Bombay High Court
Mrs. Meherbai N. Sethna vs Commissioner Of Income-Tax on 17 September, 1993
Equivalent citations: [1994]209ITR453(BOM)
JUDGMENT Dr. B.P. Saraf, J.
1. By this reference under section 256(1) of the Income-tax Act, 1961, at the instance of the assessee, the Income-tax Appellate Tribunal has referred the following question of law to this court for opinion :
"Whether, on the facts and in the circumstances of the case, having regard to the restrictions imposed by the Ceylon Government, what part, if any, of the Ceylon dividends of Rs. 9,353 and Ceylon interest of Rs. 410 are liable to be assessed in the hands of the assessee for the assessment year 1975-76?"
2. The assessee is an individual. The assessment year is 1975-76. The controversy relates to includibility of dividend and interest income which accrued to the assessee in Ceylon in computation of his income under the Income-tax Act, 1961, for the assessment year under consideration. The contention of the assessee is that in view of the restrictions on remittance from Ceylon to India during the relevant assessment year, the amount of dividend and interest is not includible in the computation of his income. This contention of the assessee was rejected by the Income-tax Officer. The appeals of the assessee against the orders of the Income-tax Officer were also rejected by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. Hence this reference at the instance of the assessee.
3. We have carefully considered the contention of the assessee. We, however, do not find any merit in the same. There is no dispute in regard to the accrual of income to the assessee from dividend and interest during the year under consideration in Ceylon. Nor is there any dispute regarding the existence of restrictions in Ceylon on remittance of money to India during the relevant year. The only controversy is regarding the effect of such restriction on accrual of income to the assessee or includibility of the same in the computation of income of the assessee. In our opinion, section 5 of the Act provides a complete answer. Section 5 deals with the scope of total income. It provides :
"Subject to the provision 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."
4. The uncontroverted facts of this case are that (i) the assessee is a resident in India and (ii) the income from dividend and interest accrued to him during the year under consideration in Ceylon. Such income clearly falls within the scope of his total income in view of section 5 of the Act. The only ground on which the assessee objects to its inclusion in his total income is the restrictions in Ceylon on the remittance of money to India. This factor, in our opinion, does not have any bearing on the computation of total income of the assessee. Despite such restriction, income which accrued to the assessee outside India falls within the scope of total income under section 5 of the Act. Accrual of income outside India in the previous year is the only relevant factor. This view of ours also gets support from section 220(7) of the Act which reads :
"Where an assessee has been assessed in respect of income arising outside India in a country the laws of which prohibit or restrict the remittance of money to India, the Income-tax Officer shall not treat the assessee as in default in respect of that part of the tax which is due in respect of that amount of his income which, by reason of such prohibition or restriction, cannot be brought into India, an shall continue to treat the assessee as not in default in respect of such part of the tax until the prohibition or restriction is removed."
5. It is clear from the above sub-section that it is intended to mitigate the hardship that may be caused to the assesses who are assessed in respect of income arising to them outside India in a country the laws of which prohibit or restrict the remittance of money to India by relieving them from the obligation to pay the tax which is due in respect of such income until the removal of the prohibition or restriction on remittance. It was necessitated only because in the case of a person who is a resident, income arising outside Indian forms part of his total income under sections 5 of the Act notwithstanding the existence of any restriction or prohibitions in such country on its remittance to India. We are, therefore, of the clear opinion that in the instant case notwithstanding the restrictions imposed by the Ceylon Government on remittance, the whole of the dividend of Rs. 9,353 and interest of Rs. 410 which accrued to the assessee during the relevant previous year in Ceylon is liable to be assessed in his hands for the assessment year 1975-76.
6. Accordingly, we answer the question referred to us against the assessee and in favour of the Revenue.
7. Under the facts and circumstances of the case, we make no order as to costs.