the use of income from a source only for determining the rate on total world income did not amount to an assessment of that source. Since the earlier inclusion of the non-taxable-territory income was only for rate purposes and not as taxable income, the proviso did not bar a fresh option as to the previous year.

Conclusion: The assessee had not been "once assessed" in respect of that source within the meaning of the proviso and was entitled to adopt the year ending 31 March 1950 as the previous year for assessment year 1950-51.

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