# THE COMMISSIONER OF INCOME-TAX, BOMBAY v. DHARAMDAS HARGOVINDAS

- **Citation:** [1961] 3 S.C.R. 731
- **Court:** Supreme Court of India
- **Decided:** 1958-04-24
- **Case number:** CIVIL APP]jJLLATE JURISDICTION: Civil Appeal No. 240 of 1955
- **Bench:** P. B. Gajendragadkar, A. K. Sarkar, K. N. Wanchoo
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-commissioner-of-income-tax-bombay-v-dharamdas-hargovindas-2081
- **Pages:** 16

## Headnote

731
Income Tax-Income already recehed outside taxable territoryBrought into or received in taxable territory--Liability to tax-If
must be first receipt in taxable territory-Income-tax Act, I922 (II
of I922). S. 4 (I)(b){iii).
The assessee, resident in British India, had some money in
deposit with a concern in Bhavnagar, outside British India. On
April 7, r947, he transferred part of it to a concern in Bombay.
He was assessed to tax on this amount under s. 4(1)\b)(iii) of the
Income-tax Act. The assessee contended that to attract the
application of s. 4(1)(b)(lii) the receipt in the taxable tefritory
must be the first receipt of income.
Held, th•t the assessee was liable to tax on this amount.
Per Gajendragadkar and Wanchoo, JJ.-Where a person,
resident in the taxable territories, has already received, outside
the taxable territories, any income etc. accruing or arising to him
outside the taxable territories before the previous year brings
that income into or receives that income in the taxable territories
he would be chargeable to income-tax thereon. Though for the
purposes of cl. (a) of s. 4 the receipt must be the first receipt of
income in the taxable territories, for the purposes of cl. (b)(iii)
the receiving in the taxable territories need not be the first
receipt.
Keshav Mills ltd. v. Commissioner of Income-tax [1953] S.C.R
9 50, referred to.
Per Sarkar, J.-The income could not be said to have been
"received" in the taxable territory within the meaning of cl. (b)(iii)
as income could be received only once. But it is clear that the
assessee "brought into" Bombay that income. It was immaterial
in what shape he received the income in Bhavnagar and in what
shape he brought it in Bombay.
Keshav Mills Ltd. v. Commissioner of Income-tax [1953] S.C.R.
950, Board of Revenue v. Ripon Press (1923) I.L.R. 46 Mad. 706
and _Sundar Das v. Collector of Gujrat (1922) l.L.R. 3 Lah. 349,
applied.
Gresham Life Assurance Society ltd. v. Bishop [1902] A.C. 2 87
and Tennant v. Smith [18<)2] A.C. 150, referred to.
CIVIL APP]jJLLATE JURISDICTION:
Civil Appeal No.
240 of 1955.
196r
February 3·
732
SUPREME COURT REPORTS
[1961]
r96r
Appeal by special leave from the judgment and
C
--:--
"order dated September 3, 1953, of the Bombay High
ommissioner o1 C
. I
R c
Income-tax,
ourt Ill ncome-tax
eierence No. 15 of 1953.
Bombay
Hardayal Hardy and D. Gupta, for the appellant.
Dha:·mdas
G. S. Pathak, S. P: Mehta, S. N. Andley, J.B. DadaH••govindas
chanji, Rameshwar Nath and P. L. Vohra, for the
respondent.
1961. February 3. The Judgment of Gajendragadkar
and Wanohoo, JJ. was delivered by
Wanehoo J.
WANCHOO, J.-In this matter by our order made on
April 24, 1958, we had referred the case back to the
Tribunal to submit a further statement of case on
certain questions. That statement of case has now
been drawn up by the Tribunal and sent to this Court.
The matter is now ready for decision.
This is an appeal by the Commissioner of Incometax, Bombay, against the judgment of the High Court
at Bombay given on a reference under s. 60(2) of the
Income-tax Act answering the question referred, in
the negative. That question was, "Whether, in any
event, on the facts found by the Tribunal, there was
any remittance by the petitioner to Bombay within
the meaning of and assessable under s. 4(1) (b) (iii) of
the Income-tax Act." The assessment year concerned
was 1948-49, the accounting year being 2003 Sambat.
The facts found may now be stated. At the relev.
ant time, Bhavnagar was a ruling State and therefore
outside British India. There was a mill there which
we shall, for brevity, call the Bhavnagar Mills. The
assessee and his brother Gordhandas had large sums
in deposit with the Bhavnagar Mills. These sums
were profits earlier earned by the assessee and his
brother in Bhavnagar. The amounts deposited belonged to the assessee and his brother in equal shares.
