Commissioner of Income Tax vs P.L. Rangiah Chetty and Sons

Abdul Hadi, J.—(17-1-1997) - All these tax cases preferred by the revenue u/s 256(1) of the income tax Act, 1961 (''the Act''), involve,

inter alia, a common question of law in relation to the assessment years 1977-78 and 1978-79. In T.C. Nos. 157 and 158 of 1984, the assessee-

respondent is the registered firm, P.L. Rangiah Chetty & Sons, Coimbatore, in T.C. Nos. 159 and 160 of 1984, the assessee-respondent is the

registered firm Vijaya Textiles, Coimbatore, and in T.C. Nos. 366 and 367 of 1984, the assessee-respondent is the registered firm, Srinivas &

Co., Coimbatore. While T.C. Nos. 157, 159 and 366 of 1984 relate to the assessment year 1977-78, the other tax cases relate to the assessment

year 1978-79. In all the abovesaid three firms, one non-resident partner is one P.R. Srinivasan. He has, apart from his share of income from the

three different firms, other incomes also from other sources. The abovesaid common question has arisen in the context of section 182(3) of the

Act, the said section runs as follows:

...When any of the partners of a registered firm is a non-resident, the tax on his share in the income of the firm shall be assessed on the firm at the

rate or rates which would be applicable if it were assessed on him personally, and the tax so assessed shall be paid by the firm. [Emphasis

supplied]

In the light of the abovesaid provision, the abovesaid firms were assessed to tax in the above referred to two assessment years on the respective

shares of income of the said partner from the three firms; and the abovesaid common question relates only to the rate of tax applicable to the

respective shares of income from the three different firms. In other words, whether the said rate in each case is the rate applicable to the respective

share of income of the said partner, or, the rate applicable to the entire ''total income'' of the said partner, that is, his income from all the three firms

and his other incomes from other sources, computed in accordance with the Act.

In the above context only, the abovesaid common question of law referred to us arises and it runs as follows:

Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 182(3) of the income tax Act, 1961, the

Appellate Tribunal was right in holding that for purposes of determining the tax payable by the firm in respect of the share income of the non-

resident partner the rate of tax to be adopted is the rate applicable to the share income and not the rate applicable to the total income of the non-

resident ?

The above question is actually question No. 1 in T.C. Nos. 157 to 160 of 1984 and the sole question in T.C. Nos. 366 and 367 of 1984.

There is also another common question of law in T.C. Nos. 157 to 160 of 1984 alone, which is the second common question in the above referred

to tax cases, which runs as follows:

Whether, the Tribunal is right in law in holding that the appeal to the Appellate Assistant Commissioner was competent u/s 246(c) of the income

tax Act, 1961 ?

This second common question can be disposed of immediately, since the learned counsel for the revenue fairly represents that the Tribunal is

right in law in coming to the conclusion it reached and that the said question should be answered in the affirmative and against the revenue and,

accordingly, we answer the same. The abovesaid action of the learned counsel for the revenue is also understandable since if the abovesaid appeal

to the AAC was not competent under the abovesaid section 246(c), this reference itself would become incompetent. Further, we are also in

agreement with the reasoning of the Tribunal in this regard, which points out that the assessment is actually u/s 143(3) of the Act, though read with

section 182(3) of the Act and since section 246(c) of the Act provides for appeal against the assessment u/s 143(3), the appeal to the AAC would

lie.

Then, coming to the above referred to first common question of law, the learned counsel for the respondent-assessees submits that the said

question is covered in favour of the assessee by virtue of the judgment dated 22-8-1995, of the Division Bench of this Court in Commissioner of

Income Tax Vs. Srinivas and Co., in relation to the assessment of one of the abovesaid firms itself, viz., Srinivas & Co., regarding the same, non-

resident partner''s share of income from the said firm in an earlier assessment year. No doubt, in the said decision also, the same common question

of law was involved in relation to section 182(3) of the Act and the said Division Bench held, on interpreting the crucial words in the said sub-

section ''if it were assessed on him personally'', that for the purpose of ascertaining the rate of tax payable by the firm (Srinivas and Co. in the said

case), in respect of the share of income of the abovesaid non-resident partner from the said firm, his share income alone should be considered and

his ''total income'' should not be considered.

