Full Judgment Text
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PETITIONER:
STANDARD TRIUMPH MOTOR CO. LTD.
Vs.
RESPONDENT:
COMMISSIONER OF INCOME TAX, MADRAS
DATE OF JUDGMENT25/02/1993
BENCH:
JEEVAN REDDY, B.P. (J)
BENCH:
JEEVAN REDDY, B.P. (J)
VENKATACHALA N. (J)
CITATION:
1993 SCR (2) 96 1993 SCC Supl. (3) 315
JT 1993 Supl. 46 1993 SCALE (1)699
ACT:
Income Tax Act 1961:
Sections 5(2) and 145-Non Resident Company and Indian Com-
pany--Collaboration agreement-Indian Company to apy royalty
to non resident company on all sales-Royalty to be remitted
to non resident in pounds Sterling-Royalty credited by
Indian Company to non resident in its account books-Credit
entries-Whether amount to receipt of income-whether non
resident liable to method of accounting adopted-Whether
relevant.
HEADNOTE:
The assessee-appellant in the appeal is a non resident
company having its place of business at Coven" in the United
Kingdom. It entered into a collaboration agreement with an
Indian company in November, 1939 the assessee being entitled
to royalty of 5% on all sales effected by the Indian
Company, and this amount less the Indian tax had to be
remitted by the assessee in Sterling currency. The
assessee’s accounting year was the year ending 30th
September and with respect to its Indian income, it was
filing its returns through the Indian Company. The
aforesaid collaboration agreement expired in the year 1965,
but it was renewed and the renewed agreement also expired in
November, 1970.
For the assessment years 1967-68 and 1968-69 the assessee
riled returns in which it stated that it was maintaining its
accounts on mercantile basis, and did not dispute its
liability to assessment. In these returns, it disclosed a
royalty income of Rs. 7,21,600 and Rs. 4,57,311
respectively. When it came to the filing of the return for
the assessment year 1969-70 the assessee admitted a royalty
of Rs. 9,25,357 but filed a nil return saying that it was
maintaining its accounts on cash basis and not on mercantile
basis, that no part of the royalty amount had been received
by it and, therefore, nothing was taxable. For the next
assessment year 1970-71 as well, the same stand was taken by
the assessee.
The Income-Tax Officer completed the assessment for the
first two
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assessment years on the basis of the returnes, but for the
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assessment years 1969-70 and 1970-71, he refused to accept
the plea of the assessee; and held that the assessee
maintaining its accounts on mercantile basis alone and that
the royalty amount disclosed be brought to tax.
The assessee filed appeals against the assessments relating
to all the four years, taking the stand that even with
respect to the accounting year relevant to the assessment
years 1967-68 and 1968-69, it had been maintaining accounts
on cash basis and since it did not actually receive any
income in all these 4 years no tax was payable. The
Appellate Assistant Commissioner dismissed the appeals
holding that the assessment orders for the past years reveal
that the method of accounting was mercantile, that for the
assessment year 1967-68, the assessee never contested its
liability to be taxed on the amounts disclosed and further
it was not open to the assessee to change the method of
accounting to suit its convenience, without the approval of
the Income Tax Officer.
The assessee carried the matter In further appeals to the
Tribunal and contended that it was not following any
particular method of accounting regularly in the past years
that it was the Indian Company which was finally filing the
returns of income on behalf of the assessee by incorporating
the figures as per its profit and loss account, that the
Indian Company was not aware of the assessee’s system of
accounting in regard to royalty and that, therefore, it had
committed a mistake in filing the returns for the assessment
years 1967-68 and 1968-69, that as soon as the mistake had
been noticed, it was corrected and returns for the
assessment year 1969-70 on correct basis showing that the
method of account cash receipt basis was filed. ’Me appeals
were allowed the Tribunal which held that as the assessee
had not been following any particular method of accounting
regularly over the past years, the question of the method of
accounting adopted by the assessee must be examined afresh
and for that purpose remanded the matters to the Income Tax
Officer.
