IN THE MATTR OF Vs. GEVERY

JUDGEMENT

(1.) The point when arises for our consideration in this m atter is a short one and is contained in the question submitted to us by the Commissioner of Income Tax, Assam, as appearing in paragraph (4) of his statement of the case. It is this : "In the facts and circumstances as stated above, can commission earned by the assessee in British India for services rendered in British India as an employee there, but actually received by him in the United Kingdom, while on leave be held to have accrued or arisen in British India within the meaning of Section 4(1) of the Indian Incom e tax Act (Act XI of 1922) ?". The facts and the circumstances referr ed to in the question are briefly these. The assessee Mr. V. G. Every is an employee of the Pathini Tea Co., Ltd. which is a joint stock company incorporated under the English Companies Act having its registered office at No. 14, Fenchurch Street in the City of London. Mr. Every is employed by the company under the terms of an a greement in writing, a certified copy of which has been placed before us. This agreement which is dated February 17, 1933 provides for a term of service for a period of four years calculated from the January 1, 1933. The provisions of the agreement which are relevant for our present purpose are those in clause 7 which runs as follows :- "In consideration of the due observance and performance by the said employee of the several terms and stipulations which by him ought to be observed and performed and in consideration of the premises t he said Company shall pay the said Employee during the continuance of this agreement a monthly salary to commence fro January 1, 1933 and to be paid monthly as follows :- "Salary; Rs. 800 per mensem. Pony allowance Rs. 75 per mensem. Commission : 5 per cent. on the nett profits of the Pathini and Champabarie Divisions as may be determined by the Secretaries of the Company. Furlough : Six months of full pay will be granted during the currency or at the expiry of this agreement as may suit the convenie nce of the Company together with Rs. 1,500 towards the cost of passage. The said Company shall provide the said Employee with suitable dwelling house accommodation and medical attendance while on the garden free of charge".

(2.) The garden referred to is that situated at a place called Pathini and by clause 1 of the agreement the employee is directed to proceed to Pathini or such Tea Garden or Plantation and in such part of India as the said company may direct and "shall serve the said company in the cultivation and manufacture of tea and in such other matters in connection with the business of a Tea Planter and Manufacturer as the said company may from time to time require." The Commissioner of Income Tax sets out in paragraph (2) of his statement of the case that Mr. V. G. Every of the Pathini Tea Estate in Assam received for his service during the accounting period 1934-35 salary in India amounting to Rs. 4,000 plus the taxable value of rent free quarters which is put at Rs. 400. During this year, that is to say, the tax year 1934- 35, says the Commissioner, Mr. Every was on leave for 7 months in the United Kingdom and while on leave there he received a sum of Rs. 6,965 being the commission earned by him in India during the previous year 1933-34. I pause here to make this observation that it appears that as a matter of fact, the sum which Mr. Every received while he was on leave during the year 1934 must actually have been received in respect of the operations of the company in the year 1932, that is to say, from January 1, 1932 to 31 December of that year... because the account of the company appear to be made up as at 31 December of each year though they are not actually certified by the Accounts of the company until some such period as the month of May in the succeeding year. The Commissioner of Income Tax proceeded thus : "Under terms of this service the assessee is entitled to a percentage of the annual profits earned by the Estate subject to the assessees being in service of the Estate during that year. The commission was earned during a period in which the assessee was in residence and in service in India."

(3.) What we are concerned with in the sum of money which was paid to the assessee while he was in England in the year 1934 which he had earned and which was payable to him on the basis of the profits made by the company for the accounting period January 1 to December 31, 1932. This matter has come before us in a rather unusual way because, originally it was never intended by the assessee that any question should come before a Court at all. The local Income Tax Officer made an assessment against Mr. Every on the September 20, 1935, and that was for the year 1935-36 on the basis of income received by the assessee during the previous year 1934-35. The assessment was for a sum of Rs. 7,702 made up follows :- Salary Rs. 4,400. Commission Rs. 2,902. Other sources Rs. 400. Total Rs. 7,702.