The Bhavnagar Mills kept an account of these
deposits. This· account showed that on April 7, 1947,
a sum of Rs. 50

## Text

3 S.C.R.
SUPREME COURT REPORTS
THE COMMISSIONER OF INCOME-TAX,
BOMBAY
v.
DHARAMDAS HARGOVINDAS.
(P. B. GAJENDRAGADKAR, A. K. SARKAR and
K. N. WANCHOO, JJ.)
731
Income Tax-Income already recehed outside taxable territoryBrought into or received in taxable territory--Liability to tax-If
must be first receipt in taxable territory-Income-tax Act, I922 (II
of I922). S. 4 (I)(b){iii).
The assessee, resident in British India, had some money in
deposit with a concern in Bhavnagar, outside British India. On
April 7, r947, he transferred part of it to a concern in Bombay.
He was assessed to tax on this amount under s. 4(1)\b)(iii) of the
Income-tax Act. The assessee contended that to attract the
application of s. 4(1)(b)(lii) the receipt in the taxable tefritory
must be the first receipt of income.
Held, th•t the assessee was liable to tax on this amount.
Per Gajendragadkar and Wanchoo, JJ.-Where a person,
resident in the taxable territories, has already received, outside
the taxable territories, any income etc. accruing or arising to him
outside the taxable territories before the previous year brings
that income into or receives that income in the taxable territories
he would be chargeable to income-tax thereon. Though for the
purposes of cl. (a) of s. 4 the receipt must be the first receipt of
income in the taxable territories, for the purposes of cl. (b)(iii)
the receiving in the taxable territories need not be the first
receipt.
Keshav Mills ltd. v. Commissioner of Income-tax [1953] S.C.R
9 50, referred to.
Per Sarkar, J.-The income could not be said to have been
"received" in the taxable territory within the meaning of cl. (b)(iii)
as income could be received only once. But it is clear that the
assessee "brought into" Bombay that income. It was immaterial
in what shape he received the income in Bhavnagar and in what
shape he brought it in Bombay.
Keshav Mills Ltd. v. Commissioner of Income-tax [1953] S.C.R.
950, Board of Revenue v. Ripon Press (1923) I.L.R. 46 Mad. 706
and _Sundar Das v. Collector of Gujrat (1922) l.L.R. 3 Lah. 349,
applied.
Gresham Life Assurance Society ltd. v. Bishop [1902] A.C. 2 87
and Tennant v. Smith [18<)2] A.C. 150, referred to.
CIVIL APP]jJLLATE JURISDICTION:
Civil Appeal No.
240 of 1955.
196r
February 3·
732
SUPREME COURT REPORTS
[1961]
r96r
Appeal by special leave from the judgment and
C
--:--
"order dated September 3, 1953, of the Bombay High
ommissioner o1 C
. I
R c
Income-tax,
ourt Ill ncome-tax
eierence No. 15 of 1953.
Bombay
Hardayal Hardy and D. Gupta, for the appellant.
Dha:·mdas
G. S. Pathak, S. P: Mehta, S. N. Andley, J.B. DadaH••govindas
chanji, Rameshwar Nath and P. L. Vohra, for the
respondent.
1961. February 3. The Judgment of Gajendragadkar
and Wanohoo, JJ. was delivered by
Wanehoo J.
WANCHOO, J.-In this matter by our order made on
April 24, 1958, we had referred the case back to the
Tribunal to submit a further statement of case on
certain questions. That statement of case has now
been drawn up by the Tribunal and sent to this Court.
The matter is now ready for decision.
This is an appeal by the Commissioner of Incometax, Bombay, against the judgment of the High Court
at Bombay given on a reference under s. 60(2) of the
Income-tax Act answering the question referred, in
the negative. That question was, "Whether, in any
event, on the facts found by the Tribunal, there was
any remittance by the petitioner to Bombay within
the meaning of and assessable under s. 4(1) (b) (iii) of
the Income-tax Act." The assessment year concerned
was 1948-49, the accounting year being 2003 Sambat.
The facts found may now be stated. At the relev.
ant time, Bhavnagar was a ruling State and therefore
outside British India. There was a mill there which
we shall, for brevity, call the Bhavnagar Mills. The
assessee and his brother Gordhandas had large sums
in deposit with the Bhavnagar Mills. These sums
were profits earlier earned by the assessee and his
brother in Bhavnagar. The amounts deposited belonged to the assessee and his brother in equal shares.
