Judgement Appeal (No. 16 of 1938) from a judgment of the High Court at Madras (April 29, 1937) upon a reference made under s. 66, sub-s. 2, of the Indian Income-tax Act, 1922. The reference related to an assessment to income-tax made upon the respondent, Diwan Bahadur S. L. Mathias, for the year 1934-5 in respect of (inter alia) profits arising to him from a coffee business. The main question arising in the appeal was whether the net sale proceeds of coffee grown by the respondent on coffee estates belonging to him outside British India, but sold within British India, were income, profits or gains arising or accruing or received within British India so as to be liable to income-tax under s. 4 of the Indian Income-tax Act, 1922, as amended by s. 2 of the Indian Income-tax (Amendment) Act, 1933, or whether the income in question was exempt from tax under the second proviso to sub-s. 2 of s. 4 as being income from agriculture arising or accruing in a State in India within the meaning of that proviso. The question referred was " Whether any part of the "income derived by the petitioner from the produce of his "coffee estates in Mysore is exempt from taxation under the "second proviso to s. 4, sub-s. 2, of the Indian Income-tax "Act as being income that has accrued or arisen outside "British India." The facts, and the relevant provisions of the Indian Income-tax Act, 1922, as amended, appear from the judgment of the Judicial Committee. The High Court (Beasley C.J., Varadachariar and King JJ.) answered the question adversely to the appellant. The judgment is reported at I. L. R. [ 1938] M. 25. 1938. Oct. 27, 28. J. M. Tucker K.C. and Hubert Hull for the appellant. The coffee is grown outside British India and sold in British India, and the question is whether the respondent is liable to pay income-tax on the whole of the profits arising from that business, or, if not, on any and what part. The High Court at Calcutta have held in similar circumstances (In re Mohanpur Tea Co., Ld, (I. L. R. [ 1937] 2C. 201.)) that he would be liable to pay tax on the whole of his profits. The High Court at Calcutta have held in similar circumstances (In re Mohanpur Tea Co., Ld, (I. L. R. [ 1937] 2C. 201.)) that he would be liable to pay tax on the whole of his profits. In the present case the High Court at Madras have held that he is not liable to pay any tax ; that the land being in a State in India outside British India, and in respect of which an annual payment is in fact made to that State, the second proviso to sub-s. 2 of s. 4 of the Indian Income-tax Act, 1922, exempts the profits of the particular business in this case. It is contended, however, that that proviso is limited to sub-s. 2 of s. 4, and that this income is caught under sub-s. 1 of s. 4, and that there is no need to attempt to make it taxable by the application of sub-s. 2 at all. With regard to sub-s. 3 of s. 4, there is a definition of " agricultural income " in s. 2 ; this is not land which falls within that definition. The respondents income is not agricultural income as defined in the Act, and is not agricultural income within the meaning of the exemption in the Act. Although it may be income from agriculture, it is none the less income—profits and gains—of a business. Reginald Hills for the respondent (interposing). For the respondent it is submitted that it is agricultural income within the meaning of the particular exemption in the second proviso to sub-s. 2 of s. 4. J. M. Tucker K.C. It is agreed that it is income from agriculture within the meaning of the second proviso to sub-s. 2 of s. 4, and that if sub-s. 2 has to be relied on to make this income taxable then the second proviso exempts it. But it is submitted that that is simply an exemption from anything in sub-s. 2, and not from anything in sub-s. 1 of s. 4. The short point is, does it come under sub-s. 1 of s. 4, and Law. Rep. 66 Ind. App. 23 ( 1938- 1939) C ommnr. of I.T. Madras v. Diwan Bahadur S. L. Mathias 167 if it does, does the second proviso to sub-s. 2 exempt it ? The short point is, does it come under sub-s. 1 of s. 4, and Law. Rep. 66 Ind. App. 23 ( 1938- 1939) C ommnr. of I.T. Madras v. Diwan Bahadur S. L. Mathias 167 if it does, does the second proviso to sub-s. 2 exempt it ? If it is held against the appellant that the profits arose or accrued outside British India, then the question still remains whether they were received in British India as profits, and if they were, then sub-s. 1 catches them equally. In re Mohanpur Tea Co., Ld. (I. L. R. [ 1937] 2 C 201) was a stronger case from the appellants point of view. Accepting the view that the raw coffee was itself income from agriculture, the High Court then said that having regard to what was done afterwards it still remained income from agriculture, and that therefore the whole of it was income from agriculture from lands in a State in India which had paid land tax in that State, and was therefore within the second proviso to sub-s. 2 of s. 4 Commissioners of Taxation v. Kirk. ([ 1900] A. C. 588.) In this case, when the raw coffee is produced, the business is only half-way through. Even if the profits arose and accrued in Mysore, in the sense that