THE COMMISSIONER OF INCOME TAX Vs. ESTATE OF LATE RM.AR.AR.RM. ARUNACHALAM CHETTIAR, THROUGH RECEIVERS V. RAMASWAMI AIYANGAR AND ANR.

JUDGEMENT

(1.) THIS is a reference made at the instance of the Commissioner of Income Tax by the Income Tax Appellate Tribunal, Madras branch, under Section 66(1) of the Income Tax Act. The assessees are the receivers of the estate of a deceased Nattukottai Chettiar named Rm. Ar. Ar. Rm. Arunachalam Chettiar. Before his death the deceased had carried on a money -lending business in Rangoon and after his death it was continued by the receivers of his estate. The income from the Rangoon business for the year of account, 1940 -41, was returned at Rs. 42,051. The remittances from Rangoon during that year far exceeded this sum. The Income Tax Officer placed the remittances into three categories. The first category consisted of remittances out of the income of the two previous years. The amount was Rs. 42,051. The second category represented remittances out of unassessed profits of former years. The amount here was Rs. 3,459. The third category represented the remittances out of assessed profits of older years and out of capital, the amount being Rs. 1,80,469. The case is only concerned with the Rs. 3,459 which was remitted in the year of account out of unassessed profits of former years.

(2.) THE Income Tax Appellate Tribunal held that this was not taxable because it represented income in respect of which there was an exemption by reason of the third proviso to Section 4 of the Act. The Commissioner asked the Tribunal to make the reference because he was of the opinion that the Tribunal had not appreciated the real effect of the proviso. At his request the Tribunal has referred the following question for the decision of this Court :

(3.) WE hold that Section 4(1)(b)(iii) is not controlled by the third proviso, which means that the Income Tax authorities rightly assessed the assessees in respect of Rs. 3,459 brought into British India in the year of account.