COMMISSIONER OF INCOME TAX Vs. A P KALYANAKRISHNAN

JUDGEMENT

(1.) IN these tax case references under section 256(1) of the INcome-tax Act, 1961 (hereinafter referred to as "the Act"), at the instance of the Revenue, the following common question of law has been referred to this court for its opinion "Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 5(1)(a) of the INcome-tax Act, 1961, the Appellate Tribunal was right in holding that the pension earned by the assessee was not assessable in INdia and was, therefore, liable to be excluded from the total income of the assessee, who was 'not ordinarily resident in INdia' in the relevant years ?"The assessee is an individual whose status is" resident but not ordinarily resident." * IN the return of income filed by the assessee initially for the assessment year 1970-71, he included therein Rs. 12, 881 representing Malaysian pension received in INdia. Subsequently, a revised return was filed in which the assessee claimed that the amount of pension was not taxable, as the pension had been received outside INdia and later remitted to INdia. For the assessment year 1971-72, in Part IV of the return submitted by the assessee, the pension received from the Malaysian Government amounting to Rs. 14, 052 was claimed as not taxable.

(2.) THE Income-tax Officer negatived the stand of the assessee on the ground that the assessee received the pension in India through the Accountant-General Madras, directly and hence, the pension received is liable to tax treatment in India on receipt basis. Accordingly, the pension received by the assessee for the two assessment years in question was subjected to tax. On appeal by the assessee before the Appellate Assistant Commissioner contending that the pension received by the assessee for the assessment years 1970-71 and 1971-72 is not liable to be subjected to tax, the Appellate Assistant Commissioner found that the pension amount received by the assessee had been subjected to assessment in Malaya in the status of non-citizen and non-resident and that clearly pointed out that the pension had accrued to the assessee only in Malaya and the Accountant-General, Madras, was merely authorised to arrange for the payment of pension to the assessee, rendering the amount of pension received in India by the assessee not liable to tax. In that view, the Appellate Assistant Commissioner directed the deletion of Rs. 12, 881 and Rs. 14, 052 from the assessable total income of the assessee for the two assessment years in question. In the further appeals preferred by the Revenue before the Tribunal contending that the payment of pension to the assessee in India by the Accountant-General, Madras, constituted the first receipt by the assessee in India and, therefore, the pension received was assessable on receipt basis, the Tribunal held, referring to a letter dated June 23, 1969, addressed by the Accountant-General of the Federation of Malaya to the Accountant-General, Madras, that that letter indicated an arrangement for payment in India and the circumstance that the pension of the assessee had also been assessed to tax in Malaya in the status of a non-citizen and non-resident would clearly establish that the pension of the assessee had been remitted to India by arrangement with the Accountant-General, Madras.

(3.) IN accordance with the terms of the agreement entered into between the commission agent and the assessee, a certain percentage of sale proceeds was payable as commission to the non-resident and, on the direction of the commission agent, the amount payable was credited to the account of the commission agent in the books of the assessee. It was tinder those circumstances that it was held that the non-resident commission agent should be regarded as having received his commission in INdia, when the amount of commission was separated from the sale proceeds and credited to his account. Though, according to the terms of the agreement, the commission was not paid or remitted to the non-resident, still as the commission agent had agreed to treat the commission as realised and further directed that the amount of commission payable from time to time should stand as a deposit to its credit in the books of the assessee to be withdrawn or remitted later, according to its pleasure, it was held that there was a receipt of the commission by the non-resident in INdia and that was taxable, as a receipt of income, within the meaning of section 4(1)(a) of the INdian INcometax Act, 1922.