Mrs. Badima Bivi vs Commissioner of Income Tax, Madras

Rajagopalan, J.—There was no dispute about the facts with reference to which we have to answer the question referred u/s 66(1) of the Income Tax Act:

"Whether the sum of Rs. 25,000 or any part thereof is assessable in the year of account to Income Tax u/s 4(2) of the Income Tax Act, 1922."

In the year of account ending with 31-3-1948, the assessee Mrs. Badima Bivi received from her husband who was resident abroad three sums of money totaling Rs. 25,000. That sum was included in her assessable income under the provisions of Section 4(2) of the Act in the assessment year 1948-49. The assessee''s husband remitted to the credit of his own account with the Tanjore Permanent Bank Ltd., Tanjore, a total sum of Rs. 19,677 in the year of account ending with 31-3-1947 and a further sum of Rs. 3115 in the year 1947-18. It was out of the amount lying to his credit in that Bank that this sum of Rs. 25,000 was paid to the assesses during 1947-48 by three cheques drawn in the name of the assessee''s brother. That the assessee received the amount of Rs. 25,000 was never in dispute.

Whether the requirements of Section 4(2) of the Act are satisfied is the question. Section 4(2) runs:

"For the purposes of Sub-section (1) where a husband is not resident in the taxable territories, remittances received by his wife resident in the taxable territories out of any part of his income which is not included in his total income shall be deemed to be income accruing in the taxable territories to the wife."

The contention of the learned counsel for the assessee was, that unless the remittances by the non-resident husband and the receipt by the wife within the taxable territories were both in the "previous year" in relation to the assessment year. --in this case the previous year was 1947-48--the amounts would not constitute remittances received by the wife within the meaning of Section 4(2). He pointed out that only a sum of Rs. 3115 satisfied that test, and he urged that only that sum could possibly have been included in the assessee''s income, liable u/s 4(2) of the Act to be assessed to tax in 1948-49. We are clearly of opinion that the plain language of Section 4(2) negatives any such contention.

Section 4(2) opens with the words "for the purposes of Sub-section (1)". The legal fiction enacted by Section 4(2) is for the purposes of Sub-section (1). The purpose of Sub-section (1) is to compute the total Income of a person in the previous year, the previous year in relation to the year of assessment. Sub-section (1) of Section 4 specifies the various items that should be included in computing that Income, the income of the assessee in the previous year. Sub-section (2) of Section 4 in effect adds one more item to that list. Accrual and receipt on both included in Section 4(1). We can leave out of further account the accrual of income in the previous year, because that is not the basis for applying Section 4(2). It is only the receipt by the assessee in the previous year of income, which by the legal fiction enacted by Section 4(2) becomes the income of the assessee that furnishes the basis for liability to tax.

Before any amount is liable to be taxed In the hands of an assessee u/s 4(2) of the Act, what has to be established is (I)''the husband of the assessee Is not resident which she is resident in the taxable territories; (2) the husband should have remitted the sum in question to his wife; the assessee; (3) the wife should have received those sums within the taxable territories and in the year in question, that is, the "previous year" and (4) the remittances should have been out of the Income of the husband which was never included in his total income.

At what point of time the remittance is effected may not be material. It is the receipt of money within the taxable territories that subjects the assessee to tax on the basis of the legal fiction enacted by Section 4(2). On the basis of the receipt by the assessee in her year of account she becomes liable to pay tax in the appropriate assessment year. As we said Section 4(2) enacts a legal fiction for the purposes of Sub-section 4(1), and that purpose is to compute the Income of the assessee for the purposes or assessment in the relevant assessment year. The basis of that liability u/s 4(2) read with Section 4(1) is receipt, receipt in the previous year, previous in relation to the assessment year. At what point of time the husband earned his income abroad, or at what point of time he remitted any portion of that Income to his wife, who was a resident in the taxable territories, are both Irrelevant in deciding whether the amount received by the wife from her non-resident husband is assessable to tax, as what is deemed to be her Income. We see no warrant for reading in Section 4(2) words which are not there "remittances in the previous year", which in effect is what the learned counsel for the assessee wants.

Our answer to the question referred to us is that the entire sum of Rs. 25,000 was assessable to tax in the assessment year 1948-49. Since the assessee has failed she will pay the costs of this reference. Counsel''s fee Rs. 250.