On a reference made at the instance. of the Revenue, the
High Court answered the reference in favour of revenue and
against assessee. The High Court held that it was
’immaterial whether the assessee was keeping his accounts in
regard to a particular income regularly on the cash basis;
that even if the assessee was keeping his accounts on the
cash basis in regard to his income the assessee was liable
to tax under Section 5 (2) (a); to hold
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otherwise would be to take the income outside the purview of
taxation under the Act, though such income had accrued in
India to a non-resident, and under Section 5(2)(b) the
charge to tax had taken effect; and, therefore, there is no
possibility of Section 5(2)(b) ever coming into operation
and that Section 145(1) cannot be given such an overriding
effect so as to defeat the charge and the provisions of
Section 5(2)(b).
The assessee appealed to this Court contending that so far
as the royalty income was concerned, the assessee was
maintaining its accounts at Coventry in the United Kingdom
on receipt basis, that the accounting year was the year
ending 30th September of each year, whereas the accounting
year for the Indian Company was the Calendar year and that
notwithstanding the stipulation in the collaboration
agreement for half yearly remittances, the practice was that
the Indian Company was determining the amount of royalty at
the end of its accounting year and that this amount was
credited to the account of the assessee in the account books
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of the Indian Company and that receipt is only when the
amount is remitted to the United Kingdom in accordance with
the Company.
Dismissing the appeals, this Court,
HELD: The collaboration agreement between the assessee
and the Indian Company was as old as 1939. The assessee had
been riling its income-tax return in India through the
Indian Company. Though the collaboration agreement
contemplated the royalty amount being remitted in Sterling
Currency to U.K., it cannot be said that until it was so
remitted to and received in the U.K., the assessee had not
received the income. The practice evidently was that the
Indian Company was maintaining an account pertaining to the
assessee in its Books. After it made up its accounts at the
end of the calender year and determined the royalty amount
payable to the assessee, the Indian Company was crediting
the said amount to the account of the assessee in its Books,
and this was recorded as income by the assessee over all
these years. The returns riled by the assessee even with
respect to the assessment years 1967-68 and 1968-69 were
based upon this premise. In the said returns, the assessee
declared a particular amount of income and offered the same
for taxation. It did not take the stand that the said
credit entry in the Books of the Indian Company did not give
rise to income in India nor did it ever say that the receipt
in U.K. in the shape of sterling pounds alone constitutes
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income or for that matter receipt of income. It can also be
noticed that in its returns relating to the assessment years
1967-68 and 1968-69, the assessee stated that it was
maintaining its accounts on mercantile basis, and that only
in the returns relating to the assessment year 1968-69, did
it raise the plea that it was maintaining its books, with
respect to the said royalty amount, on cash receipt basis.
[105E-H]
The receipt of the said income in the U.K., is immaterial.
It may happen that a non-resident assessee may choose not to
repatriate his income/profits to his parent country; he may
choose to plough back the said amount in India for such
purposes as he may choose. It, therefore, cannot be said in
such a situation that he has not received the income in
India. [106H]
Raghava Red& v. C.I.T, Andhra Pradesh, 44 I.T.R. 720; relied
on.
[107A]
The credit entry to the account of the assessee in the Books
of the Indian Company does amount to receipt by assessee and
is accordingly taxable. It is immaterial when it was
actually received in U.K. [108C]
The method of accounting adopted by the assessee for the
relevant accounting years Is really irrelevant. Thi very
concept of ’receipt" as espoused by the assessee is
untenable and unacceptable. The order of remand made by the
Tribunal was unnecessary. It is not necessary to express
any opinion either on the question whether there is any
conflict or inconsistency between Section 5(2) and Section
145 of the Act or on the view expressed by the High Court
that in the case of a non-resident assessee like the
appellant clause (a) of sub-section (2) of Section 5 has no
application whatsoever and that Section 5(2)(b) governs it
irrespective of the fact whether it maintains its accounts
on cash basis or mercantile basis. The question referred
did not really arise in the facts and circumstances of the
case and need not have been answered. The Tribunal shall
complete the assessments in question. [108D-F]
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C.I. T. v. Machillan & Co., 33 I.T.R. 182 and Keshav Mills
Ltd. v. C.I T., Bombay, 23 I.T.R. 230, distinguished. [108G]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1022-24 &
423 of 1982.
