Actual receipt required for remittance tax; directing payment to a third party is not taxable receipt.

Accumulated income earned outside the taxable territories was taxable on remittance only if the assessee himself actually brought it into, or received it in, the taxable territories. A direction to a debtor to pay a third party merely substituted one debtor for another and did not amount to actual receipt or constructive receipt by the assessee. The Bombay HC therefore held that the income was not taxable under the remittance provision of the Income-tax Act, 1922, and answered the reference in favour of the assessee.

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Issues: Whether the transfer of the assessee's accumulated income from Bhavnagar to the Bombay mills amounted to receipt or bringing into the taxable territories so as to attract tax under the remittance provisions.

Analysis: The provision taxing income under the remittance basis required that accumulated income earned outside the taxable territories be brought into or received in the taxable territories by the assessee himself. The statutory contrast with the provision dealing with income received directly or on behalf of the assessee showed that the Legislature intentionally used different language and did not extend this clause to indirect or constructive receipt. On the facts, the assessee had only directed his debtor to pay a third party and had thereby disposed of the debt by substituting one debtor for another. That was not equivalent to the assessee himself receiving or bringing the money into the taxable territories.

Conclusion: The amount was not taxable under Section 4(1)(b)(iii) of the Income-tax Act, 1922, and the answer to the reference was in favour of the assessee.

Final Conclusion: A mere substitution of debtors or transfer of the situs of a debt does not amount to the assessee's receipt of accumulated income in the taxable territories for the purpose of the remittance rule.

Ratio Decidendi: For taxation of accumulated foreign or state income on remittance basis, the statute requires actual receipt or actual bringing into the taxable territories by the assessee, and not merely a disposal of the income or an indirect/constructive transfer through third parties.

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