The Commissioner of Income Tax vs A.R.P.S.P. Manickam Chettiar

In this reference the facts are shortly as follows: The assessee is the manager of an undivided Hindu family and, inter alia, owns a money-lending

business in Penang which is outside British India. This business had dealings in current account with M. RM. VL. Penang, the proprietor of which

was resident in British India. On the 13th August, 1931, it was found on a settlement of this account that there was a sum of $11,700 owing to the

assessee. In discharge of this amount, M. RM. VL. executed a promissory note in favour of the assessee. Later, the assessee obtained a decree

against the debtor in the Devakottah Sub-Court for the sum due on this promissory note. In the year of account this decree was satisfied by the

debtor selling to the assessee in British India jewels valued at Rs. 7,842-12-0 and agreeing to pay Rs. 15,962-12-0 to A.M.A. Kallal in

consideration of which A. M. A. Kallal assigned in favour of the assessee a decree obtained by him in British India against RM. M. RM. who is in

fact the brother-in-law of the assessee. These amounts of Rs. 7,842-12-0 and Rs. 15,962-12-0 a total of Rs. 23,805-8-0 were credited in the

assessee''s headquarters accounts at Karaikudi of the year of account towards the decree debt due by M. RM. VL. and corresponding debits

were made against (1) jewel purchase account and (2) RM. M. RM. the judgment-debtor in the decree assigned in favour of the assessee. No

amount was collected by the assessee in respect of the assigned decree in the year of account but the assessee admitted before the Commissioner

of Income Tax that a receipt in kind may amount to receipt of money.provided what is received is equivalent to money or is money''s worth. He

did not contend that the assigned decree was unrealisable or was not worth the amount for which it was assigned to the assessee. The Income Tax

'' Officer held that the above transactions amounted to a receipt by the assessee in British India of Rs. 23,805-8-0 out of funds in his Penang

business. Out of this sum the Income Tax Officer computed the taxable profits to be the sum of Rs. 10,900 and accordingly this amount was

included in the assessment made upon the assessee for the tax year 1934-1935. The assessee appealed to the Assistant Commissioner and

contended that no monies had so far been realised in respect of the assigned decree and the mere assignment of the decree cannot amount to a

remittance of the amount covered by the decree within the meaning of Section 4(2) of the Act. The Assistant Commissioner dismissed the appeal.

The Commissioner has now referred to us for our decision the following question:

Whether the assignment in British India of a British Indian decree in discharge of a debt of Rs. 15,962-12-0 due to the petitioner''s foreign business

will amount to an actual receipt in British India at the time of the assignment of money''s worth from the foreign debtor even though no money has

been realised by the petitioner from the judgment-debtor under the decree assigned.

Money can be received in more ways than one and when the assessee accepted the jewels and took the assigned decree the debt due to the

Penang business was completely discharged and the assets of that business were diminished by, and there was an increase in the assessee''s assets

in British India of, the sum of Rs. 23,805-8-0. It was argued before us that as the amount of the assigned decree had not been received from the

judgment-debtor, the amount of the decree should not be taken into consideration when arriving at a sum for assessment. Assuming that no such

moneys had been received, even then the assessee had by the transactions mentioned transferred into British India assets which he could and in

respect of the jewels in fact did realise and he could have realised the assigned decree at any time. In our view, these transactions amount to

remittances into British India of moneys and money''s worth. Several cases were cited to us by the assessee''s counsel - amongst them, Californian

Copper Syndicate v. Harris (1905) 5 T.C. 159, Raja Raghunandan Prasad Singh v. Commissioner of Income Tax, Bihar and Orissa (1933) 64

M.L.J. 544 L.R. 60 IndAp 133 : ILR 12 Pat. 305 (P.C.) and St. Lucia Usines and Estates Co. v. St. Lucia, Colonial Treasurer (1924) A.C. 508.

None of these authorities in any way assist the assessee''s contention. On the contrary, in the first of the above cases, Lord Trayner at page 167

says:

A profit is realised when the seller gets the price he has bargained for. No doubt here the price took the form of fully paid shares in another

company, but, if there can be no realised profit, except when that is paid in cash, the shares were realisable and could have been turned into cash,

if the. appellants had been pleased to do so. I cannot think that Income Tax is due or not according to the manner in which the person making the

profit pleases to deal with it.

This directly is opposed to the assessee''s contention and our answer to the question referred to is ""yes"". The Income Tax Commissioner will get

Rs. 250 costs.