Chagla, C.J:—
A rather unusual case arises for our consideration on this reference. The assessee had at the material date, which is April 3, 1947, a sum of Rs. 1,00,000 deposited with the Mahalaxmi Silk Mills Ltd., Bhavnagar. The joint account was in the name of the assessee and his brother and it is established that the assessee and his brother were the owners of this amount. The assessee and his brother purported to lend this sum of Rs. 1,00,000 to one Harkison Ratilal and Dilipkumar Trikamlal who executed promissory notes in their favour. On this very day, i.e April 3, 1947, when the promissory note was executed by Harkison Ratilal and Dilipkumar Trikamlal, in the books of account of the Mahalaxmi Silk Mills Ltd., Bhavnagar, the sum of Rs. 1,00,000 was debited to the assessee and his brother and on the same day the New Mahalaxmi Silk Mills Ltd. in Bombay credited this sum of Rs. 1,00,000 in the name of Harkison Ratilal and Dilipkumar Trikamlal. Therefore in appearance the transaction was this that the assessee and his brother lent and advanced the sum of Rs. 1,00,000 to Harkison Ratilal and Dilipkumar Trikamlal from the moneys which they had in Bhavnagar and Harkison Ratilal and Dilipkumar Trikamlal in their turn advanced this money to the New Mahalaxmi Silk Mills Ltd., Bombay. The Tribunal has found, and that finding cannot be disputed before us, that Harkison Ratilal and Dilipkumar Trikamlal were the benamidars of the assessee and his brother. Therefore in understanding and appreciating the true nature of this transaction we must eliminate Harkison Ratilal and Dilipkumar Trikamlal. Therefore, in substance, the transaction was this that the assessee and his brother asked the Mahalaxmi Silk Mills Ltd., Bhavnagar, to transfer the sum of Rs. 1,00,000 which stood to their credit to the account of the New Mahalaxmi Silk Mills Ltd., Bombay. There is an affidavit on the record which has been accepted that this sum of Rs. 1,00,000 was sent by the Bhavnagar Mills to the Bombay Mills by a cheque drawn by the Bhavnagar Mills in favour of the Bombay Mills. On these facts the question that arises is whether the assessee has become liable to pay tax on his half share of Rs. 50,000.
Now, the taxing authorities have purported to tax the assessee contending that his case fell under s. 4(1)(b)(iii) of the Income Tax Act. That section provides that if a person is resident in the taxable territories and income having accrued or arisen to him without the taxable territories before the beginning of such year and after the 1st day of April, 1933, are brought into or received in the taxable territories by him during such year, the same is included in his income. The scheme of s. 4 has been often considered and in this connection we must look at s. 4(1)(a) and 4(1)(b)(iii). Section 4(1)(a) subjects to tax moneys actually received or deemed to be received in the previous year either by the assessee or on behalf of the assessee. Cl. (iii) of s. 4(1)(b) subjects to tax income which has accrued in the past years and which has been accumulated in the Indian States and which is remitted within the taxable territories in the year of account. Therefore cl. (iii) subjects to tax income on the remittance basis. Although it may have accrued or arisen in the past, the liability to tax is not on the ground that the income has accrued or arisen to the assessee, but that the assessee has brought it or received it into the taxable territories.
In this connection we must also look at s. 14(2)(c). Section 14 deals with exemptions and one of the exemptions is in respect of any income, profits or gains accruing or arising to him within any B State, unless such income, profits or gains are received or deemed to be received in or are brought into taxable territories in the previous year by or on behalf of the assessee, or are assessable under s. 12B or s. 42. Therefore, under this exemption, income which accrues or arises in a B State or in an Indian State, as called before merger, is exempt unless this very income is brought into the taxable territories by the assessee or on his behalf. One significant and striking feature of s. 4(1)(a) and 4(1)(b)(iii) and s. 14(2)(c) will become immediately noticeable. In the case of income which is received and becomes taxable under s. 4(1)(a) it is not necessary that it should be received by the assessee himself. It may be received on his behalf and even so it would be taxable. But when we turn to s. 4(1)(b)(iii), the Legislature has advisedly omitted the expression “on behalf of such person” and has made income which one might describe as accumulated income subject to tax only when it is brought into or received in the taxable territories by the assessee himself.
