Judgement Appeal (No. 87 of 1947) from a judgment of the High Court (February II, 1944) delivered on a joint reference by the Appellate Tribunal, Bombay, under s. 66, sub-s. 1, of the Indian Income-tax Act, 1922. The following facts are taken from the judgment of the Judicial Committee. The appellants in this case Law Rep. 76 Ind. App. 41 ( 1948- 1949) Seth Badkidas Daga V. C ommissioner of Income-Tax, Central 238 were, during the material time, partners of the firm of Rai Bahadur Bansilal Abirchand, which carried on business both within British India and elsewhere. Each appellant had a quarter share in the firm. The firm was a registered firm resident in British India within the meaning of the Indian Income-tax Act. The first appellant was not ordinarily resident and the second appellant was not resident in British India within the meaning of that Act. A considerable part of the firms income arose or accrued outside British India and was not brought into or received in British India. The question in the present case, shortly stated, was whether the appellants were bound to include in their total incomes for the purpose of Indian income tax the whole of their shares of the firms income, or whether they were entitled to exclude a proportion of those shares corresponding to the proportion of the firms income which arose -or accrued outside British India. The appellants were assessed to income tax for the year 1939-40 by the Income Tax Officer, Nagpur, in amounts which included the whole of their shares of the firms income for the previous, year. They appealed unsuccessfully to the Appellate Assistant Commissioner of Income Tax, Agra. They then appealed to the Income Tax Appellate Tribunal (Bombay Bench). That appeal was also unsuccessful, and the appellants requested the tribunal to state a case for reference to the High Court. The tribunal made a joint reference to the High Court of Judicature at Nagpur by stating one case which covered the appeals of both appellants. They then appealed to the Income Tax Appellate Tribunal (Bombay Bench). That appeal was also unsuccessful, and the appellants requested the tribunal to state a case for reference to the High Court. The tribunal made a joint reference to the High Court of Judicature at Nagpur by stating one case which covered the appeals of both appellants. The questions referred to the High Court were " (i.) Where the total income of a resident and registered " firm of Rai Bahadur Banislal Abirchand has been computed by including in it income, profits and gains accruing " or arising to it without British India in accordance with the " provisions of s. 4, sub-s. 1 (b), of the Indian Income-tax " (Amendment) Act, 1939, and is thereafter apportioned " among its partners for inclusion in their individual assessments under s. 23, sub-s. 5 (a), of the Act, whether Seth " Badridas Daga, who is a resident but not ordinarily " resident partner of the resident firm, is entitled to treat his " proportionate share of the profits so included as profits " accruing or arising to him outside British India so as to " entitle him to the benefit of the second proviso to s, 4, " sub-s. 1, of the Act ? " (2.) Where the total income of a resident and registered " firm of Rai Bahadur Bansilal Abirchand has been computed " by including in it income, profits and gains accruing " or arising to it without British India in accordance " with the provisions of s. 4, sub-s. 1 (b), of the Indian " Income-tax (Amendment) Act, 1939, and is thereafter " apportioned among its partners for inclusion in their " individual assessments under s. 23, sub-s. 5 (a), of the Act, " whether Seth Ramnath Daga, who is a non-resident " partner of the resident firm, is entitled to exclude from " his total income such proportionate share of the profits " of the said firm which accrue or arise to it without British " India, under s. 4, sub-s. 1 (c), of the Act ? " On February II, 1944, the High Court at Nagpur (Pollock and Sen JJ.) made an order answering both those questions in the negative. The present appeal was against that order, leave to appeal having been granted by order of the High Court dated October 25, 1945. 1948. Nov. " On February II, 1944, the High Court at Nagpur (Pollock and Sen JJ.) made an order answering both those questions in the negative. The present appeal was against that order, leave to appeal having been granted by order of the High Court dated October 25, 1945. 1948. Nov. 11, 15. Sir Roland Burrows K.C. and R. P. Hills for the appellants. Shortly stated, the question for determination in this appeal is whether, where a partner in a registered firm resident in British India is himself not resident in British India, or is not ordinarily so resident, so much of his share of the income, profits and gains of the firm for the previous year as is attributable to income which arose and accrued to the firm without British India ought, by reason of s. 4, sub-s. 1 (c), of the Indian Income-tax Act, as substituted by s. 4 of the Indian Income-tax (Amendment) Act, 1939, or of the second proviso to s. 4, sub-s. 1, of the Act as so substituted, to be excluded from the total income to be assessed on such partner pursuant to s. 23, sub-s. 5 (a), of the Act as amended to 1939. The second proviso to s. 4 of the Act, as substituted, prohibits the inclusion in the total income of a person not ordinarily resident in British India of income, profits and gains which accrue or arise to him Law Rep. 