JUDGMENT V. BHARGAVA C. J - In compliance with an order made by this court under section 66(2) of the Income-tax Act, a statement of the case has been submitted by the Income-tax Appellate Tribunal to this court referring the following four questions for our opinion :
"(1) Whether there is any material to justify the inference that the income from managing agency commission and allowance from Mewar Textile Mills Ltd., Bhilwara, was the income of the Hindu undivided family and not that of Seth Sobhagmal Lodh ?
(2) Whether, on the facts and in the circumstances of the case, a previous year different from the Diwali year could be adopted in respect of the income from the managing agency commission and allowance subject to tax on (a) accrual basis and (b) receipt basis ?
(3) Whether the amount said to have been received in British India in the previous year could be treated as income accruing or arising without British India in the same year and whether under section 4(1)(b)(iii) such amounts could be treated as assessable income for the assessment yea ? and (4) Whether the sums of Rs. 2,48,341 and Rs. 2,39,070 were rightly treated as received by the assessee in British India within the meaning of sections 4(1) and 14(2)(c) of the Income-tax Ac ?"
This reference relates to the assessment year 1944-45.
For this assessment year, two different previous years have been taken into account. In respect of income from commission and salary receivable from Mewar Textile Mills Ltd., Bhilwara, the previous year has been taken to be the calender 1943; while for other sources of income the previous year of the assessee is the Diwali year corresponding to 8th November, 1942, to 21st October, 1943. The assessee is a Hindu undivided family represented by Sobhagmal Lodha as karta of the family. The business of the family was carried on under the name of Messrs. Umed Mal Abhaymal with head office at Ajmer and branches at Bombay, Calcutta, Delhi, Kotah, Jaipur and Kishangarh. Certain income accrued in Bhilwara which at the relevant time was not a part of the taxable territories under the Indian Income-tax Act. The amounts which came up for consideration were three; the first amount was a sum of Rs. 2,39,070 received as commission and salary in respect of the calendar year 1942. There was a second sum of Rs. 2,48,341 received as dividend income at Bhilwara. Both these sums have been assessed as income of the Hindu undivided family which accrued or arose outside the taxable territories and which were brought later or received into the taxable territories during the months of May and June 1943. Out of these amounts, a sum of Rs. 2,39,070 received as commission and salary for the year 1942 was claimed by Sobhagmal Lodha to be his individual income and not income of the Hindu undivided family of which he was the karta. This claim was rejected by the Income-tax Appellate Tribunal and the income was held to belong to the Hindu undivided family. The plea of the assessee that these two sums were not brought into or received in the taxable territories was also rejected and they were subjected to tax. In accordance with the finding of the Income-tax Appellate Tribunal, there was a third sum of Rs. 3,48,080 which accrued as commission and salary for the calendar year 1943. It was held that this income accrued or arose during the calendar year 1943 and was therefore taxable in the assessment year in question as income of the Hindu undivided family. On behalf of the assessee it was contended that, since for his business the previous year was the Diwali year from 8th November, to 21st October, 1943, even in respect of this income from commission and salary the previous year should have been held to be identical with it, and that it was not open to the income-tax authorities to take the previous year for this income as the calendar year 1943. These contentions of the assessee were also rejected. It is in these circumstances that the four questions reproduced above have been referred for our opinion.
So far as the first question is concerned, the appellate order of the Income-tax Appellate Tribunal shows that the following facts and material were found by the Tribunal.
[His Lordship stated the facts and material and continue :] In these circumstances, the first question is answered in the affirmative and against the assessee.
So far as the second question is concerned, it relates to taking different years for different items of income of the assessee. The dividend income, and it appears other business income of the assessee, is being taxed on the basis that the previous year is Diwali Year while the commission and the salary income have been assessed on the basis of the previous year being the calendar year. It was never disputed by the assessee that, for all other sources of income, except commission and salary, the previous year of the assessee was the Diwali year. The assessee only disputed the right of the income-tax department to treat the calendar year as the previous year for the income from commission and salary. It was urged by learned counsel for the assessee before us that the income from commission and salary should be treated as income from the same source from which the assessee was earning other income in respect of which the previous year was the Diwali year, because all the income was from the source of business. The argument is not correct. Business as such is not treated under the Income-tax Act as a source of income but it is classified as one of the heads of income enumerated in section 6 of the act. Within the same head of income, there can be various sources and section 2(11) defines the "previous year" with reference to sources of income and not heads of income. Under the same head there can be two sources, as an example, there may be different businesses each of the which would provide a different source of income and it is always open to an assessee to have one previous year for one business and another previous year for the second business even though both the sources may fall under the same head of business. This is how the law now clearly stands after its amendment in the year 1939. It does not appear to be necessary for us to cite any decisions in support of our view because the language used in section 2(11) is itself clear and quite distinct from the language used in section 6 and a clear distinction is made between a "source" of income and "head" of income.
