The Judgment of the Court was delivered by

Pradyot Kumar Banerjee, J.:— This rule is directed against the order passed by the Additional Commissioner of Income-tax, West Bengal, rejecting the application made under section 264 of the Income-tax Act, 1961. The petitioner No. 1 is a company incorporated under the English Companies Act in London with its registered office at Copyright House, 33, Margaret Street, Cavendish Square, in the County of London, England. The petitioner No. 1 is a non-profit making body and renders public service. The petitioner No. 2 is a private limited company incorporated under the Companies Act having its office at 26, Chowringhee Road, Calcutta. The petitioner No. 2 was appointed by the society as its true and lawful attorney. By virtue of power of attorney granted by the said society to petitioner No. 2, the Natsin India Pvt. Ltd., the latter company are agents in India for the Performing Right Society and has the power to commence, prosecute, etc. The petitioner No. 1, the Performing Right Society, is an association of composers, authors and publishers of copyright musical works established to grant permission for the public performance and in accordance with more recent copyright legislation, broadcasting and diffusion by relay services of copyright music, to collect royalties for the issue of licences granting this permission, to distribute the royalties to the members of the society, namely, the composers, authors, music publishers and other persons having an interest in the copyright. All royalties collected and all receipts from other sources are distributed among the composers, authors and publishers concerned, in proportion to the respective extent to which their works are publicly performed and/or broadcast. No expenses are deducted from the royalties beyond the bare pro rata cost of administration. The petitioner No. 1 entered into an agreement with the All India Radio in 1953, which provides that the licensee shall send to the society at its registered office, lists of all musical works broadcast in each week during the term of the licence from each of the licensee's main (Delhi, Bombay, Calcutta and Madras) stations and the external services, such lists to indicate: (i) the name and location of the said stations; (ii) the name and location of any broadcasting station or other place from which the performances are relayed elsewhere other than the licensee's own studios; (iii) the date and the time of the broadcasts; (iv) the title of each work; (v) the names of the respective composers, authors, arrangers and publishers and also (where gramophone records are used) the name of the manufacturer and identification number of each record, together with such further details as will enable the society to identify the work for the purpose of distribution of fees, such lists to be certified by the licensee as correct. It was also agreed that the licensee will pay at the rate of £2 (two pounds) per hour of broadcasting western music from each of the licensee's main and external service stations and such annual payment must be paid by the All India Radio to the society in London. The petitioner filed an income-tax return before the local Income-tax Officer at Madras. The said officer later on issued notice under section 34(1) of the Income-tax Act on the ground that in the statements filed at the time of original assessments, the Indian broadcasting fees had not been included in the income. The petitioner preferred an application under section 264 of the Income-tax Act before the Commissioner of Income-tax, West Bengal, and specifically took the point which is relevant for the purpose that the business is carried on by the All India Radio and not by the society in India and that the All India Radio made the payment to the petitioner No. 1 in London as per the terms of the agreement and as such the royalties received by the petitioner No. 1 in London cannot be said to have been received in India and, therefore, this income is not taxable under the Income-tax Act. The Additional Commissioner of Income-tax did not accept the assessee's plea that this is not taxable income. The next point urged is that the assessee received all the payments outside India and as such it cannot be taxed in India. The Additional Commissioner of Income-tax, however, did not allow to raise this point at this stage and dismissed the petition. It is, however, admitted in the facts of the present case that for the performance of broadcasting in India by the All India Radio, the members will be paid by the All India Radio and the payment will be assessed on the basis of broadcasting of western music to which the petitioner No. 1 has a right to get the royalties.

2. Therefore, the question is whether such royalty is assessable as income in India.

3. For the purpose of this case sections 5 and 9 of the Income-tax Act will be relevant and which run as follows:

“5. Scope of total income.—(1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which—

(a) is received or is deemed to be received in India in such year by or on behalf of such person; or

(b) accrues or arises or is deemed to accrue or arise to him in India during such year; or

(c) accrues or arises to him outside India during such year:

Provided that, in the case of a person not ordinarily resident in India within the meaning of sub-section (6) of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India.

