Foreign business remittances after partition are taxable, while pre-partition family receipts stay exempt in individual hands.

Foreign business profits remitted into British India after partition remained taxable in the hands of the member who took over the going concern, because the receipts retained their character as profits and the statute charged income received in British India. By contrast, sums received by the Hindu undivided family before partition could not be assessed in the hands of an individual member after disruption, since the family was a separate taxable unit and the statutory exemption applied to receipts taken while it remained joint. The later amendments were treated as remedial and did not alter the plain language of the existing Act.

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Issues: (i) Whether profits of a foreign family business received after partition and brought into British India were taxable in the hands of the member who took over the business. (ii) Whether sums received before partition by the Hindu undivided family could be assessed in the hands of the individual member after the family had disrupted.

Issue (i): Whether profits of a foreign family business received after partition and brought into British India were taxable in the hands of the member who took over the business.

Analysis: Section 4(2) of the Income-tax Act brought into charge profits accruing outside British India when received in British India. Section 26 was held applicable not only to firms in British India but also to a foreign business whose profits were taxable when remitted into British India. On partition of a Hindu trading family, the person who became entitled to the business during the year was treated as the person engaged in the business for assessment purposes. The profits did not lose their character as profits merely because the business was allotted as a going concern on partition; there was no winding up or closing of accounts so as to convert the receipts into capital.

Conclusion: The receipt of Rs. 15,037 after partition was taxable.

Issue (ii): Whether sums received before partition by the Hindu undivided family could be assessed in the hands of the individual member after the family had disrupted.

Analysis: Section 14(1) exempted sums received by an assessee as a member of a Hindu undivided family, and Section 16(1) showed that this exemption was not confined in the same way as the exemption for dividends or firm profits. Section 3 charged Hindu undivided families as separate taxable units. The later amendment by Section 25-A and the recast of Section 26 were treated as remedial provisions for a defect in the earlier law and not as retrospectively altering the clear language of the existing Act. Applying the plain words of the statute, a sum received by the joint family while it remained undivided could not be taxed in the hands of the individual member.

Conclusion: The receipt of Rs. 29,218 before partition was not taxable in the assessee's hands.

Final Conclusion: The assessment was sustained only in respect of the post-partition remittance, while the pre-partition remittance was excluded from the assessee's taxable income.

Ratio Decidendi: In a fiscal statute, where the language is clear, liability must be determined strictly by the statutory words; a post-partition successor to a going concern is taxable on foreign profits remitted into British India, but receipts taken by a Hindu undivided family while it remains joint fall within the family exemption and cannot be taxed in the hands of an individual member.

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