Mr. Joshi has contended that the bringing into or receiving in the taxable territories need not be actual bringing into or receiving in the taxable territories. It may be indirect or it may be constructive. We would have been very much inclined to accept that construction but for the fact that the Legislature, with the knowledge that it has made indirect or constructive receipt taxable under s. 4(1)(a), has departed from the language used in cl. (a) and has deliberately made only direct bringing into or receiving by the assessee taxable when it comes to the income which falls under s. 4(1)(b)(iii). It is again in s. 14(2)(c) when the Legislature is dealing with income which has accrued in an Indian State and which has been brought into taxable territories in the same year, it states that the receipt need not be direct but it can be constructive or indirect. Therefore, reading s. 4 and s. 14(2)(c), the scheme seems to be that if income has accrued or arisen in a B State if the assessee brings that accumulated income into the taxable territories in the very year when it accrues or arises, then that income becomes liable to tax even though it may have been received in the taxable territories indirectly or constructively. But if the assessee does not choose to send the money into taxable territories but accumulates it in the B State, then a certain concession has been made by the Legislature and the concession is that unless he directly receives that income in subsequent years or directly brings it into the taxable territories in subsequent years, the income is not liable to tax.
Now, let us consider the transaction once again from this point of view. What exactly happened on April 3, 1947? Can it be said that the assessee received the sum of Rs. 50,000 in the taxable territories on that day? A distinction must be made for the purposes of this section between disposal and receipt. What the Legislature has taxed is not the disposal by the assessee of his accumulated income in the B State. What the Legislature wanted to tax was the receipt of the accumulated income by the assessee. All that the assessee has done with regard to his income which was accumulated in Bhavnagar is to dispose of it by directing his debtor to pay this amount not to himself but to a third party, viz. the Bombay Mills. We may look at this transaction from a different point of view. The assessee had a sum of Rs. 50,000 lying as deposit with the Bhavnagar Mills. Instead of that amount lying as deposit with the Bhavnagar Mills on April 3, 1947, it lay as deposit with the Bombay Mills. Therefore, instead of the deposit being in Bhavnagar, the deposit was in Bombay. But again it cannot be said that the assessee has received this amount or has brought it into the taxable territories. We may again look at it from a third point of view. Before April 3, 1947, the assessee's debtor was the Bhavnagar Mills; on April 3, 1947, his debtor became the Bombay Mills. So the result of the transtction was that one debtor was substituted for another, or to use different language, the situs of the debt was transferred from Bhavnagar to Bombay. It is erroneous to suggest, as Mr. Joshi has suggested, that the assessee had money in Bombay and could do what he liked with that money. That is not the correct reading of the transaction. He had an actionable claim against the Bombay Mills, he could sue the Bombay Mills for the debt, but the Bombay Mills were merely the debtor of the assessee. The money which was given to the Bombay Mills could be used as the Bombay Mills liked. The assessee had no right of disposal over that money. He had merely a right to a debt which at the highest he could have transferred. But it could not be said in the language of s. 4(1)(b)(iii) that the assessee had either received or brought the money into the taxable territory.
Mr. Joshi says that this construction may lead to serious difficulties. We do not see why that should be so. Take this very case. As soon as the Bombay Mills repaid this loan or part of it to the assessee, tax would attach to that amount. But if an assessee chose to make a gift of his accumulated money in the Indian State and he did not want to have the disposal of it, it may be that the Legislature took the view that there should be a distinction between the accumulated income in an Indian State which was brought into the taxable ??? in the year of account and the accumulated income which was brought into the taxable territory in subsequent years. The Legislature, very possibly, did not want to tax accumulated income which was not subsequently used by the assessee, but which he disposed of it in favour of others who had the right of disposal over that amount. But whatever that may be, in a taxing statute when the Legislature has used language which in a particular case subjects the assessee ??? tax and in another case does not subject him to tax, we cannot possibly construe the section against the assessee and ??? in favour of the Department that the different language used by the Legislature must mean the same thing although ??? and patently they mean entirely different things. It may be pointed out that the finding of the Tribunal itself in the order which it passed is that there have been remittance from Bhavnagar to Bombay on behalf of the assessee. Now, if in s. 4(1)(b)(ii) the language used by the Legislature had been that the receipt may be not only by the assessee himself directly but on his behalf, undoubtedly there would have been no difficulty in this case. But the Tribunal itself realised that the receipt was not directly by the assessee himself but at best on his behalf by the Bombay Mills, and if the receipt was not by the assessee but on his behalf, under s. 4(1)(b)(iii) the amount received is not subject to tax.
We will therefore answer the question submitted to us in the negative.
Commissioner to pay the costs.
Attorneys for applicant: Ardeshir Hormusji, Dinshaw and Co.
Attorneys for respondent: N.K Petigara.
Answer accordingly.
P.M.P