the receipt of raw coffee was the arising or accruing of part of the profits, the final stage, which is the receipt of money for the profits, takes place in British India. [Reference was here made to the various amendments made in the Indian Income-tax Act, 1922, down to the Indian Income-tax (Amendment) Act, 1933 see the judgment of the Judicial Committee.] If it is held, in agreement with the High Court, that the green raw coffee is itself income received in Mysore, then resort must be made to sub-s. 2 of s. 4, and the appellant is defeated by the second proviso to it. But if the Board is satisfied that the profits of this business were received when the goods were sold, then it is submitted that they were " received " in British India Pondicherry Ry. Co. v. Income-tax Commissioner of Madras. (( 1931) L. R. 58 I. A. 239.) It was because of the decisions in Sundar Das v. Collector of Gujrat (( 1922) I. L. R. 3 Lah. Co. v. Income-tax Commissioner of Madras. (( 1931) L. R. 58 I. A. 239.) It was because of the decisions in Sundar Das v. Collector of Gujrat (( 1922) I. L. R. 3 Lah. 349, 354.) and Board of Revenue v. Ripon Press and Sugar Mills Co. (( 1923) I. L. R. 46 M. 706.) that it was necessary to provide that if income arose outside British India, but was received in British India, it was to be taxable. Under the cases under the earlier Act income could not be received as income in British India if it had already been received as income outside British India hence the amendment to the Act. If the coffee was grown abroad, brought to British India, sold there, and advantage was taken of the protection which the laws of British India afford, then tribute—income tax-must be paid for the protection, because the profits have been received in British India, and received there for the first time. There is nothing illogical in that result. The production and sale of the coffee by the respondent is a business carried on by him within the meaning of s. 6 (iv.) and s. 10, sub-s. 1, of the Act that is in agreement with the authorities in India and in England. Such business is an entire business, and is not divisible into one business of producing coffee and another business of selling it if that be accepted, the foundation of the High Courts judgment goes. The profits and gains of the respondents business are the aggregate amount of the differences between the price received by him for each quantity of coffee sold, and the costs incurred by him in producing that coffee, making it read for market, and marketing it this submission follows from that immediately preceding, but is made in view of the decision in Income-tax Commissioner v. Chunilal B. Mehta of Bombay, (( 1938) L. R. 65 I. A. 332.). The price of each quantity of coffee sold was in fact received by the respondent at Mangalore for the first time, and so much of that price as represented profit was therefore also received by him for the first time in Mangalore In re Port Said Salt Association, Ld. The price of each quantity of coffee sold was in fact received by the respondent at Mangalore for the first time, and so much of that price as represented profit was therefore also received by him for the first time in Mangalore In re Port Said Salt Association, Ld. (( 1932) I. L. R. 59 C. 1226.) It is immaterial where the profits arise or accrue, it is not necessary to decide that Income-tax Commissioner v. Chunilal B. Mehta of Bombay. (( 1938) L. R. 65 I. A. 332.)Sect. 4, sub-s. 1, imposes liability to tax upon all residents in respect of any income, profits and gains which are in fact received as such in British India, wherever such income may actually have accrued or arisen. The purpose of sub-s. 2 of s. 4, is not to confer any exemption from liability to tax, but to extend the liability to cases which sub-s. 1 would not otherwise have covered. Before the second proviso to sub-s. 2 operates at all, first, the source of the profits in question should be land in a State, and secondly, the place where they arose or accrued should also be that State. Commissioners of Taxation Law. Rep. 66 Ind. App. 23 ( 1938- 1939) C ommnr. of I.T. Madras v. Diwan Bahadur S. L. Mathias 168 v. Kirk ([ 1900] A. C. 588.) does not decide that part of the profits which eventually arose accrued at the place where the various stages took place. If Kirks case ([ 1900] A. C. 588.) is got rid of, there is nothing in the way of the result that where the profits first came into existence they must arise and accrue and be received in that place. In this case they first came into existence when the coffee was sold in British India. Hubert Hull followed, and referred to Commissioners of Taxation v. Kirk. ([ 1900] A. C. 588.) Reginald Hills for the respondent. Commissioners of Taxation v. Kirk ([ 1900] A. C. 588.) is the leading authority on " arising and "accruing." To say that income-tax can be avoided by selling abroad an article which represents value and on which a lot of labour has been expended, is a very striking proposition, but one which seems to be involved in the appellants argument on Kirks case. ([1990] A.C. 588.) Sect. 4, sub-ss. ([1990] A.C. 588.) Sect. 4, sub-ss. 1 and 2, are the main charging