Receipt in India: foreign interest retained and reinvested abroad not treated as received despite accounting inclusion.

The statutory test for taxing foreign interest is whether it was actually received in British India or is expressly deemed received by statute; mere inclusion in the assessee's balance-sheet, profit computation or directors' report does not constitute receipt in India. Receipt may be effected by recognised commercial acts such as conversion into Indian assets or clear book entries showing transfer into Indian accounts. Where interest remained invested and reinvested abroad and was not shown to have been actually applied or brought into India, it is not taxable as income received in British India; the reference is answered negatively in favour of the assessee.

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Issues: Whether interest accrued on foreign (dollar and sterling) securities, though retained and reinvested abroad and included in the assessee's accounts and profit computation, was received in, or brought into, British India for the purposes of the Income-tax Act.

Analysis: The applicable statutory test is whether the income was in fact received in British India or is deemed to be received under express provisions of the Act. The provisions that deem foreign income to be received in British India (examples: Section 7(2), Section 11(3), Section 42) do not apply on the facts. Inclusion of foreign interest in the company's balance-sheet or directors' report and its use in computing profits or determining the dividend does not, without more, constitute receipt in British India. Receipt may be effected by recognised commercial methods including exchange into Indian assets or appropriate book entries showing transfer into Indian account; however where the income remains invested and reinvested outside British India and is not shown to have been actually received or applied in India, mere accounting inclusion is insufficient to convert foreign income into income received in British India.

Conclusion: The interest in question was not received in British India; the question is answered in the negative, and the reference is dismissed in favour of the assessee (respondent).

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