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From the Judgment and Order dated 14.3.78 & 2.7.79 of the
Madras High Court in Tax Case Nos. 228/74 & 215 of 1975.
Uttam Reddy, Atul Sharma, A.V. Palli and Ms. Reena Agarwal
for E.C. Agrawala for the Appellant.
G. Vishwanatha, P. Parmeshwaran and Ms. A. Subhashini (NP)
for the Respondent.
The Judgment of the Court was delivered by
B.P. JEEVAN REDDY, J. These appeals are preferred by the
assesagainst the judgment of the Madras High Court answering
the Income Tax reference made at the instance of the
Revenue, against the assessee. The assessment years
concerned are 1967-68, 1968- 69, 1969-70 and 1.970-71. The
question of law which was referred for the opinion of the
High Court under Section 256(2) of the Income Tax Act is:
"Whether, on the facts and in the
circumstances of the case, the Appellate
Tribunal was right in holding that the royalty
amounts should be assessed on cash basis for
1967-68. 1968-69 and 1969-70 assessment if the
books and balance sheet of such receipts were
found to be maintained on cash basis and
directing fresh assessment on such basis?"
In the paper-book supplied by the assessee-appellant the
Statement of the Case is not available nor are the orders of
any of the authorities supplied. We are, therefore, obliged
to draw the facts from the judgment of the High Court which
we presume are drawn from the Statement of the Case. As a
matter of fact, the facts require to be appreciated clearly
for a proper decision of the question arising herein.
The assessee, Standard Triumph Motor Co. Ltd. is a non-
resident company, having its place of business at Coventry
in the United Kingdom. It entered into a collaboration
agreement with the Standard Motor Products of India Ltd.
(Indian Company) in November, 1939 whereunder the assessee
was entitled to royalty of five per cent on all sales
effected by the Indian Company. This amount of five per
cent less the Indian tax had to be remitted to the assessee
in the Sterling currency. The assessee’s accounting year
was the year ending 30th of September. With respect to
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its Indian income, it was filing its returns through the
Indian Company.
The collaboration agreement between the assessee and the
Indian Company expired in the year 1965. It was renewed.
The renewed agreement too expired in November, 1970.
For the assessment years 1967-68 (year ending 30.9.1966) and
196869 (year ending 30.9.1967) the assessee filed returns in
which it stated that it was maintaining its accounts on
mercantile basis. It did not dispute its liability to
assessment. In these returns, it disclosed a royalty income
of Rs. 1,600 and Rs. 4,57,311 respectively. When it came to
filing of the return for the assessment year 1969-70 (year
ending 30.9.1968), the assessee admitted a royalty of Rs.
9,25,257 but filed a nil return saving that it was
maintaining its accounts on cash basis and not on
mercantile basis, that no part of the royalty amount has
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been received by it and, therefore, nothing is taxable. For
the next assessment year 1970-71 (year ending 30.9.1.969) as
well, it took the same stand. The I.T.O. completed the
assessment for the first two assessment years on the basis
of the returns. For the assessment years 1969-70 and 1970-
71, however, he refused to accept the assessee’s plea that
it was maintaining its accounts on cash basis. He held that
it was maintaining its accounts on mercantile basis alone
and accordingly brought to tax the royalty amount disclosed.