provisions of the Act. Sub-sect. 2 supplements and explains sub-s. 1. Then, and prima facie, the second proviso to sub-s. 2 is an exempting proviso it catches up the words with which the charge begins, " this Act shall apply to," and, if the respondent can be brought within it, he must succeed, and be exempted. That is the broad contention. That exempting provision does not operate merely to shift the charge from one limb of the charging provisions to another it is very specific. Sub-sect. 2 is intended to catch something which is not caught by sub-s. 1. The reasoning in In re Mohanpur Tea Co., Ld. (I. L.R. [ 1937] 2 C. 201.) is not the reasoning on the main argument of the appellant in the present case. If the Board is against the respondent on the point as to arising and accruing, then he must fail. That is the real fence to be met, and reliance is placed on Kirks case. ([ 1900] A.C. 588.) It must be assumed for the purposes of the respondents case that these profits did arise or accrue outside British India and admittedly to a person resident in British India. If that is so, and if sub-ss. 1 and 2 of s. 4 are read together, as they must be, sub-s. 2 deals exhaustively with the profits in this case. Sub-sect. 1 is divided into two categories, income, profits or gains (a) accruing or arising or received in British India, and (b) deemed under the provisions of this Act to accrue or arise or to be received in British India. That second class has two sub-classes, (a) deemed to accrue or arise, and (b) deemed to be received, in British India. Sub-sect. 2 states (inter alia) what is to be in the second category, and what are placed there, and to be taxed as such, are the profits there described—namely, those arising or accruing outside British India to a person resident in British India when brought into British India. It is submitted that that is the place to be looked at for the purpose of taxing the respondent. It is submitted that that is the place to be looked at for the purpose of taxing the respondent. It is useless seeking to tax him under the first category—he is taken out of it—he is only to be treated as a person who had profits " deemed " to have accrued or arisen in British India. It is charged simply as income deemed to arise or accrue, not as income which has in fact been received under the first limb. Coming to the second proviso—and surely a proviso does not simply shift the income out of its class into another—if the respondent is within the proviso, he is exempt and outside the whole charge. The proviso was intended to be a limitation on the charge under sub-s. 2, which is the proper charge for the respondents case. This was agricultural income which arose outside British India. The income which arose outside British India was the value of the coffee berries ; although the produce of the agriculture is not sold in Mysore, the price obtained for it elsewhere is attributable to it—the sale in the market does not alter the fact that the income arose from the agriculture. The fact that agriculture operations are mixed up with business operations must not be allowed to destroy an exemption Income-tax Commissioner, Bihar and Orissa v. Maharajadhiraj of Darbhanga. (( 1935) L. R. 62 I. A. 215, 222.) Law. Rep. 66 Ind. App. 23 ( 1938- 1939) C ommnr. of I.T. Madras v. Diwan Bahadur S. L. Mathias 169 The coffee berries are sold in India as part of the respondents merchant business of selling coffee, and the appellants reliance upon these business activities in British India is really irrelevant. Assuming that Mysore is in British India, that coffee would have been subject to taxation on the principle in Kirks case ([ 1900] A. C. 588.) Commissioner of Income-tax v. Steel Bros. & Co. (( 1925 21 T.C. 119,128,135, 138.) Kirks case ([ 1900] A.C. 588) is vital for all purposes of taxation in India. This income comes within the second proviso and is exempted. J. M. Tucker K.C. replied. It is immaterial where the profits arose or accrued; it is where they were received that matters Pondicherry Ry. Co. v. Income-tax Commissioner of Madras. This income comes within the second proviso and is exempted. J. M. Tucker K.C. replied. It is immaterial where the profits arose or accrued; it is where they were received that matters Pondicherry Ry. Co. v. Income-tax Commissioner of Madras. (( 1931) L.R. 58 I.A. 239.) [Reference was also made to Jiwan Das v. Commissioner of Income-tax, Punjab, (( 1929) 4 1. T. C. 40, 44.)] There is no difference in essence between the position of a dealer in merchandise and that of a grower in determining whether the green coffee constituted a profit in Mysore. If it is held that the net result of all the trading operations was received in British India, as it was held in the Pondicherry case (( 1931) L. R. 58 I. A. 239.), then the appellant should succeed. Nov. 18. The judgment of their Lordships was delivered by Sir George Rankin. This appeal is brought by the Commissioner of Income-tax, Madras, from a judgment of the High Court at Madras upon a reference made under the provisions of s. 66 of the Indian Income-tax Act, 1922. The year of assessment in respect of which the dispute arises is 1934-35, and the year