The Bhavnagar Mills kept an account of these
deposits. This· account showed that on April 7, 1947,
a sum of Rs. 50,000/- had been paid out to Harkisondas Ratilal and another sum of the same amount
to Dilipkumar Trikamlal. There is another mill in
Bombay which we shall call the Bombay Mills. The
account of the Bombay Mills showed that on April 3,
3 S.C.R.
SUPREME COURT REPORTS
733
1947, Rs. 50,000/- had been received from each of
Harkisondas Ratilal and Dilipkumar Trikamlal.
Harkisondas Ratilal and Dilipkumar Trikamlal were
the benamidars for the assessee and his brother and the
entries indicated that the moneys had been withdrawn
from the Bhavnagar Mills by the assessee and his
brother and advanced to the Bombay Mills'.
The
assessee and his brother were in full control of both
the Bhavnagar Mills and the Bombay Mi!ls.
On these facts the Tribunal had come to t.he
conclusion that there had been a remittance of the
a.ssessee's profits from Bhavnagar to Bombay, namely,
Rs. 50,000/- being half of the amounts mentioned
a.hove, on account of his share and such remittance
was taxable under s. 4(1) (b) (iii). The assessee raised
the question with which we a.re concerned in view of
this decision.
The.High Court held that under the section income
is taxable only when it is brought into or received in
the taxable territory by the a.ssessee himself and not
when it is so brought into or received on behalf of the
assessee and that all that the facts found by the Tribunal showed was that the a.ssessee disposed of
his accumulated income in Bha.vna.ga.r by directing
his debtor, the Bha.vnaga.r Mills, to pay an a.mount
not to himself but to a third party, namely, the
Bombay Mills. According to the High Court, "The
result wa.s that only one debtor was substituted for
another. This did not amount to a receipt of the
money by the assessee himself in Bombay or to a.
bringing of it into Bombg.y by him." In this view
of the matter, the High Court answered the question
referred in the negative.
When the appeal wa.s heard by us on the earlier
occasion, the learned .Advocate for the appellant contended that even on the ha.sis on which the High
Court had proceeded, pa.mely, that there was only a
substitution of one debtor for another, it has to be
sa.ro that the money wa.s received by the assessee
himself in Bombay. The contention was that the
respondent could not become a. creditor of the Bombay Mills unless he advanced the moneys to them.
Commissioner of
Income-tax,
Bombay
v.
Dharamdas
Hargovindas
Wanchoo ].
734
SUPREME COURT REPORTS
[1961]
'96r
His point was that even assuming that the receipt
Comm-;;:,nerof of the cheque by the Bombay Mills drawn in its
Income-tax,
favour by the Bhavnagar Mills did not amount to
Bombay
receipt of moneys by the respondent, as soon as the
v.
Bombay Mills credited the amount of it to the respondDharamdas
ent, there was notionally a receipt of the money by
Hargovindas
h
t e assessee and an advance of it by him to the BomWanchoo J.
bay Mills to create the debt. The learned advocate
for the assessee said in answer to this contention that
there was nothing to show that the agreement for
the advance of the money by the assessee to the
Bombay Mills had not been made at Bhavnagar. He
also said that there was nothing to show as to how
the money or the cheque came from Bhavnagar to
Bombay and that it might have been that it was
agreed between the assessee and the Bombay Mills
at Bhavnagar that the money would be deposited in
the Bombay Mills to the credit of the assessee and the
cheque or the money might have been delivered to
the Bombay Mills or its agent at Bhavnagar. His
contention was that if such was the case-and on the
evidence it could not be said that it was not-then
tlie notional receipt of the money by the assessee and
its advance by him to the Bombay Mills, if any,
would have taken place in Bhavnagar and when the
money was thereafter brought to ~ombay, it was the
Bombay Mills' own money. In this view of the matter,
according te the learned advocate for the assessee,
the moneys could not be subject to tax under the
section.
In this position of the arguments then advanced,
we observed as follows :-
"It seems to us that this contention of the learned
advocate for the respondent has to be dealt with
before this appeal can be finally disposed of.
We
therefore think it fit to refer the case back to the
Tribunal to submit a further s~tement of case, after
taking such evidence as may be necessary, as to
show how the cheque was brought from Bhavnagar
to Bombay and what agreement had been made
between the parties concerned as a result of which
the amount of the cheque was credited in the names
3 S.C.R.
SUPREME COURT REPORTS
735
of Harkison Ratilal and Dilipkumar Trikamlal in
the accounts of the Bombay Mills. The Tribunal
will submit its report within four months.
