Foreign income spent abroad on imported goods is not income brought into British India for tax purposes.

Foreign income spent in England on mill stores and machinery, later imported into British India, was not income "received or brought into British India" under Section 4(2) of the Indian Income Tax Act, 1922. The charging provision applies to income only when it accrues, arises, is received, or is deemed received in British India; once the foreign income is spent abroad and loses its character as income, the later arrival of goods purchased with it does not bring that income into India. The inclusion in taxable income was therefore unsustainable and the assessee succeeded.

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Issues: Whether interest accruing in England, when spent there on purchase of mill stores and machinery subsequently sent to British India, could be treated as income "received or brought into British India" within Section 4(2) of the Indian Income Tax Act, 1922.

Analysis: The charging scheme taxes income only when it accrues, arises, is received, or is deemed to be received in British India. A foreign receipt does not become taxable merely because the money or its equivalent is later converted into goods and those goods are brought into India. The decisive question is whether the income itself, as income, is brought into India. Once the foreign income has been spent abroad and ceases to retain its character as income, the subsequent import of the purchased articles does not amount to the bringing in of that income. The deeming provision cannot be extended to treat the arrival of depreciating goods acquired abroad for business use as the arrival of the money that paid for them.

Conclusion: The amount of Rs. 18,333 was not income received or brought into British India within Section 4(2); the inclusion in taxable income was unsustainable, in favour of the assessee.

Final Conclusion: Foreign income spent abroad on goods later imported into British India does not, by that reason alone, become income brought into British India for tax purposes.

Ratio Decidendi: For the purposes of Section 4(2), only income itself, and not property or goods purchased out of income after the income has been spent abroad, can be treated as income received or brought into British India.

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