of account, or " previous year," is that which ended on April 30, 1933. The assessee respondent resides at Mangalore, in British India, and owns coffee estates in the Mysore State, which is no part of British India. The Income-tax Officer at Mangalore assessed him to tax on a " total income" of Rs. 29,160, of which Rs. 25,963 was computed as the assessees profits of a " business " of growing, curing and selling coffee for profit. By appeal to the Assistant Commissioner the assessee disputed his liability in respect of any part of the sum of Rs. 25,963, and, on his appeal being dismissed, required the Commissioner to make a reference to the High Court. x\n agreed question having been stated and referred (July 24, 1936), in terms to be presently mentioned, the High Court decided in favour of the assessee, holding that the whole income derived by the assessee by the sale of the produce of his coffee estates was exempt from taxation. From the joint judgment (dated April 29, 1937) of Beasley C.J., Varadachariar and King JJ., this appeal has been brought pursuant to a certificate granted by the High Court on October 13, 1937. From the joint judgment (dated April 29, 1937) of Beasley C.J., Varadachariar and King JJ., this appeal has been brought pursuant to a certificate granted by the High Court on October 13, 1937. There is no dispute as regards the material facts, and the figure (Rs. 25,963) determined by the Income-tax Officer as the amount of net profit is not in itself in dispute as a question of amount. In arriving at this figure deduction has been made from the proceeds of sale for all expenses incurred, whether in or outside British India. The Commissioners statement of the facts is as follows "The petitioner owns two coffee estates in the Mysore State "for which he pays land tax to that State. These estates are "worked by the petitioner. He employs the labour required "for the purpose, and maintains an office in the estate in "order to supervise them. The labour is recruited mainly at "Mangalore, and the manure, spray materials, tools, crop-"bags, etc., required for the estate are purchased by the "petitioner at Mangalore, and are sent to the estate. The "crops are harvested by the labour employed by the petitioner, "and are then brought to Mangalore in their raw state. There "is no ready market for raw coffee. The petitioner gets the "green coffee cured at Mangalore by persons owning curing "factories, on payment of a commission to them. The cured "coffee is insured against fire till sale, and the petitioner pays "the insurance charges. It is then sold at Mangalore by the "petitioners selling agents, Messrs. Pierce Leslie & Co., Ld., "and the sale-proceeds are realised and retained there. A "separate staff is Law. Rep. 66 Ind. App. 23 ( 1938- 1939) C ommnr. of I.T. Madras v. Diwan Bahadur S. L. Mathias 170 maintained at Karkal, in the Mangalore "district, for the various operations conducted in Mangalore. "The accounts are written up by the estate staff in Mysore in "respect of the expenses incurred in Mysore, and by the "Karkal staff in respect of the expenses incurred in Mangalore "and in respect of the receipts. All the operations connected "with the cultivation of the coffee plants and the collection, "transport and sale of produce are controlled by the petitioner "from Mangalore. The result of the accounts in Mysore is "incorporated in the books maintained at Karkal, and a "consolidated profit and loss account is made there. All the operations connected "with the cultivation of the coffee plants and the collection, "transport and sale of produce are controlled by the petitioner "from Mangalore. The result of the accounts in Mysore is "incorporated in the books maintained at Karkal, and a "consolidated profit and loss account is made there. The "income from this source was assessed under the head "business in the past." On these facts the assessees liability depends upon s. 4 of the Act (XI. of 1922), its true construction, and the manner in which it is to be applied to his case. As it stood at the time of this assessment ( 1934) and still stands, it reads as follows— " Section 4.—(1.) Save as hereinafter provided, this Act " shall apply to all income, profits or gains, as described or comprised in section 6, from whatever source derived, " accruing, or arising, or received in British India, or deemed "under the provisions of this Act to accrue, or arise, or to "be received in British India. "(2.) Income, profits and gains accruing or arising without "British India to a person resident in British India shall, if "they are received in or brought into British India, e deemed "to have accrued or arisen in British India and to be income, "profits and gains of the year in which they are so received "or brought notwithstanding the fact that they did not so "accrue or arise in that year "Provided that nothing contained in this sub-section shall "apply to any income, profits cr gains so accruing or arising "prior to the 1st day of April, 1933, unless they are income, "profits or gains of a business and are received in or brought "into British India within three years of the end of the year "in which they accrued or arose "Provided further that nothing in this sub-section shall "apply to income from agriculture arising or accruing in a "State in India from land for which any annual payment in "money or in kind is made to the State. "Explanation.