But, with respect, we are unable to agree with the view taken by the said Division Bench in the said decision in interpreting section 182(3). We

are, therefore, of the view that the matter has to be dealt with by a Full Bench. We give below our reasons.

In our view, a plain reading of the abovesaid provision, section 182(3), would lead to the conclusion that the abovesaid share of income of the

partner should be subjected to tax, only at the rates applicable to the ''total income'' of the partner and not at the rate applicable to his abovesaid

share only. No doubt, the crucial words ''if it were assessed on him personally'' are not preceded by the word ''as''. But the said crucial words

would only mean ''as if it were assessed on him personally''. In Municipal Corporation, Indore Vs. Rai Bahadur Seth Hiralal and Others, also this

view has been taken in relation to a similar expression in section 79(2) of the M.B. Municipalities Act, 1954. The relevant observation therein is

that the word ''if'' appearing in sub-section (2) of section 79 is obviously a mistake and must be read as ''as if'' because the word ''if'' standing by

itself makes no sense at all. Secondly, we may also point out that in Words and Phrases, Volume 4, at page 303, it is also mentioned that the

words ''as if'', mean ''in the same manner and to the same extent''. Therefore, if the provisions contained in section 182(3) of the Act were not there

in the statute, the assessment on the abovesaid partner''s share of income from each of the said three firms would be only on the partner''s ''total

income'', comprising his said shares of income from the abovesaid three firms and his other sources of income also. When assessment is so made,

obviously the rate applicable to his abovesaid share of income from each of the abovesaid firm would only be the average rate applicable on his

abovesaid ''total income''. This average rate, on the present facts, would be higher than the rate applicable to the respective shares of income from

the different firms alone. But, it must also be pointed out that the said average rate may also be lower if his income from other sources is actually a

minus figure and it could be set off against the respective shares of income from the three different firms and the net resultant income is lower than

his share of income from the firm in each case. Anyway the object of introducing section 182(3) is mainly to see that the tax due on the non-

resident partner in respect of his share of income from the firm is recovered from the firm itself, more easily than seeking to recover from the

partner himself. But, in achieving that object, by introducing section 182(3), the Legislature could not be taken to have intended to effect a change

(increase or decrease) in the quantum of tax recoverable, simply because the assessment was partly made on the firm itself in relation to the said

share of income of the partner from the firm, and partly on him in relation to his other incomes. On the other hand, the fact that it should have

intended otherwise, viz., not to effect any such change, is made clear by using the abovesaid expression ''if it were assessed on him personally''.

Now, adverting to the reasoning of the abovesaid Division Bench in Srinivas & Co.''s case (supra), we find that the said Division Bench, for

coming to the conclusion it reached, relied on GNANAM AND SONS Vs. COMMISSIONER OF Income Tax, MADRAS., . But, with

respect, we state that this reasoning while placing reliance on Gnanam & Sons'' case (supra), is not correct and requires reconsideration for the

following reasons:

Gnanam & Sons'' case (supra) arose under the Indian income tax Act, 1922. There, the ITO assessed to income tax a registered firm under the

second proviso to section 23(5)(a) of the Indian income tax Act, 1922, in regard to the share of a non-resident partner for the profits of his firm,

calculating the tax payable by applying section 17 of the said Act at the maximum rate. It was held in that context by the above referred to the

Division Bench that the assessment was properly made on the firm and the levy of tax at the maximum rate u/s 17 was correct.