In view of this order we refrain from expressing
any opinion on any of the points argued at the bar."
It is pursuant to this order that the further state.
ment of case has been submitted by the Tribunal. In
its statement of case now submitted the Tribunal
found the following facts: The Bhavnagar Mills had
an account in the Bank of India Limited at one of its
Bombay Branches. A cheque book in respect of this
account was with the assessee who had power to
operate it on behalf of the Bhavnagar Mills. The
assessee acting on behalf of the Bhavnagar Mills drew
a cheque on the Bhavnagar Mills aforesaid account in
the Bank of India Limited on April 3, 1947, in favour
of self. This was done in Bombay. This cheque was
handed over by the assessee to the Bombay Mills in
Bombay for being credited in the account of the
Bombay Mills in the names of Harkison Ratilal and
Dilipkumar Trikamla.l which were really the benami
names of the assessee and his brother. The Bombay
Mills on the same date presented this cheque to
another branch of the Bank of India Ltd. in Bombay
where they had an account, for deposit in that
account. The actual entries in the books of the
different branches of the Bank were made on April 5,
1947. The ·Bombay Mills also made entries in their
own books crediting the moneys received on the
cheque, to Harkison Ratilal and Dilipkumar Trikamlal.
The assessee in his turn instructed the Bhavnagar
Mills to debit the joint account of himself and his
brother with it in the sum of Rs. 1 lac as having been
paid to Harkison Ratilal and Dilipkumar Trikamlal.
This entry was actually made a little later, namely on
April 7, 1947. The facts now found would show that
nothing had been done at Bhavnagar. It was also
found that as the Bombay Mills needed moneys and
the assessee had m<mey with the Bhavnagar Mills, he
utilised these latter moneys for an advanci> being
made by him out of it to the Bombay Mills.
94
I')6I
Commissioney· of
Income-tax,
Bombay
v.
Dharamdas
Har govindas
i-vanchoo ].
Commissiomr of
Ineome-tax~
Bt»Oboy
v.
Dlsar.,,.das
Hargoviadas
Wancboo ].
736
SUPREME COURT REPORTS
[1961]
As will appear from our earlier order hereinhefore
set out, none of the points a.rising in the appeal ha.d
been decided by us on that occasion. The question
that we have to decide is whether on these facts it
can be said that income ha.d been brought into or
received in Bombay by the a.ssessee. The relevant
portion of the section is in these terms :-
" 4. (1) Subject to the provisions of this Act, the
total income of a.ny previous year of any person
includes all income, profits and gains from what.
ever source derived which-
(a) are received or are deemed to be received in
the ta.xa.ble territories in such year by or on behalf
of such person, or
(b) if such person is resident in the taxable territories during such year,-
(i) accrue or arise or are deemed to accrue or
a.rise to him in the ta.xa.ble territories during such
year, or
(ii) accrue or a.rise to him without the taxable
territories during such year, or
(iii) having accrued or arisen to him without
the taxable territories before the beginning of such
year and after the 1st da.y of April, 1933, a.re brought
into or received in the taxable territories by him
during such year, or
(o) if such person is not resident in the taxable
territories during such year, accrue or a.rise or a.re
deemed to accrue or a.rise to him in the taxable
territories during such year."
In the present case we a.re concerned with cl. (b).
In order however to understand what the words
"brought into or received in the taxable territories by
him" mean we have to consider the whole scheme of
this sub:11ection. The sub-section ma.inly deals with
the total income of any previous year which is charge.
able to income-tax under s. 3 of the Act. It is divided
into three parts. The first pa.rt, which is cl. (a.) provides that a.11 income, profits a.nd gains received or
deemed to be received in the taxable territories in
such year by or on behalf of such person will be
included in the taxable income. So far as cl. (a.) is
3 S.C.R.
SUPREME COURT REPORTS
737
concerned, it is immaterial whether the person is
resident in the taxable territories or is not resident
therein; as long as income etc. is received in the
taxable territories by or on behalf of such person in
the previous year, it is liable to be included in the
computation of total income. Under this clause therefore it is the receipt in the previous year that is
material and the residence of the person to be taxed
is immaterial.