—Income, profits or gains accruing or "arising without British India shall not be deemed to be "received or brought into British India within the meaning "of this sub-section by reason only of the fact that they are "taken into account in the balance sheet prepared in British "India. "Explanation.—Income, profits or gains accruing or "arising without British India shall not be deemed to be "received or brought into British India within the meaning "of this sub-section by reason only of the fact that they are "taken into account in the balance sheet prepared in British "India. "(3.) This Act shall not apply to the following classes of "income — " (viii.) Agricultural income." Upon this section the assessee contended (1.) that his income from coffee was not assessable as profits of a business ; (2.) that it was within the second proviso to sub-s. 2 ; (3.) that, if any income was assessable under sub-s. I, it was only the residue left out of the sale proceeds after deducting the market value of the green coffee and the curing and other charges. The question of law upon which the parties were at issue was ultimately stated to the High Court in an agreed form as follows " Whether any part of the income derived "by the petitioner from the produce of his coffee estates in "Mysore is exempt from taxation under the second proviso "to s. 4, sub-s. 2, of the Indian Income-tax Act as being "income that has accrued or arisen outside British India ? " The High Court were of opinion that the income in question was " income from agriculture/ and that it arose or accrued in Mysore. " Whatever may be said as to profits or "gains/ the view that income from Law. Rep. 66 Ind. App. 23 ( 1938- 1939) C ommnr. of I.T. Madras v. Diwan Bahadur S. L. Mathias 171 agriculture can be "said to arise or accrue only when and where the produce "is sold and converted into money seems to us, with all respect, "difficult to reconcile with the reasoning in Commissioners of "Taxation v. Kirk, ([ 1900] A. C. 588.). " (I. L. R. [ 1938] M. 28.) The learned judges speak of that decision as recognizing " that as a matter both of "language and of business, receipt of produce in kind may "well be spoken of as receipt or accrual of income at the "place where the produce is received.” (I. L. R. [ 1938] M. 30-31.) To the contention that, even so, the money income had been " received in British "India" within the meaning of sub-s. 1, as in Pondicherry Ry. Co. Co. v. Income-tax Commissioner of Madras (( 1931) L. R. 58 I. A. 239.), the learned judges replied that sub-s. 1 comprises receipts falling under sub-s. 2 as well, and that it was not necessary or reasonable to read the two sub-sections as mutually exclusive. Hence, on the footing that the income was received within the meaning of sub-s. 1, they considered that the second proviso to sub-s. 2 applied to exempt it. Finally, they held that the exemption to which the assessee was entitled under this proviso was of the same scope as the exemption of " agricultural income " as defined in s. 2, sub-s. 1, of the Act. Finding that the process applied to the coffee beans after they are picked was only a process " ordinarily employed by the cultivator to "render the produce fit to be taken to the market " (I. L. R. [ 1938] M. 36.]) (as described in the definition of “agricultural income " given by s. 2, sub-s.1 (b) (ii.), of the Act), they held that the assessee was entitled to exemption "in respect of the whole price realized "by the sale of his coffee.” (I. L. R. [ 1938] M. 36.) Having regard to the assessees contention that he was not conducting any business in coffee, and to certain observations made by the learned judges of the High Court, it is necessary to state expressly their Lordships opinion that the assessee is carrying on a"business” within the definition of the word given by s. 2, sub-s. 4, and within the meaning of s. 10 of the Act. The observations of the Commissioner in his letter of reference are justified " Such profit as the petitioner in "this case derives from his possession of land in Mysore is "derived by means of a business; and the fact that "agricultural operations form an element in the business does "not render it any the less a business/ On the other hand, the mere circumstance that income is to be placed under the head " business " has no effect to negative its being u agricultural income " as defined by s. 2, sub-s. 1, or "income "from agriculture" under the second proviso to s. 4, sub-s. 2. But the green coffee itself cannot be regarded as income, profits or gains within the meaning of the Act ; it is grown for purposes of sale and in order that profit may be earned. The business operations cannot be arbitrarily cut into two portions, but must be regarded as a whole. Thus, if the coffee market may be assumed to have its ups and downs, the assessee, if he delayed his sales in expectation of a rise, but found that prices fell, would not expect to be charged to tax on the