1944 (2) TMI 23 - HC - Income Tax

High Court interprets Income Tax Act on taxation of income brought into British India. Assessee liable for tax.

Commissioner of Income Tax Versus S.N.A.S.A. Annamalai Chettiar, Karaikudi

Commissioner of Income Tax Versus S.N.A.S.A. Annamalai Chettiar, Karaikudi - [1944] 12 ITR 226 (Mad) Issues:Interpretation of Section 4(1)(b)(iii) of the Income Tax Act regarding taxation on income brought into British India.Analysis:The judgment delivered by the High Court of Madras involved the interpretation of Section 4(1)(b)(iii) of the Income Tax Act regarding the taxation of income brought into British India. The case revolved around an assessee who had separated from his father and received the family business in the Federated Malay States as his share. The assessee brought a sum of &8377; 40,742 into British India, which led to a dispute regarding his liability to pay tax on this amount. The Income Tax Officer held him liable under Section 4(1)(b)(iii), while the Appellate Assistant Commissioner disagreed. The Appellate Tribunal sided with the Appellate Assistant Commissioner, prompting the Commissioner of Income Tax to seek the opinion of the High Court on the matter.The key contention in the case was the interpretation of the phrase 'income profits and gains from whatever source derived which having accrued or arisen to him without British India before the beginning of such year.' The Tribunal emphasized the word 'him' and argued that since the profits were earned by the joint family, the assessee could not be assessed for them. However, the High Court disagreed with this interpretation, stating that the profits accrued to the assessee when he acquired the business on the date of partition. The Court highlighted that the profits became the absolute property of the assessee, and he brought them into British India, making him liable to pay tax on them.The Court rejected the assessee's interpretation that tax could not be collected on profits earned abroad if transferred before bringing them into British India. The Court emphasized that the profits accrued to the assessee within the meaning of the section, and as he brought them into British India, he was obligated to pay tax on them. Therefore, the High Court held that the respondent was liable to pay tax on the sum of &8377; 40,742 brought into British India during the accounting year. The Commissioner of Income Tax succeeded in the case and was awarded costs of &8377; 250.