The second proviso to the abovesaid section 23(5)(a) of the 1922 Act is similar to section 182(3) of the present Act. The said second proviso ran

as follows:

Provided further that when any of such partners is a person not resident in the taxable territories, his share of the income, profits and gains of the

firm shall be assessed on the firm at the rates which would be applicable if it were assessed on him personally, and the sum so determined as

payable shall be paid by the firm

Thus, in using the expression ''if it were assessed on him personally'', the abovesaid second proviso is identically the same as the present section

182(3). But the abovesaid conclusion is reached in Gnanam & Sons'' case (supra) only after reading the said section 23(5) proviso together with

the other relevant provision, viz., section 17, which provides thus:

Determination of tax payable in certain special cases.-- (1) Where a person is not resident in the taxable territories and is not a company, the tax,

including super tax, payable by him or on his behalf on his total income shall be an amount equal to--

(a) the income tax which would be payable on his total income at the maximum rate, plus

(b) either the super tax which would be payable on his total income. . . . [Emphasis supplied]

To the abovesaid section 17(1), there were two provisos, and, the effect of not making a declaration in relation to the option exercisable by the

non-resident partner, stipulated under the first of the abovesaid provisos, is that the non-resident partner would be liable to income tax at the

maximum rate on the whole of his total income itself, without the benefit of the slab system on the initial margin of exemption. The case before the

Division Bench in Gnanam & Sons'' case (supra) was only such a case, where the said declaration was not made. That is why the said decision

observes, thus:

. . . It is not necessary to examine whether such an option was properly exercised or not, because that matter has not been raised in this reference,

. . . But the question for consideration in this connection is whether section 17(1)(a) was properly applied. [Emphasis supplied] (p. 489)

The said question was answered by saying that the rate that would be applicable to the non-resident partner if his share were assessed on him

personally, is the rate that was laid down in section 17 of the Act. Thus, in the above situation, since the rate applicable to the non-resident partner

if his share were assessed on him personally, was the maximum rate that was laid down in the abovesaid section 17, that itself was adopted in

making the assessment on the firm in respect of the said share. Thus, in the light of the above referred to provisions of the old Act, the above

referred to decision was rendered in Gnanam & Sons'' case (supra).

But, it cannot be said that the said Division Bench which decided in Gnanam & Sons'' case (supra), gave any different meaning to the term ''if it

were assessed on him personally'' appearing in the second proviso to section 23(5) of the 1922 Act. In fact, it should be stated that Gnanam &

Sons'' case (supra) actually supports the abovesaid view taken by us. On the facts in Gnanam & Sons'' case (supra), as already stated, only the

abovesaid maximum rate of tax was applicable to the partner not resident in the taxable territory, on his total income. Accordingly, the said

maximum rate alone was applied even on the abovesaid share of income. In the present case also, in the light of the provisions under the 1961 Act,

the average rate of tax applicable on the total income of the non-resident partner (which may be different from the rate applicable to his share of

income from the firm alone), is alone applicable while assessing the firm on his said share. When such is the case, even on the ratio of Gnanam &

Sons'' case (supra), it should be stated that in respect of his share of income from a firm, the tax on the firm shall be only in the same manner as it

would be levied if the assessment was made on the non-resident partner himself.

No doubt, it was also held in Gnanam & Sons'' case (supra) that on the language of the abovesaid proviso to section 23(5) of the 1922 Act,

there did not appear to be any ground for computing the share income of such non-resident partner with reference to section 4(1) of the 1922 Act

and for excluding the income derived without the taxable territories by the operation of section 4(1)(c) of the 1922 Act. But, it is to be noted that

just as in the abovesaid proviso to section 23(5) of the old Act, here also, u/s 182(3) of the Act, what is charged to tax in the hands of the firm is

only the share of income of the non-resident partner from the firm, but not his entire ''total income'' computed in accordance with the provisions of

the Act. Even though the old section 4(1)(c) provides for exclusion of the income which accrues outside the taxable territories, it was held in

Gnanam & Sons'' case (supra), that the said exclusion would not come into the picture at all since what was charged to tax under the said proviso

to section 23(5) was only the partner''s share of income from the firm and not his total income computed u/s 4(1) of the old Act.