profits that he would have made had he sold without delay. On the other hand, upon the question whether the profits and gains accrued or arose in British India, it may be that the fact that the coffee was grown in Mysore is by no means to be disregarded, notwithstanding that it was sold in British India, especially if it be true that it was sold without further process of a manufacturing character. For the moment it is enough to say that it may be so, without examining the matter, and without prejudice to either view. The High Court, in holding that the assessees business income arose in Mysore, placed much reliance upon Kirks case ([ 1900] A. C. 588.), and considerable argument was addressed to the Board upon the matter. But it appears to their Lordships that other considerations decide this appeal, and that it is unnecessary to determine whether the income in question accrued or arose within or without British India. Accordingly they express no opinion as to the light, if any, thrown upon the phrase " accruing or arising in (a country) " by the decision in Kirks case ([ 1900] A. C. 588.) upon the phrases " earned in "(a country) " and " arising or accruing from (a trade, land, "a source) "—a matter upon which the High Court in the present case differed in opinion from the High Court at Calcutta In re Mohanpur Tea Co., Ld. (I. L. R. [ 1937] 2 C. 201.) The contention of the Income-tax authorities has been throughout that the income assessed to tax was Law. Rep. 66 Ind. App. 23 ( 1938- 1939) C ommnr. of I.T. Madras v. Diwan Bahadur S. L. Mathias 172 not within sub-s. 2 of s. 4, because it did not accrue or arise outside British India. Rep. 66 Ind. App. 23 ( 1938- 1939) C ommnr. of I.T. Madras v. Diwan Bahadur S. L. Mathias 172 not within sub-s. 2 of s. 4, because it did not accrue or arise outside British India. But in the High Court it was pointed out that the income was received in British India as the proceeds of all sales were paid to the assessee in Mangalore, and so much of the price as represented profit was there received for the first time. It was contended, therefore, that the assessee was liable under sub-s. 1 of s. 4, and that sub-s. 2 and its proviso did not affect the assessees liability. The answer given by the High Court has been stated, and is now to be examined. But, as the section has from time to time been altered by the Legislature in view of rulings of the Courts, it is legitimate, and it will be convenient, to consider its history ; though its present wording will prima facie determine its meaning completely, being intended to state with exactness the test of liability. The Indian Income-tax Act of 1918 (VII. of 1918) contained no clause corresponding to the second sub-section of the present s. 4, but s. 3, sub-s. 1, of the Act of 1918 was similar to the present s. 4, sub-s. 1, as hereinbefore set out. It was as follows " 3.—(1.) Save as hereinafter provided, this Act " shall apply to all income from whatever source it Is derived, if it accrues or arises or is received in British India, or is, "under the provisions of this Act, deemed to accrue or arise or to be received in British India." When the Act of 1922 was passed, the section was revised and expanded—a new sub-section being introduced together with an explanation thereof. This new sub-section applied only to the profits or gains of a business, and had no effect upon income under any of the other " heads of income " (of. s. 6). It read — "4,—(1.) Save as hereinafter provided, this Act shall apply "to all income, profits or gains, as described or comprised in "section 6, from whatever source derived, accruing, or arising, "or received in British India, or deemed under the provisions "of this Act to accrue, or arise, or to be received in British "India. s. 6). It read — "4,—(1.) Save as hereinafter provided, this Act shall apply "to all income, profits or gains, as described or comprised in "section 6, from whatever source derived, accruing, or arising, "or received in British India, or deemed under the provisions "of this Act to accrue, or arise, or to be received in British "India. "(2.) Profits and gains of a business accruing or arising "without British India to a person resident in British India "shall be deemed to be profits and gains of the year in which "they are received or brought into British India, notwithstanding the fact that they did not so accrue or arise in "that year, provided that they are so received or brought in "within three years of the end of the year in which they "accrued or arose. "Explanation.—Profits or gains accruing or arising without "British India shall not be deemed to be received or brought "into British India within the meaning of this sub-section by "reason only of the fact that they are taken into account "in the balance sheet prepared in British ndia/ In the following year, however, 1923, the second sub-section was amended to read as follows (Act XXVII. of 1923), s. 2 "4.