The assessee filed appeals against the assessments relating
to all the four years. In these appeals, it took the stand
that even with respect to the accounting years relevant to
the assessment years 1967-68 and 1968-69, it has been
maintaining accounts on cash basis and since it did rot
actually receive any income in all these four years, no tax
is payable by it. Its case was that there was ’no actual
payment’ of the royalty by the Indian Company. It stated
that though the Indian Company had credited to the assessee
in its account books for the relevant years (accounting year
for the Indian Company is stated to be the calendar year),
the assessee did not actually receive the amount nor did it
take credit for the said amounts in its Books at Coventry.
The Appellate Assistant Commissioner dismissed the appeals
holding that the assessment orders for the past years
relating to the assessee reveal that the method of
accounting was mercantile, that for the A.Y. 1967-68, the
assessee did never contest its liability to be taxed on the
amounts disclosed and further that it was not open to it to
change the method of accounting to suit its convenience,
without the approval of
102
the Income Tax Officer. The assessee carried the matter in
further appeals to the Tribunal.It was contended by the
assessee before the Tribunal that it was not following any
particular method of accounting regularly in the past years,
that it was the Indian Company which was finally filing the
returns of income on behalf of the assessee by incorporating
the figures as per its profit and loss account, that the
Indian Company was not aware of the assessee’s system of
accounting in regard to royalty and that, therefore, it had
committed a mistake in filing the returns for the assessment
years 1967-68 and 1968-69. The assessee submitted that as
soon as it noticed that said mistake it corrected the same
and filed the return for the assessment year 1969-70 on
correct basis, showing that the method of accounting was
cash receipt basis. The appeals were allowed by the
Tribunal. The Tribunal held that the assessee had not been
following any particular method of accounting regularly over
the past years. For example, it said, for the assessment
year 1963-64 it did not say anything regarding the method of
accounting. For the assessment year 1.964-65, it said it
was on cash basis. For the assessment years 1967-68 and
1968-69 it stated it was maintaining accounts on mercantile
basis and again for the two subsequent years it stated as
cash basis. The Tribunal was, therefore, of the opinion
that the question of method of accounting adopted by the
assessee must be examined afresh and for that purpose
allowed the appeals and remanded the matters to the Income
Tax Officer. The Tribunal gave liberty to the parties to
adduce additional evidence in that behalf. It directed
further that if it is found that the assessee was
maintaining its accounts and balance sheets on cash basis in
respect of the royalty it should be assessed on cash basis.
On a Reference made at the instance of Revenue, the High
Court answered the question in the negative, i.e., in favour
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of the revenue and against the assessee. It would be
appropriate at this stage to notice the contentions urged by
the assessee and how they were met by the High Court.
Though the High Court has not set out the arguments of the
assessee as such, the arguments advanced can easily be
gleaned from the judgment. The assessee reiterated his
contention that though the Indian Company made a credit
entry in the account of the assessee in its Books, it did
not actually receive the amount. The argument appears to be
that the assessee can be said to have received the royalty
amount only when it receives the same in U.K. in the shape
of pounds and makes an entry to that effect in its own Books
at Coventry. Since it is maintaining its accounts, with
respect to the said royalty on cash basis, it argued,
receipt means receipt in U.K. Section 145 was relied upon by
the
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assessee to say that the method of accounting regularly
adopted by an assessee is binding upon the department; on
that basis it was argued that if the assessee is proved to
have maintained its accounts with respect to royalty amount
on cash basis, then there is no receipt until it is received
by it in U.K. It is this argument which led the High Court
to say that acceptance of the said argument would mean
escapement of income from taxation in India altogether.
