Indirect receipt of foreign-earned income can make it taxable in British India when credited and brought into taxable territories.

Income earned outside the taxable territories may be treated as received in British India where it is first encashed there, credited to the assessee's Bombay accounts, and then matched by withdrawals elsewhere to fund an outside-territory payment. The note explains that such an arrangement can increase the assessee's assets within British India while indirectly bringing the income into the taxable territories through an accounting device. On that reasoning, the sum is regarded as received within British India and assessable under the rules governing income received in taxable territories.

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Issues: Whether the sum of Rs. 2,19,150 was received in British India so as to be assessable as income received within the taxable territories.

Analysis: The amount was first encashed at Bombay and credited in the assessee's Bombay accounts. An equivalent amount was later withdrawn at Kotah and paid to the Kotah State Darbar, with the assessee's outside-taxable-territory funds being used to meet that payment. The arrangement resulted in the assessee's assets increasing at Bombay while a corresponding amount of income earned outside the taxable territories was effectively brought into British India through an indirect device. On these facts, the amount could be treated as received in British India and assessed under the relevant provisions governing income received within taxable territories.

Conclusion: The question was answered against the assessee and in the affirmative.

Final Conclusion: The receipt was held to be taxable in British India, and the reference was answered in favour of the Revenue.

Ratio Decidendi: Income earned outside the taxable territories becomes taxable when, by an actual or indirect device, it is received or brought into the taxable territories and credited as part of the assessee's funds there.

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