—(2.) Profits and gains of a business accruing or arising "without British India to a person resident in British India "shall, if they are received in or brought into British India, "be deemed to have accrued or arisen in British India and "to be profits and gains of the year in which they are so "received or brought, notwithstanding the fact that they "did not so accrue or arise in that year, provided that they "are so received or brought in within three years of the end "of the year in which they accrued or arose." In 1933, the second sub-section was again revised, and put into the form already set forth as governing the present case. In its new form it applies to all income, profits and gains, and not merely to those of a business, and the provision limiting its effect to income received in or brought into British India within three years of accrual was omitted, with a conditional saving in this respect for past income (that is, income accrued before April 1, 1933), which retained its previous immunity unless it was business Law. Rep. 66 Ind. App. Rep. 66 Ind. App. 23 ( 1938- 1939) C ommnr. of I.T. Madras v. Diwan Bahadur S. L. Mathias 173 income within the three years limit. At the same time, the second proviso was introduced upon which the assessee is now relying. The occasion for, and to some extent the explanation of, the second sub-section in its original form is to be seen in decisions of the Courts upon the word " received " as it appeared in the first sub-section of s. 3 of the Act of 1918. These decisions were to the effect that, if income had been received by the assessee outside British India, it could not be again received by him within the meaning of the first sub-section Sunday Das v. Collector of Gujrat (( 1922) I. L. R. 3 Lah. 349.); Board of Revenue v. Ripon Press and Sugar Mills Co. (( 1923) I. L. R. 46 M. 706.) (cases under the Act of 1918); Sir Alt Imams case (1 I. T. C. 402.) (under the Act of 1922, but not a case of " business " profits). The view taken was that the same sum could not be received a second time as income. There was a further difficulty or discrepancy under the earlier forms of the section if the income of one year was brought into British India in a later year. The result was that under sub-s. 1 income could only be taxed on the ground of having been received in British India if it was income of the year of account originally received in British India. It will be observed that the various amendments leave the principle of the decisions above-mentioned untouched so far as concerns non-residents. Their general effect is to widen the liability of residents in respect of what they receive in British India by extending it to sums not received for the first time. But non-residents do not become chargeable by reason of moneys having been brought into the country if originally received abroad. The question to be answered is whether the second proviso to sub-s. 2, assuming it to apply and the assessees income to have accrued to him in Mysore, is any answer to an assessment made on him under sub-s. 1 by reason of the fact that the income was received by him originally and as income in British India in the year of account. If the central words of sub-s. 1 be considered first—income accruing, or arising, or received in British India—it is clear that all three expressions must be applicable to the great bulk of the incomes of inhabitants of British India. It may be taken that all three expressions would not have been used unless it was thought that they exhibited some variation in meaning, and that a case might possibly arise which would come under one only of the three. If, on a question as to the exact meaning of " accruing," it were to be suggested that this only means " received/ it would be reasonable to object that this can hardly be correct, even though the difficulty of distinguishing between " accruing " and " arising " may be great. In this sense, perhaps not a very important sense, the expressions are antithetical. But it is very plain that there is here no question of a complete disjunction, or of the presentation of three mutually exclusive qualifications. No one would go about to prove that income was not received in British India by establishing that it arose or accrued there. When in sub-s. 2 income " received in or brought into " British India is put into the class of " income accruing, or arising " this does not at first sight suggest that such income, if within the word " received/ is thereby excluded from it in sub-s. I. The circumstances and context do not assist to carry any such negative implication. For that, there would seem to be required some words to the effect that it " shall be charged "to tax as such and not otherwise." Still, no doubt, a draughtsman even at his fourth attempt may not succeed in saying quite as much as he means. Other indications must be carefully considered. If the exact language of the second proviso be examined with any care, it must appear that, if nothing in sub-s. 2 is to apply to the income of the assessee, he can hardly rely upon sub-s. 2 to take his case out of sub-s. 1. Other indications must be carefully considered. If the exact language of the second proviso be examined with any care, it must appear that, if nothing in sub-s. 2 is to apply to the income of the assessee, he can hardly rely upon sub-s. 2 to take his case out of sub-s. 1. No doubt, had it been expressly stated, or