CHAKRAVARTTI, C. J. - (1.) THIS reference involves a short but intriguing point which afforded an opportunity for arguments of some subtlety.
(2.) THE assessees, McGregor and Balfour Ltd., Calcutta, are a limited company, incorporated in the United Kingdom and having their registered office there. THE control and management is also not wholly situated in India. THEy however trade in this country as well and had to pay excess profits tax under the relevant Acts both in India and in England. In respect of the tax paid in this country, they availed themselves of the provisions of s. 12(1) of the EPT Act and in respect of the tax paid in the United Kingdom they availed themselves of the provisions of s. 12(2) and so deducted appropriate amounts in computing their profits and gains of the relevant years for the purposes of income-tax and super-tax. In the accounting year ended on the 31st Oct., 1946, relative to the asst. yr. 1947-48 they obtained in the United Kingdom a repayment of a sum of Rs. 2,31,009 out of the excess profits tax paid there under the English Act. That repayment was made to them under s. 28(1) of the Finance Act of 1941 (4 and 5 Geo. 6, c. 30). THE ITO included the amount in the taxable profits of the assessees for the accounting year, purporting to do so under the provisions of s. II(14) of the Indian Finance Act, 1946; and upon adding that amount to the assessees'business income in Calcutta which was Rs. 4,03,928 and treating the whole of the total of Rs. 6,34,937 as their Indian income, he found that it exceeded their foreign income which was Rs. 4,29,620. Accordingly, the ITO applied s. 4A(c)(b) of the Indian IT Act and held the assessees to be resident in British India and assessed them on the whole of their world income. THE assessment was upheld successively by the AAC and the Tribunal. The assessees resisted the assessment on two grounds. They contended, in the first place, that the amount of the repayment was not chargeable to tax at all, because the only provision under which a refund of excess profits tax obtained in the United Kingdom could be brought to charge in India was contained in the Finance Act of 1946, which was limited in its operation to the asst. yr. 1946-47 and did not apply to the asst. yr. 1947-48. In the second place, they contended that, in any event, the amount of the repayment could not be taken into account for the purpose of s. 4A (c)(b), inasmuch as it was not income arisen in India as required by that section, but only an amount deemed to be income for the purposes of the IT Act and treated as the income of the year in which the repayment was made. The contentions of the assessees having been rejected by the IT authorities and the Tribunal, they required the questions to be referred to this Court. They have been referred in the following form :- "(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 IT Act ? (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 IT Act ?"
(3.) THE first question challenges the very assessability of the amount of repayment. As a question arising out of the appellate order, the only contention involved in it is that a provision in the Finance Act of 1946 could not apply to the asst. yr. 1947-48 and since there was no corresponding provision in the Finance Act of 1947, there was no provision at all which made the amount liable to the Indian tax. In my opinion, that contention is entirely misconceived. THE Finance Acts, though annual Acts, are not temporary Acts, nor has the Act of 1946 ever been repealed. It is true that, in the main, the annual Finance Acts make provision for the rate at which tax is to be charged or sometimes the manner in which income is to be computed in assessments for the financial year to which the Acts relate, but if such provisions are limited to the particular assessment year, it is not because the Act itself is a temporary Act, limited for all purposes to a single year, but because the particular assessment year is specifically mentioned in the provisions as the year to which they solely relate. THEre may, however, be and often are provisions of a general character which are of permanent operation and which are available for application, whenever circumstances are found to which they are, by their terms, applicable. It is not unoften that the IT Act or some other Act is amended by a Finance Act or that some principle of taxation or computation of income is laid down in a Finance Act, which is intended to form part of the general law of the country. It is clear that s. 11, sub-s. (14), of the Finance Act of 1946 is a provision of that character. THE Act in which it occurs is still on the statute book as an operative enactment and it was continuing to say in 1947- 48, as it is continuing to say even to- day, that all refunds of excess profits tax obtained in England, if they be of the kind mentioned, shall be treated for the purposes of the Indian IT Act in the manner laid down. THE very fact that such refunds could not be obtained only in the accounting year relative to the asst. yr. 1947-48 but might be obtained in other years in future, is sufficient to indicate that s. 11(14) could not have been intended to be limited to the accounting year 1946-47 and, in fact, the language in which it was expressed shows that it was not so limited. I should add in fairness to Mr. Mitra that he himself conceded that there were weighty considerations against the contention he was advancing and he instanced cases where one Finance Act had been amended by another. In my opinion, there is no substance in the contention that s. 11, sub-s. (14), of the Finance Act of 1946 could not apply to the sum of Rs. 2,31,009 refunded in the accounting year ended on the 31st Oct., 1946. In addition to the ground taken on behalf of the assessees before the authorities below, Mr. Mitra pressed for a negative answer to the first question on another ground. He contended that assuming s. 11(14) of the Finance Act of 1946 applied, still the maximum effect of that section was to make the amount of the repayment income for the purposes of the IT Act and further to make it income of the year in which it was repaid, but the effect was not also to make it taxable income. The argument was that even after the amount had been brought into the computation as income, it had to be decided by the application of the relevant provisions of the IT Act, whether it was liable to tax or exempt from taxation and if liable to tax, to what extent liable. The amount, it was contended, was not income which had arisen in India and it was nobody's case that it had been received here. If it was not income arising in India, it could not be taken into account in determining the residence of the assessee under s. 4A(c)(b) and, without that amount, the Indian income of the assessees would not exceed their foreign income, with the result that they would be non-residents. If they were non-residents, the amount would not be taxable at all, since it was not income accrued or arisen in India, nor income received here.;