K.S Hegde, J. - (1.) In this appeal by certificate the question that arises for decision is whether under the circumstances of the case having regard to Section 2 (11) (i) (a) of the Income Tax Act, 1922 (to be herein -after referred to as the Act), the assessee is entitled to take the year ended on 31-3-1950 as the " previous year" relevant to the assessment year 1950-51 in respect of his sources of income arising outside the " taxable territories". This question under Section 66 (1) of the Act was answered in favour of the assessee by the High Court of Madhya Pradesh. Aggrieved by that decision, the Commissioner of Income-tax, Madhya Pradesh has brought this appeal.
(2.) The assessee (the respondent) is a Hindu Undivided Family with its Headoffice at Indore and branches at several places. It derives income from property, business in cotton and oil seeds, speculation, dividends, managing agency commissions etc. Prior to the assessment year 1950-51, the assessee was assessed under the Income Tax Act, 1922 in the status of a non-resident Hindu Undivided Family. The income which accrued to or was received by the assessee in the former Indian States was not subject to tax under the act but was taken into consideration in computing its " world income" for the purpose of determining the rate. After the Constitution came into force, the present definition of " taxable territories" was incorporated in the Income-tax Act by the Finance Act, 1950 and the areas in which the assessee was carrying on the businesses with which we are concerned in this appeal were included therein. The result of the amendment was that for the assessment year 1950-51, the assessee who was a resident of Madhya Bharat, was deemed to be a resident in the " taxable territories" during the " previous year" and hence liable to be taxed in respect of its income that accrued or received in Madhya Bharat. For the purpose of its accounts the assessee was adopting the year ending on Diwali day. In the returns submitted by the assessee, prior to the assessment year 1950-51, it had proceeded on the basis that its account year ended on Diwali day; but for the assessment year 1950-51, in respect of its income accrued from its businesses in Madhya Bharat, it chose the financial year ending on March 31, 1950 as the " previous year." The Income-tax Officer as well as the Appellate Assistant Commissioner rejected the claim of the assessee that it could make such a choice. The Income-tax Officer assessed the assessee on the basis that the " previous year" in respect of the concerned sources ended on Diwali of 1949. That decision was affirmed by the Appellate Assistant Commissioner but the Income-tax Appellate Tribunal reversed the finding of the Income-tax Officer and the Appellate Assistant Commissioner and agreed with the stand taken by the assessee. Thereafter a reference was made to the High Court of Madhya Pradesh under Section 66 (1) of the Act at the instance of the Commissioner of Income-tax but the High Court agreed with the view taken by the tribunal. Hence this appeal.
(3.) The question for our consideration is whether the view taken by the High Court is correct In order to decide that question, it is necessary to find out the true scope of Section 2 (11) (i) (a) of the Act, which provision defines the term " previous year" thus: " " Previous year" means- (i) in respect of ' any separate source of income, profits and gains - (a) the twelve months ending on 31st day of March, next preceding the year for which the assessment is to be made, or, if the accounts of the assessee have been made up to a date within the said twelve months in respect of a year ending on any date other than the said 31st day of March, then, at the option of the assessee, the year ending on the date to which his accounts have been so made up: Provided that where in respect of a particular source of income, profits and gains, an assessee has once been assessed . . . . . . . . . he shall not, in respect of that source or, as the case may be, business, profession or vocation, exercise the option given by this sub-clause so as to vary the meaning of the expression " previous year" as then applicable to him except with the consent of the Income-tax Officer and upon such conditions as the Income-tax Officer may think fit to impose." (Emphasis herein ' ' is ours). ;