But this does not mean that even for the determination of the rate of tax applicable on the said share, the partner''s share of income itself should be

treated as his total income. On this aspect, both the abovesaid proviso to section 23(5) of the old Act and the present section 182(3) of the new

Act have provided the same rule, viz., that the said rate applicable is as if the tax on the said share income were assessed on the partner personally.

That is why in Gnanam & Sons'' case (supra), the above referred to maximum rate prescribed u/s 17 of the old Act was applied and in the present

case also, the average rate applicable on the said partner''s total income should necessarily be applied while assessing the firm in respect of the said

share income. It must also be mentioned that though there are two assessments in relation to the non-resident partner, one, on his firm in relation to

his share of income from the firm, and another, on himself in relation to his other sources of income comprised in his total income, both the

assessments must be done as if there were one assessment on the partner himself directly on his entire ''total income''. Here, it must also be pointed

out that the fundamental principle is that the income tax is only one tax levied on the sum total of the income and not a collection of distinct taxes

levied separately on each head or item of income - vide United Commercial Bank Ltd. Vs. Commissioner of Income Tax, West Bengal, and B. M.

KAMDAR, IN RE., The net result is, in our view, in Srinivas & Co.''s case (supra) and Gnanam & Sons'' case (supra) has been applied wrongly.

Further, one other observation in Srinivas & Co.''s case (supra) at pages 640 and 642 is as follows :

The sub-section [section 182(3)] does not say if it were assessed on him personally on his total income. . . . In the absence of the words ''total

income'' in section 182(3), we are not inclined to accept the argument advanced by the learned standing counsel that the rate applicable to the non-

resident partner would be the rate applicable on his total income including other income, if any. . . .

[Emphasis supplied]

But, in our view, though the term ''on his total income'' is absent, the said term is implied in the context. In other words, the crucial words ''if it were

assessed on him personally'' means ''if the tax on his share in the income of the firm were assessed on him personally on his total income.''

We may also point out that in interpreting section 161(1) of the Act, which deals with liability of a representative-assessee and which also

provides that the tax as regards the income in respect of which he is a representative-assessee shall be levied upon him in the like manner and to

the same extent as it would be levied upon the person represented by him, the Supreme Court in The Commissioner of Wealth Tax, Andhra

Pradesh, Hyderabad Vs. Trustees of H.E.H. Nizam''s Family Hyderabad, has also held, inter alia, that the amount of tax payable by the trustee-

representative-assessee would be the same as that payable by each beneficiary therein in respect of his beneficial interest if he was assessed

directly. No doubt, the earlier part of section 161(1) of the Act makes a rather procedural provision that the abovesaid representative-assessee

shall be subject to the same duties, responsibilities and liabilities as if the income, in respect of which he is a representative-assessee, were the

income received by or accruing to or in favour of him (representative-assessee) beneficially.

For all the abovesaid reasons, we are of the view that the above referred Srinivas & Co.''s case (supra) requires reconsideration of a Full Bench of

this Court. Therefore, the registry is directed to place the matter (only in relation to the first common question in T.C. Nos. 157 to 160 of 1984,

which is also the sole question in T.C. Nos. 366 and 367 of 1984), before the Chief Justice for appropriate orders.

No costs.

Balasubramanian, J J.

The above tax cases are posted before the Full Bench as a Division Bench of this Court felt that the earlier decision of this Court in the case of

Srinivas & Co. (supra) requires reconsideration by a Full Bench of this Court.

The facts are not in dispute. In all the tax cases, the assessees are firms and in the three firms, one of the partners in the assessee-firms was a

non-resident and apart from the share income from the three firms, the said non-resident partner had other income also from other sources. The

firms were assessed to tax for the two assessment years in question on the share income of the partner in the three firms under the provisions of

section 182(3), and the said sub-section reads as under :

(3) When any of the partners of a registered firm is a non-resident, the tax on his share in the income of the firm shall be assessed on the firm at the

rate or rates which would be applicable if it were assessed on him personally, and the tax so assessed shall be paid by the firm ?

