Broad interpretation of Section 42(1) extends to residents and can override exemption for business connection profits.

Section 42(1) of the Income-tax Act, 1922, as amended in 1939, was interpreted as applying to residents as well as non-residents because the opening words were framed broadly and the later reference to a person not resident in British India was treated as a specific subset, not a limitation. The marginal note "Non-residents" was held to be an unreliable guide to construction, and its later alteration supported the wider reading. The provision was also described as capable, in an appropriate case, of operating with the charging provisions and overriding the exemption otherwise available under Section 14(2)(c) where profits arose through a business connection.

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Issues: Whether Section 42(1) of the Income-tax Act, 1922 as amended in 1939 applies to residents as well as non-residents.

Analysis: The first part of Section 42(1) was framed in wide terms and did not limit its operation to persons residing out of British India. The later words dealing specifically with a person not resident in British India were treated as showing that the earlier part covered a wider class, including residents. The marginal note "Non-residents" was held to be an unreliable aid to construction, and the subsequent change in the marginal note was noted as supporting the broader interpretation. The Court also held that, in a proper case, the section could operate alongside the charging provisions and override the exemption otherwise available under Section 14(2)(c) where profits arose through a business connection.

Conclusion: Section 42(1) applies to residents as well as non-residents, and the question referred was answered in the affirmative against the assessee.

Ratio Decidendi: Where the language of a deeming provision is general and the later part of the section expressly singles out non-residents, the earlier part is not confined to non-residents and may apply to residents also.

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