It has been held under this clause
that receipt must be the first receipt in the taxable
territories and if income etc. has been received elsewhere in the same year and is then brought into the
taxa.ble territories it should not be considered to be
income etc. received in such year in the taxable territories: (see Keshav ,'!fills Ltd. v. Commissioner of
Income-tax(')). The basis of this decision obviously i11
that cl. (a.) is dealing with the receipt of income etc.
in the, taxable territories in the year in which it has
accrued or arisen and in those circumstances it is the
first receipt of such income in the taxable territories
that gives rise to liability of the charge of income-tax.
If such income etc. accruing or arising in the previous
year has already been received outside the taxable
territories it cannot be said to be received again as
such in the taxable territories, if it is brought from
the place where it was received as such into the
taxable territories.
The second part which is cl. (b) deals with the case
of a person who is resident in the taxable territories
during such year. In his case all income which
accrues or a.rises or is deemed to accrue or arise to
him in the taxable territories during such year is
chargea.ble to income-tax ; besides, all income etc.
which accrues or a.rises to him without the taxable
territories during such year is also chargeable to
income-tax.
Then comes the part with which we are directly
concerned and which provides that all income etc.
which having accrued or, arisen to such person with.
out the taxable territor.ies before the beginning of such
year and after the first day of April 1933 is brought
(l) [1953[5.C.R.950.
zg6z
Commissi01Ur uj
Imom#-111.x,
Boinbay
v.
DharamdM
H argovindas
Wandiooj.
738
SUPREME COURT REPOR'rS
[1961]
x96x
into or received in the taxable territories by him
-. -.
during such year will be chargeable to income-tax.
Commsssioner of '.I'h'
·
· 1
· ·
1 t'
t
·
t
1
1
is 1s a speCia prov1s1on re a. mg o mcome e c.
';:~:;"
which has accrued or arisen not in the previous year
v.
but in years previous to that though after April 1,
Dhar•mdas
1933. This special provision relating to a. person
Hargovindas
resident in the taxable territories must be distinguished
from the provision in cl. (a.) in connection with which
IVanclloo J.
it has been held that the receipt there meant must be
the first receipt, for cl. (a) applies irrespective of whether the person is resident in the territories or not to
income etc. of the previous year received in the tax'
able territories in the same year. Clause (b)(iii) on the
other hand refers to inco:ne etc. which accrued before
the previous year and is brought into or received in
the taxable territories in such year by a person resident therein, and obviously the considerations which
led this Court to hold in Keshav Mills case(') thatthe
receipt in cl. (a) means the first receipt would not
apply to this special provision in cl. (b)(iii).
Mr. Pathak for the respondent however argues that
the words in cl. (b)(iii) are the same as in cl. (a),
namely, "are received" and therefore the receipt in
cl. (b)(iii) must also be the first receipt. These words
however are not terms of a.rt and in our opinion their
meaning must receive colour from the context in which
they are used. In the context of cl. (a) these words
could only refer to the first receipt ; but it does not
follow from this that in the context of cl. (b)(iii) also
they refer only to the first receipt.
Let us see what cl. (b)(iii) is meant to provide for.
It will be noticed that cl. (a), cl. (b)(i) and (ii) and cl. (c)
deal only with income etc. which has arisen in the
previous year while cl. (b)(iii) deals with a. special class
of cases where a person resident within the taxable
territories had income etc. accruing or a.rising to him
without the taxable territories and which he did not
bring in the taxable territories as and when it arose
but does so many years later. In such a case it stands
to reason that the income etc. having arisen to such
person, may be years before the previous year, must
(1) [1953) S.C.R. 950.
3 S.C.R.
SUPHEME COURT HEPOR'rS
739
have been received by him outside the taxable territories; but it is urged that cl. (b)(iii) docs not speak of
receipt outside the taxable territories but only speaks
of incbme etc. having accrued or arisen to him without
the taxable territories and that it is possible that
though the income etc. might have accrued Jong ago it
might not have been received ov~n outside the taxable
territories. This is theoretically possible; but in our
opinion it is clear that when cl. (b)(iii) speaks of income
etc. having accrned or arisen without the taxable
territories it is implicit in it further that such income
etc. having accrued or arisen without the taxable
territories had already been received there. Considering that cl. (b)(iii) applies to all income having accrued
or arisen after the first day of April 1933 (that is more
than 27 years ago now) it does not seem reasonable to
hold that the words "having accrued or arisen" usPd
in that clause have no reference to its receipt also
outside the taxable territories. It seems to us therefore
that what cl. (b)(iii) provides is that if any income etc.