(2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which—

(a) is received or is deemed to be received in India in such year by or on behalf of such person; or

(b) accrues or arises or is deemed to accrue or arise to him in India during such year.

Explanation 1.—Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance-sheet prepared in India.

Explanation 2.—For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India.”

“9. Income deemed to accrue or arise in India.—(1) The following incomes shall be deemed to accrue or arise in India—

(i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through or from any money lent at interest and brought into India in cash or in kind or through the transfer of a capital asset situate in India;

Explanation.—For the purposes of this clause—

(a) in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India;

(b) in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export;

(ii) income which falls under the head ‘Salaries’ if it is earned in India;

(iii) income chargeable under the head ‘Salaries’ payable by the Government to a citizen of India for service outside India;

(iv) a dividend paid by an Indian company outside India.

(2) Notwithstanding anything contained in sub-section (1), any pension payable outside India to a person residing permanently outside India shall not be deemed to accrue or arise in India, if the pension is payable to a person referred to in article 314 of the Constitution or to a person who, having been appointed before the 15th day of August, 1947, to be a judge of the Federal Court or of a High Court within the meaning of the Government of India Act, 1935, continues to serve on or after the commencement of the Constitution as a judge in India.”

4. Under section 5(2) it has been provided that the total income of any previous year of a person who is a non-resident includes all income from whatever source derived. Admittedly, the petitioner No. 1 is a non-resident. Section 5(1)(a)(b) and (2)(b) provides for the scope of total income which may from whatever source be derived and which accrues or arises or is deemed to accrue or arise to him in India during such year. Under section 9(1) of the Act it has been provided that all incomes accruing or arising from any source or income in India shall be deemed to accrue or arise in India. Admittedly, in this case the source of income is broadcasting by the All India Radio of western music for which the petitioner No. 1 has a right to receive royalty from the All India Radio in London.

5. Mr. Dutta contended that as the royalty was received in London it is not assessable by the income-tax authority in India, while Mr. Balai Pal on behalf of the respondent contended that the emphasis is not on the source upon which income-tax is to be assessed but it is necessary to see where the income accrues and, therefore, the income is taxable under the Income-tax Act. In my opinion, Mr. Pal is right in his contention and the contention raised is also supported by the judgment of the Privy Council in Rhodesia Metals Ltd. v. Commissioner of Taxes [1941] 9 I.T.R Supp. 45 P.C.. At page 52, the Judicial. Committee observed that “source” means not a legal concept but which a practical man would regard as a real source of income. The case, Rhodesia Metals Ltd. v. Commissioner of Taxes, was a case where the assessee was assessed in London though the income accrued in Rhodesia and the Judicial Committee held that the company is assessable for income which accrued in Rhodesia. This view is supported by the Supreme Court in Commissioner Of Income Tax, Madhya Pradesh v. Lady Kanchanbai [1970] 77 I.T.R 123, 126 S.C.. In paragraph 6 of the said judgment the Supreme Court stated as follows:

“It is necessary to note that section 2(11)(i)(a) does not refer to the income of the assessee generally but to his ‘separate sources of income, profits and gains’. Hence, it is possible for an assessee to have a different ‘previous year’ for each ‘separate source of income, profits and gains’ as held by the Madras High Court in Commissioner of Income-tax v. Savumiamurthy. In Rhodesia Metals Ltd. v. Commissioner of Taxes, the Judicial Committee observed that ‘source’ means not a legal concept but which a practical man would regard as a real source of income. There is hardly any room for doubt—nor was it contended otherwise—that the business of the assessee in Madhya Bharat constituted a separate source or sources. Hence, all that we have to see is whether the income accruing from those businesses had ‘once been assessed’ under the Act.”

6. Mr. Dutta, however, contended that the circular given by the Central Board of Revenue on 23rd July, 1969, applies to the facts of the present case. In my opinion, in view of the facts, there cannot be any dispute about the source of income and the circular has no application in the facts of the present case.

7. In the circumstances, this rule must fail and is hereby discharged.

8. There will be no order as to costs.