This is what the High Court said : "If the contention of the
assessee that the royalty should be assessed to income-tax
only on its actual receipt under Section 5(2)(a) of the Act
on the ground that it maintains its accounts on cash basis
is accepted, the income could not be taxed at all as it
would be received in England and not in India. The
assessee-company, a non-resident, receiving its income
outside India could be assessed to tax only under Section
5(2) (b) of the Act on accrual basis. Section 5(2) (a)
cannot be made applicable to such an assessee. In the case
of a non-resident, to whom income accrues in India, Section
5(2)(a) will have no application. unless the non-resident
receives income in India. On the facts of this case it is
clear that eventuality will never arise in regard to the
income with which were are concerned, because that income
will have to be remitted to the nonresident by obtaining an
irre-vocable letter of credit and will thus be received only
outside India." Pursuing the said reasoning the High Court
held further:
"So it is clear that there can be cases of
non-residents to whom section 5(2)(a) will
never apply in regard to a particular income.
The question then is, whether in such
circumstances the assessee concerned (non-
resident to whom income had accrued in India)
can insist it, since )has kept his accounts in
regard to that income on the cash basis, he is
not liable to be taxed on the accrual basis.
In other words, the question is
Sec 145(1) can be applied in such
circumstances. The effect of applying the
section would be to take the income outside
the purview of taxation though the charge to
tax on that income had taken effect on the
accrual basis. Further, no occasion for
imposing tax on receipt outside India would
arise in the case of a non-resident, because
Section 5(2)(a) will apply only to receipt in
India. In such circumstances, to apply
Section 145(1) would be to defeat the charge
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under Section 4 and to obliterate the
provisions of section 5(2)(h) and let the
income which is taxable escape Such a
104
result is not certainly intended by the
statute. Section 145(1) is only an enabling
provision to effectuate the charge. The
section cannot be used for destroying the
charge to tax and the provisions of Sec.
5(2)(b), though by merely looking at the
wording of Section 145(1) it may appear that
in all cases the method of accounting must be
followed, unless in any case where the
accounts are correct, but the method is such
that, in the opinion of the Income-Tax
Officer, the income cannot properly be deduced
therefrom.
But it must be remembered that Sec. 145 is
only a machinery provision and cannot qualify
the charging section so as to make the latter
otioss. So Section 145(1) should not be
permitted to be applied in such circumstances
as those while arise from the facts of this
case. it is therefore immaterial whether the
assessee is keeping his accounts in regard to
a particular income regularly on the cash
basis. Even if the assessee is keeping his
accounts on the cash basis in regard to his
income, the assessee is liable to tax under
Sec. 5(2)(b). To hold otherwise would be to
take the income outside the purview of
taxation under the Act, though such income had
accrued in India to a nonresident and under
Sec. 5(2)(b) the charge to tax had taken
effect and there is no possibility of Sec.
5(2)(b) ever coming into operation. We cannot
give to Sec. 145(1) such an overriding effect
as to defeat the charge and the provisions of
Section 5(2)(b)."
In this court, the learned counsel for the assessee
contended that so far as the royalty income is concerned,
the assessee was maintaining its accounts at Coventry in the
United Kingdom on receipt basis. Its accounting years was
the year ending on 30th of September of each year whereas
the accounting year of the Indian Company was the calendar
year. Notwithstanding the stipulation in the collaboration
agreement for half-yearly remittances, the practice was that
the Indian Company was determining the amount of royalty at
the end of its accounting year. This amount was credited to
the account of the assessee in the account books of the
Indian Company, but mere crediting to the account of the
assessee in the Books of the Indian Company does not
105
amount to receipt of income by the assessee. Receipt is
only when the amount is remitted to United Kingdom in
accordance with the agreement. Counsel submitted that the
assessee was not maintaining any particular method of
accounting regularly in respect of the said royalty amount
and that the alleged statement in the returns relating to
the assessment years 1967-68 and 1968- 69 to the effect that
it was maintaining its accounts on mercantile basis, was an
incorrect statement made by the Indian Company which was not
aware of the true state of affairs relating to the
assessee’s accounts. The learned counsel submitted that all
that the Tribunal has done is to direct an inquiry to find
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out the true state of affairs viz., whether the assessee was
maintaining its accounts on mercantile basis or on cash
receipt basis in so far as the royalty amount is concerned.
