MUTHAYYA ODAYAR S Vs. AGRICULTURAL INCOME TAX OFFICER

JUDGEMENT

(1.) THE assessee left India for Fiji Islands in 1922. He remained there till 1948. During that period, he engaged himself as an employee for some time and later had an independent business. He acquired certain properties one of which was a house which he constructed in 1939. On his return to India in 1948, he brought with him the cash that was available. Subsequently, through his friends and others at Fiji the other assets left behind were sold and the sale proceeds were remitted to India Such remittance amount to Rs. 9,300 Rs. 24,074 and about Rs. 31,000 in the account years relevant to the assessment years 1949-50, 1951-52 and 1952-53. THE Income-tax Officer started proceedings under section 34 in the view that these amounts brought into the taxable territories cam out of the profits from business carried on in the Fiji Islands. THE contention of the assessee was that these amounts represented remittances out of capital. But this contention was repelled and assessments were made. An appeal was taken to the Appellate Assistant Commissioner, before whom the assessee pleaded that it was impossible for him to furnish particulars of his income from 1932 onwards. He claimed that he had converted the profits into capital assets and that what he brought into the taxable territories was only the sale proceeds of such capital assets. THEse contentions failed to find favour with the appellate authority, who thought that the mere investment of income for the time being in any asset would not alter the character of the income. while he accepted the fact that so long as the assessee resided in the Fiji Islands he kept the money in the shape of property, he thought that when he decided to return to India he converted the assets into cash. He held accordingly that the alternation did not destroy the character of the amount as income. On further appeal to the Tribunal, the assessee again reiterated his former contentions. He pointed out that his return to India was due to unforeseen circumstances and that the purchases of real property and other assets in Fiji Islands from out of his income could not be regarded as merely temporary investments, that these acquisitions were genuine and that when once the income had been converted into capital, its subsequent reconversion into money would not restore to it the original character of income. But the tribunal declined to accept this contention holding that the conversion into capital in the Fiji Islands was only of "passing nature" there being no "effective capitalisation" of the income.

(2.) ON the application of the assessee under section 66(1) of the Indian Income-tax Act being rejected, this court directed the Tribunal to state a case and submit the following question for the determination of this court.

(3.) ANOTHER decision of the privy Council relied upon for the department is commissioner of Income-tax v. Ahmedabad Advances Mills Ltd. In that case the assessee received interest on Government of India bonds, which interest was payable in England. They invested the income in the purchase of mill stores and machinery in England and brought the articles to India and used them for the purpose of their mills. The question was whether this sum was income which was brought to British India and therefore assessable. The High court held that it was not received in or brought to British India and there was no liability to income-tax. This decision was affirmed by the Privy council. The principle is amply illustrated by the headnote which reads thus :