if it be held or assumed, that in the case of a resident income received in British India is never to be charged as such, but only as having "accrued or arisen," it might become necessary to read the second proviso as meaning only that sub-s. 2 should not apply to charge it. Even so, however, the language of the proviso is a second difficulty in the assessees contention, which involves both that in the main clause of the sub-section the Legislature has said less than it meant, and that in the proviso it must be taken to have Law. Rep. 66 Ind. App. 23 ( 1938- 1939) C ommnr. of I.T. Madras v. Diwan Bahadur S. L. Mathias 174 meant less than it said—if not, indeed, something different in kind. A third consideration must be allowed effect as a matter of construction. The question is entirely concerned with the result for purposes of tax of income having been " received in or brought into " British India. Had the assessee not been a resident he would have had no answer whatever to the present claim. But it is said that he escapes because he is a resident, and comes as such within sub-s. 2. This is to invert the intention of the sub-section, which is to make receipt impose liability on the resident in some cases where the non-resident would go free. There is nothing whatever in sub-s. 2 as it now stands, or as it stood in 1922 and 1923, to relieve the resident from any liability which the non-resident is under. Hence, the correct meaning of the proviso may well be the meaning which is intended—namely, that the widening of liability shall not attach to the incomes therein mentioned. It is right to consider whether s. 4 can be interpreted more favourably to the assessee on the footing that his income is of a class which is assimilated to " agricultural income " in British India. It is right to consider whether s. 4 can be interpreted more favourably to the assessee on the footing that his income is of a class which is assimilated to " agricultural income " in British India. But unless it can be assumed as plain (despite much argument in the present case) that income from cultivating land in an Indian State can never accrue or arise in British India, it is at least clear that in some cases the agriculturist is not exempt at all. Again, the agriculturist in an Indian State, whose income in the narrow sense of sub-s. 1 is received in British India, is not the ordinary agriculturist of his State. Nor does the typical agriculturist of Mysore reside in British India. The Legislature may or may not have thought it to be advisable and sufficient that such a person should be relieved of the extended liability attached by sub-s. 2 to the fact of receipt in British India without relieving him of the same liability under sub-s. 1 as non-residents undoubtedly incur. It is said, however, that the second proviso gives the assessee exemption ; hence no other provision of the Act can be construed to render him liable. But what is the exemption given ? There can be no general presumption that exemption from the provisions of a sub-section is intended as complete exemption from the tax. The distinction is between exempting a class of income in some events and exempting it in all events. The case of Income-tax Commissioner, Bihar and Orissa v. Maharajadhiraj of Darbhanga (( 1935) L. R. 62 I. A. 215.) was a case of "agricultural income" to which the Act does not apply [s. 4, sub-s. 3 (viii.)]. " The exemption is conferred, and "conferred indelibly, on a particular kind of income and does "not depend on the character of the recipient " [per Lord Macmillan (Ibid. 223.)]. The proviso now in question is not rendered otiose or even unimportant by the assumption that its opening words are a correct expression of its intention. Their Lordships have reached the conclusion that upon this question the meaning and intention of the Legislature is yielded by a strict construction of s. 4 according to its language, and that any departure therefrom which can be suggested in favour of the assessee appears upon a full consideration to be unjustified. Their Lordships have reached the conclusion that upon this question the meaning and intention of the Legislature is yielded by a strict construction of s. 4 according to its language, and that any departure therefrom which can be suggested in favour of the assessee appears upon a full consideration to be unjustified. The assessee must be held liable to fax under sub-s. 1 of s. 4. The answer proper to be given to the question stated by the Commissioner is that no part of the income therein mentioned is exempt from taxation under the second proviso to s. 4, sub-s. 2, of the Indian Income-tax Act. Their Lordships will humbly advise His Majesty that this appeal should be allowed, and that the question referred to the High Court should be answered as above-mentioned. As the contention upon which the appeal has succeeded was not formally raised in the letter of reference, though it was mooted in argument before the High Court and dealt with by the judgment, there will be no order as to the costs of this appeal, but the High Courts order as to costs will be set aside, and each party will bear its own costs in the High Court.