He submitted further that since the Appellate Assistant
Commissioner exercises all the powers of the assessing
authority, it was perfectly open to the assessee to raise
the contention relating to the method of accounting even
with respect to the assessment years 1967-68 and 1968-69, in
the appeals. When the assessee has not actually received
any royalty income from the Indian Company, it is not
expected to bring money from the United Kingdom for paying
its taxes in India, the learned counsel contended.
The collaboration agreement between the assessee and the
Indian Company is as old as 1939. According to its own
case, the assessee has been filing its income-tax returns in
India through the Indian Company. It is true that the
agreement contemplated royalty amount being remitted in
Sterling currency to U.K., but it cannot be said that until
it is so remitted to and received in the U.K., the assessee
has not received the income. The practice evidently was
that the Indian Company was maintaining an account
pertaining to the assessee in its Books. After it made up
its accounts at the end of the calendar year and determined
the royalty amount payable to the assessee, the the Indian
Company was crediting the said amount to the account of the
assessee in its Books. This was treated as income by the
assessee over all these years. The returns filed by the
assessee even with respect to assessment years 1967-68 and
1968-69 were based upon the said premise. In the said
returns, the assessee declared a particular amount of income
and offered the same for taxation. It did not take the
stand that the said credit entry in the Books of the Indian
Company does not give rise to income in India nor did it
ever say that the receipt in U.K. in the shape of Sterling
pounds alone constitutes income or for that matter receipt
of income. It may also be noticed that in its returns
relating to the assessment years 1967-68 and 1968-69, the
assessee stated that it was maintaining its
106
accounts on mercantile basis. Only in the returns relating
to the assessment year 1968-69, did it raise the plea that
it was maintaining its books, with respect to the said
royalty amount, on cash receipt basis. (The Tribunal appears
to have stated that for the year 1964-65 too, the assessee
had stated ,cash basis’ but it is not clear for what purpose
the said plea was raised. One thing is clear: the assessee
did not say at any time earlier to A.Y. 1968-69 that receipt
of money in U.K. alone is receipt by it). It also took the
rather strange plea that the Indian Company was not aware of
the method of accounting adopted by the assessee and,
therefore, it made the aforesaid incorrect statement in the
returns relating to the years 1966-67 and 1967-68. This
plea, the Appellant Assistant Commissioner refused to
countenance. It is significant to notice that the assessee
did not say that the method of accounting adopted by it for
all its income was on cash basis. It confined the said plea
to its Indian income alone. The said plea, it should be
noticed, had no significance by itself. Its significance
lies when we examine the said plea in the fight of the
further contention of the assessee that it did not actually
receive the amount from the Indian Company. We put a
pointed question to the learned counsel for the assessee
whether it was the assessee’s case at any stage that the
credit entry made in the account books of the Indian Company
in favour of the assessee was a bogus or a mere make-believe
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entry. The counsel replied that it was not its case at any
point of time. His contention was that the mere entry in
the account books of the Indian Company does not amount to
receipt of income by the assessee. The assessee had been
very careful not to say that the Indian Company did not
place the said amount at the disposal of the assessee.
Indeed, he replied to a further question by us that even if
the said amount were put by the Indian Company in a Bank to
the credit of the assessee, it could not have been said that
the assessee has received the amount. In other words,
according to the learned counsel, the said royalty income
can be said to have been received by the assessee only when
it received the same in U.K. It is this extreme argument
which led the High Court to make the observations quoted
hereinbefore. It would immediately be evident that this was
not the basis put forward by the assessee at any point of
time till it to the filing of return for the assessment year
1969-70. We are not suggesting that it is estopped from
doing so. We are only saying that the said plea was not and
is not acceptable. The receipt of the said income in the
U.K., in our opinion, is immaterial. It may happen that a
non-resident assessee may choose not to repatriate his
income/profits to his parent
107
country; he may choose to plough back the said amount in
India for such purposes as he may choose. It cannot be said
in such a situation that he has not received the income in
India. In Raghava Reddi v. CL T., Andhra Pradesh, 44 I.T.R.
