Receipt of income by a foreign principal depends on whether remittance follows actual realisation of sale proceeds.

For section 4(1)(a) of the Income-tax Act, 1922, the first receipt of income by or on behalf of a foreign principal is the material test. Where a statutory agent remits sale money before actually realising the proceeds from purchasers, the payment is made in discharge of an independent contractual obligation and is not a receipt of the sale proceeds by the principal in the taxable territories. If the agent remits only after the proceeds have been realised, the remittance is merely a transfer of money already received on the principal's behalf, and receipt basis taxation applies.

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Issues: Whether sums remitted by the statutory agent to the foreign principal before the sale proceeds were actually realised could be treated as "receipt" by the principal within the meaning of section 4(1)(a) of the Income-tax Act, 1922, and whether receipts made after the sale proceeds had already been realised stood on a different footing.

Analysis: The assessee, acting as statutory agent of the non-resident principal, was bound under the agency agreement to remit the sale price within 30 days of sale, irrespective of whether the purchaser had paid. The remittances made before actual recovery from purchasers were therefore not remittances of realised sale proceeds, but payments made in discharge of the agent's contractual obligation to the principal. In such cases, the foreign principal cannot be said to have first received the sale proceeds within the taxable territories, because the receipt took place in Sweden when the agent remitted the amount. Where, however, the agent remitted the proceeds only after they had been realised from the purchasers, the remittance merely forwarded money already received on behalf of the principal.

Conclusion: Amounts remitted before recovery of the sale proceeds were not taxable as receipt within section 4(1)(a), but remittances made after the proceeds had been realised were taxable on the receipt basis.

Final Conclusion: The reference was answered by distinguishing between pre-realisation and post-realisation remittances, with tax liability confined to the latter on the receipt basis.

Ratio Decidendi: For purposes of section 4(1)(a), the taxable receipt is the first receipt of the income by or on behalf of the foreign principal; a remittance made by the agent in discharge of an independent contractual obligation before actual realisation by the agent is not such receipt.

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