76 Ind. App. 41 ( 1948- 1949) Seth Badkidas Daga V. C ommissioner of Income-Tax, Central 239 without British India unless they are derived from a business controlled in, or a profession or vocation set up in, India or unless they are brought into or received in British India. The share of the income, profits and gains of the firm to be included in the total income of the first appellant, being a person not ordinarily resident in British India, for the purpose of the charge to income tax, ought not to include his share of the income, profits and gains of the firm accruing or arising without British India and neither derived from a business controlled in or a profession or vocation set up in India, nor brought into or received in British India. Under s. 4, sub-s. 1 (c), of the Act, as substituted, the total income of a person not resident in British India does not include income, profits and gains not accruing or arising or deemed to accrue or arise to him in British India. The share of the income, profits and gains of the firm to be included in the total income of the second appellant, being a person not resident in British India, ought not to include his share of the income, profits and gains of the firm which did not accrue or arise or were not deemed to accrue or arise in British India. The questions referred ought to have been answered in the affirmative. [Reference was made to Income-Tax Commissioner v. Great Eastern Life Assurance Co., Ld. (( 1948) L. R. 75 I. A. 331.).] Millard Tucker K.C. and B. Sen for the respondent. For the purposes of the Income-tax Act a registered firm is treated as a separate entity and its income is computed as such, though the tax payable is actually determined in the hands of the partners. The income of the firm from sources outside British India was rightly included in the computation of its total income. The provisions of s. 23, sub-s. 5 (a), taken in conjunction with s. 3 relating to partners, and other provisions of the Act relating to registered firms, require that the total income of a resident firm shall be computed as if such firm was itself liable to pay income-tax and super-tax in respect of such total income, and that such total income shall then be apportioned among the partners. In the case of a resident partner the effect of the above-mentioned statutory provisions is to require that he shall himself pay tax on the amount so apportioned to him, whether he be ordinarily resident in British India or not. The second proviso to s. 23, sub-s. 5 (a), of the Act provides that in the case of a partner who is not resident in British India the firm itself is then liable to pay tax on his apportioned share of the firms total income at the rates which would be applicable if the amount of the share were assessed on him personally. Neither in the case of a non-resident partner, nor in that of a partner who is not ordinarily resident, is there any provision of the Act which enables the apportioned amount of any such share to be reduced for the purposes of assessment. The decision of the High Court answering the questions referred in the negative was right. [Reference was made to Income-Tax Commissioner v. Khemchand Ramdas {a Firm) (( 1938) L. R. 65 I. A. 236.) ; Income-Tax Commissioner v. Great Eastern Life Assurance Co., Ld. (L. R.75 I. A.331.) ; Mohan Lal Hiralal v. Income-Tax Commissioner (( 1943) 11 I T. R. 259, 263.) and Trustees Corporation {India), Ld. v. Income-Tax Commissioner (( 1930) L. R. 57 I. A. 152.).] Dec. 20. The judgment of their Lordships was delivered by LORD REID, who stated the facts set out above and continued The decision of this case depends on the interpretation of certain sections of the Indian Income-tax Act, including amendments made by the Indian Income-tax (Amendment) Act, 1939, and earlier amending Acts. It will be convenient to begin with s. 23, which deals with assessment. Some confusion arises from the fact that in the Act the words " assessment " and " assessee " are used in different places with different meanings. Section 2, sub-s. 2, defines " assessee " as a person by whom income-tax is payable/ but the context in s. 23 makes it clear that down at least to the middle of sub-s. 5 (a) " assess " and " assessment" refer primarily to the computation of the amount of income, and " assessee " means primarily a person the amount of whose income is being computed. The section requires the Income-Tax Officer to do two things first, to compute or " assess " a persons total income, and then to determine the sum payable as tax. Sub-sections i to 4 set out alternative methods of computation or " assessment/ In the normal case the person whose income is being computed is the person who pays the tax, and for that case these Law Rep. 76 Ind. App. 41 ( 1948- 1949) Seth Badkidas Daga V. C ommissioner of Income-Tax, Central sub-sections also provide for the income tax officer taking the second step and determining the sum payable as tax. But the case of a firm is specially dealt with by sub-s. 5. 