The question that arises is whether it is only the respective share income of the non-resident partner in the three firms that should be taken into

account for the purpose of determination of the rate of tax, or whether his share income should be assessed at the rate applicable on the entire total

income of the said partner, i.e., apart from his income from the three firms, to determine the rate of tax. The ITO held that it is on the total income

of the partner and his view was confirmed by the AAC but the Tribunal held otherwise. The revenue has challenged the order of the Tribunal in the

three tax case references. The Tribunal has referred the following common question of law for our consideration:

Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 182(3) of the income tax Act, 1961, the

Appellate Tribunal was right in holding that for purposes of determining the tax payable by the firm in respect of the share income of the non-

resident partner, the rate of tax to be adopted is the rate applicable to the share income and not the rate applicable to the total income of the non-

resident ?

There is also another common question of law in T.C. Nos. 157 to 160 of 1984, which is the second common question of law in the above

referred to tax cases, but that question was already answered against the revenue by the Division Bench by the judgment dated 17-1-1997 (see

page 721), when it referred the matter to the Full Bench and, hence, it is not necessary to express any opinion on the same.

The same question on the interpretation of section 182(3) of the Act of 1961, with reference to one of the firms (Srinivas & Co.) came up for

consideration before this Court in Srinivas & Co.''s case (supra) and this Court held that for the purpose of ascertaining the tax payable by the firm

under the provisions of sub-section (3) of section 182 of the Act, in respect of the share income of a non-resident partner, his share income alone

should be considered and tax determined accordingly and his other income from any other source should not be included for the purpose of

determining the tax payable by the firm. As already observed by us, another Bench of this Court found it difficult to agree with the view expressed

by the Division Bench in Srinivas & Co.''s case (supra) and, hence, the references are before us.

Mr. S.V. Subramaniam, the learned senior counsel appearing for the Department, submitted that under the provisions of section 182(3), the

entire total income of a non-resident should be taken into account. He laid emphasis on the words found in section 182(3), viz., ''if it were assessed

on him personally'' and submitted that under relevant provisions of the Indian income tax Act, 1922 (""the Act of 1922""), and also under the Act of

1961, though initially for some years, the maximum rate of tax was applied on the share income derived by the non-resident partner from a firm,

the system underwent some change and at present, during the relevant assessment years, the rate of tax is determined on the total income at a

progressive rate, and if the partner''s share income alone is assessed to tax in the hands of a partnership firm, it may not result in a proper

assessment of the share income as the tax would be assessed at a lower rate than the proper rate that would be applicable if the partner''s total

income is assessed and, therefore, he submitted that in the case of a non-resident partner, his entire total income would be taken into consideration

to determine the rate of tax. His submission was that the expression ''if it were assessed on him personally'' connotes that his entire total income

should be taken into account and the share income from the firm should be subjected to tax at the rate applicable to the total income derived by the

non-resident partner.

Mr. P.P.S. Janarthana Raja, the learned counsel for the assessee, on the other hand, submitted that the rate of tax applicable is the rate which

would be applicable to the share income derived by the partner from the firm as if it was his total income and under the scheme of the Act, the

provisions of the Act of 1961 do not indicate that the rate of tax should be determined taking into account the entire total income of the partner.

We have carefully considered the submissions of the learned counsel. Under the scheme of the Act of 1961, the assessment of total income of

the firm is first determined u/s 182. When a firm is a registered firm, the share income of each partner is included in his total income and the firm is

also assessed at a lower rate of tax. Sub-section (3) of section 182, inter alia, provides that where any of the partners is a non-resident, the tax on

his share income from the firm shall be assessed on the firm itself, and it is required to be assessed at the rate which would be applicable if it is

assessed on him personally and the tax so determined is required to be paid by the firm. We are of the opinion that the provisions contained in sub-

section (3) of section 182 provide for levy of tax with regard to the share income of a partner and it also prescribes the rate or rates which would

be applicable to the share income. The sub-section, in our opinion, does not contemplate that the entire total income of the partner should be

