GIRDHARLAL GHELABHAI Vs. CIT

JUDGEMENT

(1.) Two questions of law arise on this Reference. One which is relatively simple raises the question as to whether an assessee can have two or more different statuses for the same assessment year. There are two decisions one a decision of the Privy Council and the other a decision of the Madras High Court which throw considerable light on this question and render it easy of solution. But the second question is one of some difficulty and no guidance to its solution is to be derived from any decided authority. That question turns on the true interpretation to be put upon the provisions of sec. 17(1) of the Incometax Act 1922 These questions which have been submitted to this Court by the Tribunal arise out of an assessment made on one Girdharlal Ghelabhai as an individual for the assessment year 1956-57. The assessee had at the material time two sources of income namely (1) property and (2) business. The previous year in respect of the first source namely property was the financial year ending 31/03/1956 while in respect of the second source namely business having regard to the accounting year adopted by the assessee for maintenance of his accounts the previous year was Samvat Year 2011. The assessee left India on 12/08/1954 and returned on 14/02/1956 with the result that he was not in India at any time during the period covered by Samvat Year 2011 namely 27 October 1954 to 14/11/1955 though during the period covered by the financial year ending 31/03/1956 he was in India for a part of the period namely 14/02/1956 to 31/03/1956. The assessee had maintained a dwelling house in India throughout the period of his absence but since he was not in India at any time during Samvat Year 2011 he was treated as not resident in Samvat Year 2011 under sec. 4A(a)(ii) which was the relevant provision applicable to the case. In the financial year ending 31/03/1956 however he was treated as resident under sec. 4A(a)(ii) since he was in India during a part of that year. The income from property for the financial year ending 31/03/1956 which was the previous year in respect of the source property was computed at Rs. 490/while the income from business for Samvat Year 2011 which was the previous year in respect of the source business was computed at Rs. 5 545 The total income assessable to tax was thus determined at Rs 6 35 since the assessee was not resident in Samvat Year 2011 which was one of the two previous years for the assessment year in question the revenue authorities applied section 17(1) to the income from business in respect of which the assessee was treated as not resident and taxed it at the maximum rate. The result of the application of sec. 17(1) was that the tax charge on the assessee amounted to Rs. 2 567 nP. whereas if sec. 17(1) had not been applied the tax charge would have come to only Rs. 253-13-3. To escape the application of sec. 17(1) the assessee urged two contentions before the revenue authorities. The first contention was that on a true construction of sec. 4A(a) the word year in the section referred to a financial year and the tests of residence laid down in the section were therefore to be applied with reference to a financial year and not with reference to a previous year so that even though there might be for the same assessment year different previous years of an assessee in respect of his separate sources of income an assessee could not have different statuses according to the different previous years but could have only one status according to the financial year and the financial year according to the assessee was the financial year immediately preceding the assessment year. This contention was advanced obviously because if it were correct the assessee in the present case would be a resident and in that event sec. 17(1) admittedly would not apply The second contention which was urged in the alternative was that even if the tests laid down in sec. 4A(a) were to be applied with reference to each different previous year which an assessee may have in respect of his separate source of income and an assessee could therefore have different statuses for same assessment year according to the application of the tests with reference to different previous years sec. 17(1) could not be attracted unless an assessee was non-resident in all the different previous years corresponding to the assessment year that is in respect of all sources of income. It was contended on behalf of the assessee that since in the present case he was not non-resident in both the previous years but was resident in one of the two previous years namely the financial year ending 31/03/1956 sec. 17(1) did not apply and he was not liable to be taxed on his business income at the rates specified in that section. Both these contentions were rejected by the revenue authorities and on the matter being carried in appeal to the Tribunal the Tribunal also negatived these contentions. The assessee thereupon asked the Tribunal to state a case and to refer to this Court the questions of law arising out of its order under sec. 66(1) and the following questions of law namely:-

(2.) The answer to the first question turns primarily on the interpretation to be put upon the provisions of sec. 4A(a) but it is a trite-saying that no section can be read in isolation. When construing the terms of any provision found in a statute The Court is bound to consider other parts of the statute which throw light on the intention of the legislature and serve to show that the particular provision ought not to be considered as it would be alone and apart from the rest of the statute. Every clause of a statute should be considered with reference to the context and other clauses in the statute so as far as possible to make a consistent enactment of the whole statute. No part of a statute should be construed in isolation for the intention of the law-maker is to be found not in one part of the statute or another but in the entire enactment and that intention can best be gathered by viewing a particular part of the statute not detached from its context in the statute but in connection with its whole context. It is therefore necessary to refer to some other sections of the Act for the purpose of determining what is the meaning which must be put upon the word year occurring in sec. 4A(a).

(3.) Section 3 is the charging section and it imposes tax for each assessment year at the rate or rates prescribed in the Finance Act for the time being in force and such tax is charged on the total income of the previous year. Previous year as defined in sec. 2(11) may be either the financial year immediately preceding the assessment year or at the option of the assessee any other period of twelve months ending within such year for which he has made up his accounts. It was at one time held by the High Court of Bombay in Commissioner of Income-tax v. Abubaker Abdul Rehman (1936) IV I. T. R. 233 on a construction of sec. 2(11) as it stood prior to its amendment in 1939 that an assessee could not have two different previous years for the same assessment year but that view was altered by the amendment effected by the Income-tax (Amendment) Act 1939 and it is now possible for an assessee to have a different previous year for each separate source of income. The language of the opening part of sec. 2 (11) clearly shows thatprevious year is defined in reference to each separate source of income and consequently there can be different previous years for separate sources of income. This position is very clear and in fact it was not disputed on behalf of the assessee. Total income is defined in section 2(15) to mean total amount of income profits and gains referred to in sec. 4(1) computed in the manner laid down in the Act. Section 4(1) prescribes the ambit of taxation and lays down what is total income of the previous year of any person which subject to the other provisions of the Act is chargeable to tax under sec. 3. It defines the extent of the total income with reference to the residence of the assessee. All assessees are divided into three categories:- (a) resident and ordinarily resident; (b) resident but not ordinarily resident; and (c) not resident and the computation of the total income chargeable to tax is made dependent on a basis which differs according as the assessee belongs to one or the other of these three categories during the previous year of which the income falls to be assessed. If the assesses is resident and ordinarily resident during the previous year all income accruing arising or received or deemed to accrue arise or be received in the taxable territories as also all income accruing arising or received without the taxable territories is liable to be taken into account in the computation of his total income. If the assessee is resident but not ordinarily resident during the previous year his total income is liable to be computed in the same manner as in the case of an assessee resident and ordinarily resident with this difference that income accruing of arising without the taxable territories is not to be taken into account unless it is derived from a business controlled in or a profession or vocation set up in India or unless it is brought into or received in the taxable territories by the assessee during the previous year. If the assessee is not resident during the previous year his total income will comprise only income which accrues or arises or is deemed to accrue or arise in the taxable territories or is received or deemed to be received in the taxable territories by or on his behalf. Since the computation of the total income of the previous year of an assessee depends on the factor of residence the first inquiry that requires to be made in every case is as to the residential qualification of the assessee in the previous year of which the total income is to be computed. The tests of residence are laid down in sec. 4A while the tests of ordinary residence are to be found in sec. 4B. We are concerned in this reference only with the provisions of sec. 4A.