76 Ind. App. 41 ( 1948- 1949) Seth Badkidas Daga V. C ommissioner of Income-Tax, Central sub-sections also provide for the income tax officer taking the second step and determining the sum payable as tax. But the case of a firm is specially dealt with by sub-s. 5. This sub-section only comes into operation after the total income of the firm has been computed or " assessed " under one of the earlier sub-sections. It draws a distinction between registered and unregistered firms. In the case of a registered firm the firm does not itself pay income tax and therefore the sub-section directs that the sum payable by the firm shall not be determined, but that each partners share of the firms income shall be included in the assessment or computation of the total income of that partner. Thereupon the sum payable by that partner as tax is to be determined on the basis of that assessment which includes his share of the firms income. It is now necessary to turn to s. 4, sub-s. 1, of the Act, which defines total income. The parts of that sub-section relevant to the decision of this case are " Subject to the provisions of this Act, the total income “of any previous year of any person includes all income, " profits and gains from whatever source derived which " (a) are received or are deemed to be received in British " India in such year by or on behalf of such person, or .... " (c) if such person is not resident in British India " during .such year, accrue or arise or are deemed to " accrue or arise to him in British India during such " year ; " Provided .... " (c) if such person is not resident in British India " during .such year, accrue or arise or are deemed to " accrue or arise to him in British India during such " year ; " Provided .... that, in the case of a person not " ordinarily resident in British India, income, profits and " gains which accrue or arise to him without British India " shall not be so included unless they are derived from a 11 business controlled in or a profession or vocation set up in " India or unless they are brought into or received in British " India by him during such year." It was argued for the appellants that the provisions of s. 4 limiting the liability of persons not resident or not ordinarily resident in British India must be applied universally so as to qualify or even override any subsequent provision in the Act dealing with a particular kind of income which is so framed as to exclude this limitation. This argument neglects the opening words of s. 4, " subject to the provisions of this Act," and contradicts the principle that the Act must be read as a whole. In their Lordships view the question in this case is whether the provisions of the Act which deal with partnership income can be reconciled with an intention to exclude from the total income of partners not resident or not ordinarily resident in British India a part of their share of the firms income in respect of income accruing to the firm from outside British India. The second proviso to s. 23, sub-s. 5 (a), deals with partners not resident in British India. It provides that the share 01 such a partner shall be assessed on the firm at the rates which would be applicable if it were assessed on him personally, and it makes no provision for any deduction from that share in respect of any part of the partnership profits having arisen outside British India. It is difficult to understand why no reference was made to any such deduction if it was intended that any such deduction should be made. If no deduction is intended to be allowed in this case there is no reason to hold that any deduction is permissible in any other case of a partner not resident or not ordinarily resident in British India. If no deduction is intended to be allowed in this case there is no reason to hold that any deduction is permissible in any other case of a partner not resident or not ordinarily resident in British India. If the appellants contention is correct it would be necessary for the income tax officer not only to determine the total income of each firm as he is directed to do by s. 23, but also to determine what part of that income was such that if it were the income of a person not resident or not ordinarily resident in British India it would not be part of his total income within the meaning of the Income-tax Act. Without such a determination it would not be possible to assess the taxable income of a non-resident partner. But there is nothing to require the income tax officer to undertake this task. It may be that if those difficulties were overcome the relief sought by the appellants could be worked out satisfactorily in cases where the firm made profits both within and without British India, but great difficulties would be encountered in a case where a firm made profits in British India but incurred Law Rep. 76 Ind. App. 41 ( 1948- 1949) Seth Badkidas Daga V. C ommissioner of Income-Tax, Central 241 losses in its foreign business. It is not at all clear what the taxable income of a non-resident partner would be in such a case, if the appellants contention were correct. These are some of the difficulties which would be encountered if it were held that the operation of s. 23 must be modified to meet the appellants contention. This contention would require much to be written into the section which is not there, would complicate its operation and would lead to practical difficulties. Their Lordships are satisfied that this section cannot be so modified it must be taken as it stands. Moreover, there are other sections, such as s. 16, sub-s. 1, the terms of which are almost equally difficult to reconcile with the appellants contention. The Lordships therefore hold that this contention is not well founded and that the decision of the High Court at Nagpur was correct. Their Lordships will humbly advise His Majesty that this appeal be dismissed. The appellants will pay the costs of the appeal.