assessed to tax in the hands of the firm. As a matter of fact, a non-resident is separately assessed on his total income. The income tax Act, 1961, in

effect, provides for two separate assessments in the case of a non-resident partner; one on his total income and the other in respect of his share

income derived from the firm on the firm itself at the rate prescribed. The expression ''if it were assessed on him personally'' does not, in our

opinion, connote that his share income should be assessed at the rate applicable to his entire total income in the hands of the firm. If the intention of

the Legislature was otherwise, then, the Legislature would have used a different expression. The object of section 182(3) of the Act of 1961, is to

levy and collect tax on the share income derived by a non-resident partner from the firm and it is not expected that the ITO assessing the firm

should wait indefinitely for the completion of the individual assessment of the non-resident partner before he levies tax on the firm and collects the

same from the firm. If the ITO is expected to wait for the completion of the partner''s assessment, it will create another problem for him as the

share income of the non-resident would already have been assessed in his individual assessment and there is no need to resort to the provisions of

section 182(3), and proceed against the firm. Section 182(3) empowers the ITO, without waiting for the completion of the individual assessment of

a non-resident partner, to levy tax on the share income derived by the non-resident partner from the firm in the hands of the firm itself and at the

time of completion of assessment of the firm, he will have to focus his attention only to the share income of the non-resident partner derived from

the firm. The section, in our opinion, provides for assessment of a non-resident partner''s share income in a summary manner in the hands of the

firm itself. The non-resident partner may be a partner in several firms and he may derive share income from different firms and may also have

income from other sources throughout the world. If the ITO is expected to wait for collection of all the particulars regarding his entire income

throughout the world, it may lead to a situation that the share income of the non-resident partner in the firm may escape from the levy of tax.

Further, the firm is not expected to furnish the income particulars of the non-resident partner to the officer assessing the firm. Therefore, the

provisions of section 182(3), in our opinion, do not contemplate an elaborate procedure of demanding from the firm or from a non-resident partner

to submit the requisite particulars regarding his total income from all other sources and then complete assessment on the firm with reference to his

share income. We are of the view that the provisions of section 182(3) have been enacted to enable the Department to complete the assessment of

the share income of a non-resident partner in an expeditious manner so that the requisite amount of tax on the share income from the firm is

collected quickly from the firm and it does not escape from the net of taxation. The view taken by this Court in Srinivas & Co.''s case (supra) that

for the purpose of ascertaining tax payable by the firm in respect of share income of a non-resident partner his share income alone should be

considered and tax determined accordingly, in our opinion, is the correct statement of law and does not suffer from any infirmity.

A similar question on the interpretation of the provisions found in section 23(5)(a) of the Act of 1922, came up for consideration before this

Court in the case of Gnanam & Sons (supra) and a Bench of this Court has held that under the proviso to section 23(5)(a) of the Act of 1922,

which deals with assessment of a non-resident partner''s share in a registered firm, the total income of the non-resident partner does not come in

for assessment at all, and it is only his share income from the firm that is made liable for assessment, and the sum so determined as payable is made

payable by the firm. The above decision of the Court in Gnanam & Sons'' case (supra) was approved by the Supreme Court in the case of R.M.

Ramanathan Chettiar, etc. Vs. Commissioner of Income Tax, Madras, and the Supreme Court has held that a non-resident partner of a registered

firm is not entitled to exclude from his share income from the firm determined u/s 23(5) of the Act of 1922, i.e., income accruing or arising to the

firm without the taxable territories by the operation of section 4(1)(c) of the Act of 1922. In our opinion, the underlying principle laid down by the

Supreme Court in R.M. Ramanathan Chettiar''s case (supra) and by this Court in Gnanam & Sons'' case (supra), is that the share income of a non-

resident partner in a registered firm is alone the subject-matter of consideration in making the assessment of his share income on the firm under the

provisions of the Act and it is not open to the partner to exclude from the share income any other income on the ground that it is exempt or not

taxable in view of some other provisions of the Act. We are of the opinion that when there is no scope for exclusion of any amount from the share

income of a partner for assessment of the share income, there is also no scope for inclusion or addition to the share income of the non-resident

partner by the Department. There cannot be one view for exclusion and a different view for inclusion of certain amounts in the share income. In our

opinion, the emphasis laid down by the Supreme Court is that it is only the share income of the partner that should be the subject-matter of

consideration u/s 23(5)(a) of the Act of 1922 and neither more, nor less.