had arisen or accrued outside the taxable territories
and had been received there sometime before the previous year and if such income etc. is brought into or
received in the taxable territories by such person in
the previous year it will be liable to be charged under
s. 3. In the circumstances, looking to the special provision of cl. (b)(iii) it would be reasonable to infer that
what it contemplates is bringing into or receipt in the
taxable territories in the previous year of income etc.
which had already accrued or arisen without the taxable territories earlier than the previous year and may
have also been received there. Any other interpretation would really make that part of cl. (b)(iii) which
refers to "received in the taxable territories" more or
less useless, for it is not likely that income having
accrued or arisen outside the taxable territories before
the previous year should not have been received also
outside the taxable territories. Therefore, the reasonable interpretation of cl. (b)(iii) is that if a person
resident in the taxable territories has already received
without the taxable territories any income etc. accruing or arising to him without the taxable territories
Ig6I
Co1nmissi<mer o_
Income-tax,
Bombay
v.
Dharamdas
Hargouindas
Wanchoo J.
SUPREME COURT REPORTS
[1961]
before the previous year brings that income into or
receives that income in the taxable territories he would
Commissioner of·
Income-tax.
be chargeable to income-tax under s. 3. Therefore, for
Bombay
the purpose of cl. (b){iii) the receiving in the taxable
v.
territories need not be the first receipt. We shall later
Dharamdas
consider what will be the effect of this interpretation on
Hargovindas
the facts of this case.
Wanchoo ].
Then there is cl. {c), which deals with the case of a
person resident outside the taxable territories to w horn
income etc. has accrued or arisen or is deemed to have
accrued or arisen in the taxable territories during the
previous year. It will thus be seen that cl. (a) deals
with a person who may or may not be a resident in
the taxable territories and makes the income etc.
accruing or arising to him in the previous year liable
to income-tax if it is received or deemed to be received
by him in the taxable territories also within the same
year; cl. (b) deal8 with the case of a person who is
resident in the taxable territ,ories and gives a wider
definition of the total income and cl. (c) deals with a
person not resident in the taxable territories and
makes only such of his income as accrues or arises or
is deemed to accrue or arise in the previous year in the
taxable territories liable to iucome-tax in addition to
what is provided in cl. {a).
Let us now see on the facts of this case whether the
respondent can be said to have received this sum of
Rs. 50,000/- in the taxable territories during the previous year. The statement of tbe case shows that this
sum was income etc. of the respondent which accrued
to him outside the taxable territories and had been
received by him there and deposited in the Bhavnagar
Mills in his account. It is also clear from the facts
which we have set out already that this money which
was lyiug to the credit of the respondent in the Bhavnagar Mills was received by him by means of a cheque
on the Bank of India Ltd., Bombay, in \vhich the
Bhavnagar Mills had an account and on which the
respondent had the authority to draw. Having thus
drawn the money by a cheque on the said b;rnk, the
respondent advanced it to the Bombay Mills :ind the
cheque was cashed Qy the Bombay }!ills aud the
3 S.C.R.
SUPREME C'OURT REPORTS
741
money was credited into the account of the respondent's benamidars in the Bombay Mills. There was thus Commissioner of
clearly receipt in the previous year of income etc.
Income-tax,
which had accrued to the respondent outside the taxBombay
able territories before the previous year and he would
Dha;;mdas
therefore be chargeable under s. 3 of the Act with
Hargovindas
respect to this amount.
_
The High Court has held that the income would be . Wanchoo f.
taxable only when it is brought into or received in the
taxable territories by the assessee himself and not
when it was so brought or received on behalf of the
assessee. The relevant words of cl. (b)(iii) with which
we are concerned are these: "are brought into or
received in the taxable territories by him during such
year." We h:we held that this is a case of receipt by
the respondent in the taxable territories; it is therefore
unnecessary to consider in the present case whether
t.he words " brought into the taxable territories by
him" mean that the income must be brought in by
the person himself as held by the High Court. This
being a case of receipt, there can be no doubt that
income etc. was received by the respondent and the
indirect. method employed in this case for receiving
the money would none the less make it a receipt by the
respondent himself. Reference in this connection may
be made to Bipin Lal Kuthiala v. Commissioner of
Income-tax, Punjab (1), where it was held that the
money was received by the assessee even though in
fact what bad happened there was that the assessee
directed his debtor in Jubbal which was outside the
taxable territories to pay money to his creditor in
British India. It was held that in the circumstances
there was receipt of income in Brit}sh India, though
the method employed was indirect. We are therefore
of opinion that the respondent is liable to pay incometax on the sum of Rs. 50,000/- under s. 4(1)(b)(iii) of
the Act and the question framed therefore muRt be
answered in the ai!irmative. The result is that the
appeal is allowed and the order of the High Court set
aside. The appellant will get the costs of this appeal
and in the court below.
