Statutory interpretation of "was assessable" under income tax law treated the foreign association as a company and favoured the assessee.

Section 2(17)(ii) of the Income-tax Act, 1961 was construed to treat "was assessable" as referring to status rather than to actual assessable income in the relevant year. The Court read the words in the context of the statutory scheme and the Finance Acts, and held that requiring actual assessment would make the alternative phrase "was assessed" redundant and produce anomalous results. Because the foreign association was formed under the British Companies Act and fell within the definition of "company" under the Indian Income-tax Act, 1922, it was capable of being assessed only as a company. The question was answered in the affirmative in favour of the assessee.

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Issues: Whether, for the purposes of section 2(17)(ii) of the Income-tax Act, 1961, a foreign association that was not actually assessed in the assessment year commencing on 1 April 1947 could nevertheless be treated as a company because it was assessable as a company under the Indian Income-tax Act, 1922.

Analysis: The expression "was assessable" in section 2(17)(ii) was read in its statutory context and in light of the scheme of income-tax classification under the Act and the Finance Acts. The provision was held to deal with status, not with the existence of assessable income in the relevant year. Reading "assessable" as requiring actual assessable income would render the alternative words "was assessed" substantially redundant and would create impractical and anomalous consequences. Since the foreign company in question was formed under the British Companies Act and fell within the definition of "company" under section 2(6) of the Indian Income-tax Act, 1922, it was capable of being assessed only in the status of a company in the relevant assessment year.

Conclusion: The foreign association was a company within the meaning of section 2(17)(ii) of the Income-tax Act, 1961, and the question was answered in the affirmative in favour of the assessee.

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