Case Note & Summary
The case involved the Commissioner of Income-tax, Bombay, appealing against a judgment of the Bombay High Court regarding the tax liability of the respondent, Dharamdas Hargovindas. The respondent had income deposited with a concern in Bhavnagar, which was outside British India. On April 7, 1947, he transferred part of this income to a concern in Bombay. The Commissioner assessed him to tax under Section 4(1)(b)(iii) of the Income-tax Act, 1922, which pertains to income accrued outside the taxable territory but brought into it. The respondent contended that the income must be the first receipt in the taxable territory to be taxable. The High Court ruled in favor of the respondent, stating that the income was not received by him in Bombay but was merely remitted. The Supreme Court, however, held that the income was indeed taxable as it was brought into the taxable territory, clarifying that the receipt in the taxable territory need not be the first receipt. The court emphasized that the income had been received outside the territory but was brought into it, thus making it liable for tax under the relevant section. The appeal was allowed, and the High Court's order was set aside, confirming the tax liability of the respondent.
Headnote
A) Income Tax - Taxable Income - Definition of Receipt - Income-tax Act, 1922, Section 4(1)(b)(iii) - The court held that income brought into the taxable territory after having accrued outside it is taxable, even if it is not the first receipt in the territory. The distinction between first receipt and subsequent remittance was clarified, emphasizing that prior receipt outside does not negate tax liability upon bringing it into the taxable territory (Paras 731-742).
Issue of Consideration
Whether the income received outside the taxable territory must be the first receipt in the taxable territory to attract tax liability under Section 4(1)(b)(iii) of the Income-tax Act, 1922.
Final Decision
The Supreme Court allowed the appeal, ruling that the respondent was liable to pay income tax on the sum of Rs. 50,000 under Section 4(1)(b)(iii) of the Income-tax Act, 1922, and set aside the High Court's order.
Law Points
- Income tax liability
- first receipt
- taxable territory
- remittance
- Income-tax Act
- 1922