720 the non-resident company instructed the assessee, in
view of the difficulties in this country in remitting the
monies abroad, to credit the amount due to it on account of
commission in the account Books of the assessee awaiting
further instructions regarding its remittance. The assessee
was assessed as the statutory agent of the non-resident
company. The I.T.O. assessed the amounts credited in the
accounts of the assessee as the income of the non-resident
company. The contention of the assessee was that mere entry
in the Books of the assessee cannot amount to receipt and
that the amounts cannot be assessed until they were actually
paid over to the non-resident company or dealt with
according to its directions. Rejecting the contention, it
was held by this court that as soon as the monies were
credited to the account of the non-resident (Japanese) com-
pany, it must be held that it "received" the same and are
taxable. Hidayatullah, J. speaking for the Constitution
Bench observed:
"This leaves over the question which was
earnestly argued, namely, whether the amounts
in the two account years can be said to be
received by the Japanese company in the
taxable territories. The argument is that the
money was not actually received, but the
assessee firm was a debtor in respect of that
amount and unless the entry can be deemed to
be a payment or receipt, clause (a) cannot
apply. We need not consider the fiction, for
it is not necessary to go to the fiction at
all. The agreement, from which we have quoted
the relevant term, provided that the Japanese
company desired that the assessee firm should
open an account in the name of the Japanese
company in their books of account, credit the
amounts in that account, and deal with those
amounts according to the instructions of the
Japanese company. Till the money was so
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credited, there might be a relation of debtor
and creditor; but after the amounts were
credited, the money was held by the assessee
firm as a depositee. The money then belonged
to the japanese company and was held for and
on behalf of the company and was at its
disposal. The character of the money changed
from a debt to a deposit in much the same
108
way as if it was credited in bank to the
account of the company. Thus, the amount must
be held, on the terms of the agreement, to
have been received by the Japanese company,
and this attracts the application of section
4(1)(a). Indeed, the Japanese company did
dispose of a part of amounts by instructing
the assessee firm that they be applied in a
particular way. In our opinion, the High
Court was right in answering the question
against the assessee."
Applying the above principle, it must be held in this case
that the credit entry to the account of the assessee in the
Books of the Indian Company does amount to its receipt by
assessee and is accordingly taxable and that it is
immaterial when did it actually receive it in U.K.
In this view of the matter, it must be held that in the
circumstances of the case. the method of accounting adopted
by the assessee for the relevant accounting years is really
irrelevant. As explained hereinbefore, the very concept of
"receipt" as espoused by the assessee is untenable and
unacceptable. The order of remand made by the Tribunal was
thus unnecessary. In the circumstances, we do not think it
necessary to express any opinion on the question whether
there is any conflict or inconsistency between Section 5(2)
and Section 145 of the Act nor is it necessary to express
ourselves on the view expressed by the High Court that in
the case of a non-resident assessee like the petitioner
clause (a) of sub-section (2) of Section 5 has no
application whatsoever and that Section 5(2)(b) governs it
irrespective of the fact whether it maintains its accounts
on cash basis or mercantile basis. The question referred
did not really arise in the facts and circumstances of the
case and need not have been answered. The Tribunal shall
complete the assessments in question in the light of this
judgment.
In view of the above, it is unnecessary for us to deal with
the decisions cited by the learned counsel for the assessee.
The first decision cited by him is in C.I.T v. Macnzillan &
Co., 33 I.T.R. 182 regarding the powers of the Appellate
Authority. The second decision is in Keshav Mills Ltd. v.
CL T., Bombay 23 I.T.R. 230. The principle of this decision
does in no way support the principle contended for by the
appellant.
The appeals accordingly fail and are dismissed. No costs.
N.V.K.
Appeals dismissed.
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