Further, the appellate judgment of the Income-tax Appellate Tribunal shows that, in earlier years, the income of the assessee from commission and salary was always being taxed on the basis of the previous year being the calendar year and, consequently, under the proviso to section 2(11), the previous year subsequently has to be the same as in those earlier years unless an alteration is permitted by the Income-tax Officer of the application of the assessee. In the present case, while there is the finding the in earlier years this income from commission and salary was assessed on the basis of the calendar year being the previous year, there is not even a suggestion that any application was ever made by the assessee of changing that previous year. Consequently, question No. 2 is also answered in the affirmative and against the assessee.
So far as the third question is concerned, it only relates to two amounts, viz., the sum of Rs. 2,39,070 received as commission and salary for the year 1942 and the sum of Rs. 2,48,341 received as income from dividends on the shares of the textile mills. The question asked is whether these two sums, which were received in British India in the previous year, could be treated as income accruing or arising without British India in the same year and whether under section 4(1)(b)(iii) such amount could be treated as assessable income for the relevant assessment year. As regards the sum of Rs. 2,48,341, this amount became payable to the assessee only when the dividend was declared by the Mewar Textile Mills Ltd. That declaration took place during the Diwali year which began on 8th November, 1942, and ended on the 21st October, 1943. That declaration of the dividend took place at Bhilwara and, according to the finding of the Tribunal, the amount was brought into British India some time in the months of May and June 1943. Since the dividend was declared in the Diwali year relevant to the assessment year in question, the first part of question No. 3 in respect of this amount has to be answered by saying that this dividend income did accrue or arise outside British India at Bhilwara in the same previous year in which it was said to have been received in British India.
As regards the other sum of Rs. 2,39,070, this represented commission and salary for the calendar year 1942. The right to receive this amount as commission and salary accrued to the assessee on the 31st December, 1942, even though the amount might have been computed by the mills or paid by it subsequently. In fact, the Income-tax Appellate Tribunal, when dealing with the case of relating to the third item of Rs. 3,48,080, itself held that this amount, being commission and salary for the calendar year 1943, had accrued to the assessee on the 31st December, 1943. The same principle will apply to the determination of the accrual of this sum of Rs. 2,39,070 and as such it must be held to have accrued or arisen in the calendar year 1942. Consequently, the first part of the question relating to this amount of Rs. 2,39,070 has to be answered by saying that this sum received in British India in the previous year relevant to the assessment year 1944-45 accrued or rose to the assessee outside British India not in the same previous year but in the earlier previous year which was the calendar year 1942.
Both these amounts, Rs. 2,39,070 and Rs. 2,48,341 have been had to have been brought into British India or received in British India during the months of May and June, 1943. If they are held to have been received during that period and, as we have held earlier, they were income which had accrued outside British India, these amounts could be tested as assessable income of the assessment year in question under section 4(1)(b)(iii). This follows from the fact that these amounts were brought into British India or received in British India in the relevant previous year.
We answer the various parts of the third question in accordance with the views we have just expressed above.
The fourth question relates to the sum of Rs. 2,48,341 and Rs. 2,39,070 which have been treated as received by the assessee in British India within the meaning of section 4(1) and 14(2)(c) of the Income-tax Act. It has been urged before us by the learned counsel for the assessee that there was no material or evidence on the basis of which the Income-tax Appellate Tribunal could record a finding of fact that these two sums had been received by the assessee in British India. It appears that the case of the assessee was that both these sums accrued to the assessee at Bhilwara and were actually received by the assessees agent into two different instalments from the Mewar Textile Mills Ltd. and on both occasions the amounts received were taken from Bhilwara to Jaipur which was another place outside British India and was not included within the taxable territories. On the other hand, these amounts have been taxed on the basis that they were brought into or received by the assessee at Ajmer within the taxable territory of British India. The question whether they were actually brought or not brought to Ajmer within the British India was a question of fact. The judgment of the Appellate Tribunal shows that the Tribunal relied on the following facts and circumstances to record this finding of fact.
[His Lordship referred to the facts and continue :] These six facts which we have enumerated above having been found by the Income-tax Appellate Tribunal, we consider that there was material before the Tribunal for recording a finding that these two items of Rs. 2,48,341 and Rs. 2,39,070 were brought into British India or received by the assessee at Ajmer within the meaning of section 4(1) and, consequently, also within the meaning of section 14(2)(c) of the Income-tax Act. The question No. 4 is, therefore, also answered in the affirmative and against the assessee.
Let the record be returned to the Income-tax Appellate Tribunal with the answers given by us above. The assessee will pay the costs of the department. Counsels fee is assessed at Rs. 200.