(r) A.LR. r956 S.C. 634.
Commissioner of
I ncome~tax,
Bombay
v.
Dharamdas
Hargovi11d1is
Sa.rkar ].
742
SUPRE:ME COURT REPORTS
[1961]
SARKAR, J.-The facts necessary for this appeal are
few aml simple. The assessee, who is the respondent
in this appeal, was a resident of Bombay. He had
certain income in .Bhavnagar, a place without the
taxable territories, which he had kept in depPsit with
a concern there.
Tbis concern had an account in a
bank in Bombay. The assessee, presumably as one of
the officers of the concern, could opcrntt' this ac :uunt.
He drew, in Bomb<ty, tL cheque on this account which
cheqne eventually found its way into the account of
a concern in Bombay in a bank there and was credited
in that account.
The Bombay concern there<tfter
made entries in its own books of <iccount in respect of
the <imount of the cheque in fa your of two persons of
the names of Harkison Rati!til <ind Dilipkumar
Trikam!al. The Bh<tvnagar concern, in its turn, a
few days lator debited the account th~i,t the assessee
had with it in respect of the deposits, with the amount
of the cheque as moneys paid to these two perwns.
These two persons however were only bemtmidars for
the assessee. The trans<ictiuns, thcrefow, showed that
the assessae had withdrawn the money from the concern at Bhavnagar out of its accnmubted income
and advanced it to the concern in Bombav. The
Tribunal found it as a fact that the <isses~ec had
utilised in Bombay his income lying at Bhavnagar
for making an tidvance in Bombay. These transactions
took place in April 1947.
I have simplified the facts . a little for clarity.
Actually the account in the concern at Blrnv1rngar
was in the joint names of the assessee <ind his brotlier
and the advance to' the concern in Bombtiy was really
in their joint names. The assessee's share was half of
the amount of the cheque and with that shu,re u,lone
we <ire concerned in this c<ise.
On these facts half lhe :1mount of the cheque as
representing the asscssee's sh:ue of the accumulated
income, was included in his total income, for a.ssessrnent to income-tax for· the year 1948-49 uudel'
"· 4(1)(\i)(iii) of the lncorne-t ax Act, 1922. Thtit section
:-io fa!' a.~ iR 1naJc-l'inl i:-; in t hc:--;0 t.prn1:-;:
3 S.C.R.
SPPRE~IF. corRT HF.PORTS
74:3
S. 4. (1) Subject to the provisions of this Act, the
total income of any previous year of any person
includes all income, profits and gains from whatever
source derived which-
(a) are received or are deemed to be received in
the taxable territories in such year by or on behalf
of such person, or
(b) if such person is resident in the taxable territories during such year,-
*
*
•
(iii) having accrued or arisen to him without
the taxable territories before the beginning of such
year and after the 1st day of April, 1933, are
brought into or received in the taxable territories
by him during such year, or
* .
*
*
The only question is whether the assessee can be said
to have "brought into" or "received" this income in
Bombay within the meaning of sub-cl. (iii) of s. 4(l)(b).
No other objection to the assessment was raised.
The respondent first contends that he cannot be
said to have "received" the income in Bombay. He
contends that on the facts found it must be held that
he had already "received" the income in Bha.vnagar
and he could not " receive" it again in Bombay or
anywhere else. It seems to me that this contention
is well founded.
This Court has held that " Once an
amount is received as income, any remittance or
transmission of the amount to another place does not
result in ' receipt', within the meaning of this clause,
at the other place " : Keshav Mills Ltd. v. Commissioner of Income-tax, Bombay (1). No doubt, the observation was made with regard to cl. (a) of s. 4(1).
But
I am unable to find any reason why the word should
have a different meaning in sub-cl. (iii) of s. 4(l)(b).
On the contrary, the words "brought into" in subcl. (iii) would furnish a reason, if one was necessary,
for the view that the word " received " there means
received for the first time.
I venture to think that this Court did not in Keshat·
Mills case (1), hold that that word in B· 4(l)(a) meant
<• > (1953J s.c.R. 950, 90,.
9~
Connnissioner- of
Income-tax,
Bombay
v.
Dharamdas
Hargovindas
Sarkar].
Commissioner of
Income-lax,
Bombay
v.
Dharamdas
Hargovindas
Sarkar ].
