COMMISSIONER OF INCOME TAX Vs. NADIMUTHU PILLAI

JUDGEMENT

(1.) -

(2.) THE assessee derives income from immoveable property, trade in cloth, money-lending and other sources existing within the jurisdiction of the Income-tax Officer, Tanjore circle. He is also the owner of considerable house property in Saigon in Indo-China. For some years he has kept an account with the Saigon branch of the Banque Franco-Chinoise and has the right to overdraw it to the limit of 50,000. On 1st April 1935 his overdraft amounted to $ 20,149. It is unnecessary to embark on an inquiry into the purposes for which the $ 20,149 was used, but it is common ground that it was used in part for paying for repairs to the assessees properties in Saigon and meeting taxes levied thereon. THE period of account was the year from the 1st April 1935 to the 31st March 1936 and the assessees net income from his Saigon properties during that year was $ 18,414. As the result of payment into his account of the income from these properties he had reduced his overdraft to $ 12,165 by the 30th November 1935. On the 7th December 1935, while the overdraft still stood at that figure, he withdrew from the account a further sum of $ 5,719, the equivalent of Rs. 10,000. THE $ 5,719 represented a remittance which he made to British India, and the question which the Court is called upon to decide is whether this remittance represents a remittance of profits derived from his Saigon properties. After making the remittance the assessee continued to draw on the account for various purposes and to make payments in from the rents he received in Saigon. THE payments into the account from the 7th December 1935 to the end of the financial year amounted to $ 11,570 and the year closed with his overdraft standing at the figure of $ 9,441. It is conceded by the assessee that the $ 11,570 has been rightly treated as being net income. THE assessee says, however, that the payments into his banking account both before and after the 7th December 1935 should be treated as payments in reduction of the overdraft. He contends that inasmuch as throughout the year he was still overdrawn in spite of his payments into the account from the income from his properties, the Income-tax authorities are bound to treat the remittance of the $ 5,719 on the 7th December 1935 as being a remittance of borrowed money. In the course of his argument Mr. Venkatarama Sastriar admitted that if the overdraft has been completely discharged by payments in of further profits after the new year commenced the position would have been different but the overdraft had not been paid off. On the other hand, the Income-tax authorities say that the true position cannot be gathered by treating the payments into the account and the withdrawals as being entirely separate transactions. THEy maintain that the net result of the assessees payments in and his withdrawals from the account is that he has reduced his overdraft by $ 12,695 and has remitted the balance of his total profits ($ 18,414 less $ 12,695) to British India.

(3.) I would answer the question referred by saying that on the facts of this case the remittance was properly assessed under Section 4 (2) of the Indian Income-tax Act, 1922, as receipt of foreign income in British India, and I would award the Income-tax authorities the usual costs granted by this Court in such cases, namely Rs. 250.