It is significant to notice that in Gnanam & Sons'' case (supra), this Court referred to a decision of the Privy Council in Seth Badridas Daga v.

CIT [1949] 17 ITR 209 and the Privy Council also considered section 23(5)(a) of the Act of 1922, and observed that it is only the share income

of a non-resident partner that should be assessed but the rate has to be determined on the basis of his share income as if it was assessed on him

personally and there is no scope to make any deduction from the share income in respect of any part of the partnership profits having arisen

outside British India. The Privy Council also pointed out the practical difficulties that may be encountered in determining the total income of the

partner and their Lordships felt that the question of determining what part of the income of the firm should be excluded would involve reading into

the section things which are not there, which would complicate its application and would lead to practical difficulties. The decision of the Privy

Council was also noticed with approval by the Supreme Court in R.M. Ramanathan Chettiar''s case (supra). Ever since the decision of the Privy

Council, the law laid down therein has been consistently followed and it is the share income of the non-resident partner that is the subject-matter of

consideration for assessment u/s 23(5)(a) of the Act of 1922 or u/s 182(3) of the Act of 1961. The submission of the learned senior counsel for

the Department that under the Act of 1922, the share income of a non-resident partner was assessed in the hands of the firm at a maximum rate

and it did not make any difference whether his other income was included or not is bereft of force as the Privy Council as well as this Court held

that on the interpretation of section 23(5)(a) of the Act of 1922, there is no scope for exclusion from the share income of any amount and the said

interpretation of section 182(3) of the Act of 1922 was independent of and de hors the applicability of the maximum rate of tax on the share

income. Therefore, the mere fact that the share income of a non-resident partner is now assessed at a progressive rate does not warrant any

different interpretation to be placed on the provisions contained in section 182(3) of the Act of 1961. Further, the decision of the Privy Council

was followed by this Court in Gnanam & Sons'' case (supra) and also by the Supreme Court, and the law laid down by the Privy Council has been

holding the field for more than five decades and we are of the opinion that there is no warrant or no need to upset the settled law well-settled by

the Privy Council, the Supreme Court and also by this Court. In our opinion, the principles laid down by those decisions would equally apply to the

interpretation of the provisions contained in section 182(3) of the Act of 1961 as well, and the provisions of section 182(3) of the Act of 1961, are

not in any way differently worded from section 23(5)(a) of the Act of 1922, and in fact they are in pari materia.

The learned senior counsel for the applicants also referred to the decision of the Supreme Court in the case of Municipal Corp.''s (supra). We are,

however, of the opinion that the aforesaid decision has no application to the facts of the case as in the said decision, the Supreme Court was

construing the word ''if'' found in section 79(2) of the Madhya Bharat Municipalities Act (1 of 1954), and held that the word ''if'' must be read as

''as if'', because the word ''if'' by itself makes no sense. In our opinion, the said decision has no application to the interpretation to be placed on

section 182(3) of the Act of 1961.

We, therefore, hold that on the interpretation of section 182(3) for the purpose of determination of tax payable by the firm in respect of the

share income derived by a non-resident partner, his share income alone should be considered and the tax determined accordingly and his income

from other sources would not come for consideration for the purpose of determination of the tax payable by the firm in respect of the share income

derived by a non-resident partner. Accordingly, we approve the decision in Srinivas & Co.''s case (supra). In the result, we answer the first

common question of law referred to us in Tax Cases Nos. 157 to 160 of 1984 and the sole common question in Tax Cases Nos. 366 and 367 of

1984, in the three tax cases in the affirmative and against the revenue. No costs.