744,
SUPREME COURT REPORTR
[1961]
"the first receipt after the accrual of the income",
because of anything in the context in which the word
occurred but because, in the nature of things, income
can be "received" only once and not more than once,
and a subsequent dealing with income after it has
been received, can never be a "receipt" of income.
It seems to me that what was said in connection with
the Act as it then stood, in Board of Revenue v. Ripon
Press (1), namely, "that you cannot receive the same
sum of money qua income twice over, once outside
British India and once inside it" expresses the inherent nature of receipt of income and still holds good and
unless the context compels a different meaning, which
I do not find the present con text to do, income can be
received only once.
As, in the present case, it seems
fairly clear that the a.ssessee had received the income
in Bhavnagar, . I do not think he can be taxed on it
on the basis that he "received" it in Bombay over
again.
If, however, the assessee did not "receive" the
income in Bombay, it seems clear to me that he
" brought into" Bombay that income. He got in
Bombay an amount which he had earlier received in
Bhavnagar a.s income, for he advanced it to a concern
in Bombay and this he could not do if he had not got
it. The getting of the income in Bombay may not
have been the receipt of it but how could he get it if
he did not bring it in ?
After the assessee received the income in Bhavnagar,
it remained all the time under his control and that is
why he could not receive it again: see Sundar Das v.
Collector of Gujrat (•).
An assessee might, however,
change the shape of the income received. Section 4(1)
(b)(iii) does not require that in order that income may
be brought into the taxable territories it is necessary
that the shape of the income should not have been
changed since it was first recflived. Indeed; it has not
been contended to t.he contrary. Sub-clause (iii) of
s. 4(l)(b) would have completely defeated itself if it
required that the income had to be kept in the same
shape in which it had been received. Whatever shape
(1) (1923) l.L.R. 46 Mad 706, 7II.
(2) (•922) !.L.R 3 Lah. 349.
I
'
3 8.C.R.
SUPREME COURT REPORTS
145 ·.
the income had assumed, the a.ssessee had it with him
all the time as incoue and for the purpose of sub-cl. (iii)
it could be brought into the taxable territories in that
shape.
Now what the a.ssessee had done with the income in
this case was to put it with a party in Bha.vnagar.
The income then took the shape of a debt dne to him.
It became a right to receive money or moneys worth.
When he had that debt discharged in Bombay, he
must have had it brought into Bombay. Therefore he
had brought the income into Bombay.
Suppose he had received the income in the shape of
coins and had kept it in his safe at Bhavnagar and
brought the coins in_to Bombay. There would have
been no doubt that he had brought the income into
Bombay. Suppose a.gain, he had put the income
originally received by him at Bhavnagar in a bank
there and then he obtained a draft from the bank
payable in Bombay and brought the draft from Bha.vnagar to Bombay and cashed it there. Again, there
would be little doubt that he had, by this process,
brought the income into Bombay. It is well known
that though income in income-tax law is generally
contemplated in terms of money, it may be conceived
in other forms. In fa.ct anything which represents and
produces money and is treated as such by businessmen,
would be income : see per Lord Lindley in GreslUlm Li/ e
Assurance Society Ltd. v. Bishop (1) and per Lord Hals.
bury L.C. in Tennant v. Smith('). If the bringing of
the bank draft would be bringing of income, I am
unable to see why the bringing of a right to receive
the money would not be bringing of income when that
right has been exercised and turned into moneys
worth. Such a right would be based on a promise by
the debtor to pay and though verbal, would be considered by businessmen to represent money.
The
assessee in Bombay used that right and obtained
moneys worth. He accepted the Bhavnagar concern's
cheque in Bombay, gave it a pro tanto discharge for
the debt owing by it to him. He used the cheque in
acquiring a new asset, namely, a promise by the
11) (19<>1) A.C. z87, •96,
(2) (189•] A.C. 150, 156.
COf'9tmissiotur of
Ineo,,,e--ta#.
Bombay
v.
Dha,.amdos
Hargovi1'das
s.,~., J.
1:
Commissioner of
Income-ta~,
Bombay
v.
Dharamd1Js
Ha1govindas
Sarkar ].
746
SUPREME COURT RFPORTS
[1961]
Bombay concern to pay money. Therefore, in my view,
the respondent aesessee was liable under s. 4(l)(a),
(b)(iii) to be taxed on the amount of the cheque
as income which he had brought into the taxable
territories.
I would hence allow the appeal and answer the
question referred, in the affirmative.
Appeal allowed.
}-
' •
. ,