S. 11(14) of the Indian Finance Act, 1946 creates a charge by itself and the fiction therein created being sufficient and clear, it was not necessary to consider where the income arose.

Judgment

HIDAYATULLAH J.: Messrs. McGregor and Balfour, Ltd., Calcutta (hereinafter called the Company) is a Company incorporated in the United Kingdom. Its head office is also there. It, however, does business in India also. In some of the previous years, the Company was required to pay excess profits tax both in England and in India. When it did so, it obtained deduction of the amounts from its profits and gains for purposes of the Indian Income-tax Act, under S. 12(2) of the Indian Excess Profits Tax Act.

2. In the assessment year 1947-1948 which corresponded to the accounting year of the Company ending on October 31, 1946, it obtained a repayment of Rs. 2,31,009 out of the excess profits tax paid in England. This was under S. 28(1) of 4 & 5, Geo. VI, Ch. 30. For purposes of the levy of the Indian income-tax, this sum was included in the taxable profits of the Company by the Income-tax Officer. He purported to act under S. 11(14) of the Indian Finance Act, 1946 (hereinafter called the Act). The income of the Company in India was held to be Rs. 6,34,937 including the sum of Rs. 2,31,009) while the income outside the taxable territory was held to be Rs. 4,29,620. Applying S. 4A (c) (b) of the Indian Income-tax Act, the Income-tax Officer assessed the Company on its total world income.

3. The appeals of the Company made successively to the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal were dismissed. The Tribunal, however, referred the following questions of law to the High Court at Calcutta under S. 66 of the Indian Income-tax Act:

"(1) Whether on the above facts and circumstances of this case the Tribunal was right in holding that the sum of Rs. 2,31,009 was income of the assessee during the assessment year under consideration and was liable to be assessed under the Indian Income-tax Act? and

(2) If so, whether this amount could not be taken into consideration for determining the residence of the assessee under S. 4A(c) (b) of the Indian Income-tax Act?"

4. This reference was heard by Chakravarti, C. J., and Lahiri, J., who by their judgment dated August 26, 1954, answered the first question in the affirmative and the second in the negative. They, however, granted a certificate under S. 66A of the Indian Income-tax Act, read with Art. 135 of the Constitution to appeal to this Court. No appeal has been filed on behalf of the Department, and the second of the two questions must be taken to be finally settled in this case.

5. The contentions of the Company in this appeal, thus, concern only the first question, and they are two: It was said firstly that S. 11(14) of the Finance Act could not be made applicable to the assessment year 1947-1948, because the provision was not incorporated in the Indian Income-tax Act or repeated in the subsequent Finance Acts. This argument was not seriously pressed before us, and beyond mentioning it, Mr. Mitra for the Company did not choose to elaborate it. We think that Mr. Mitra has been quite correct in not pursuing the matter. The section framed as it is, does apply to subsequent assessment years just as it did to the assessment for 1946-1947, and prima facie, it was not necessary to follow one of the two courses detailed above. Since the point was not pressed before us, we need not give our reasons here.

6. It was said nextly that the High Court was in error in construing S. 11(14) of the Finance Act as a provision which created a liability proprio vigore, as if it was a charging section. It was contended that the repayment was not within the taxable territory, and in view of the answer to the second question as to the applicability of S. 4A (c), (b), there could be no tax upon it. On behalf of the Department it was argued that the sub-section created a charge by itself and the fiction therein created being sufficient and clear, it was not necessary to consider where the income arose.

7. Section 11(14) of the Finance Act reads as follows:

"Where under the provisions of sub -