Judgment :- RAJAGOPALAN, J. Under Section 66(I) of the Indian Income-tax Act the following question was referred to this Court :- "Whether on the admitted facts of the case, the sum of Rs. 40, 070 remitted from Bhopal to Manchester could in law be treated as a remittance of profits to British India ?" * The assessee, W.A. Beardsell and Co., Ltd., Madras, has its registered office at Madras. Messrs. Calico Printers Association, Ltd., Manchester, hold a large block of shares in the assessee company. The assessee company was the managing agent of the Bhopal Textiles Ltd., with its registered office at Bhopal. The income which the assessee company derived as managing agent of the Bhopal Textiles Ltd., was credited to the assessee's account with the Imperial Bank of India at Bhopal. A sum of Rs. 61, 500 was payable as dividend to the Calico Printers Association Ltd., Manchester, under the dividend declared by the assessee company on November 30, 1945, at the meeting held at Madras that day. A dividend warrant was issued at Madras. In partial discharge of that liability to pay Rs. 61, 500 to the Calico Printers Association Ltd., Manchester, the assessee firm directed the Imperial Bank of India at Bhopal to transfer a sum of Rs. 40, 070 to Manchester, to be paid to the shareholder, the Calico Printers Association Ltd., at Manchester. In its accounts at Madras, the assessee company credited the Imperial Bank of India at Bhopal with this sum of Rs. 40, 070 thus reducing the bank balance at Bhopal, and debited the profit and loss account or dividend account with this sum. The Income-tax Officer held that the payment of Rs. 40, 070 was a constructive receipt of the assessee company's Bhopal income at madras. The Appellate Assistant Commissioner reversed that decision. But on further appeals to the Appellate Tribunal, it agreed with the Income-tax Officer.The claim of the assessee company that Rs. 40, 070 that was remitted from Bhopal to Manchester was not "received" by it at Madras within the meaning of Section 4(I)(iii) of the Income-tax Act must prevail. The claim falls within the scope of the rule in Multanchand Johurmul v. Commissioner of Income-tax, Bengal, which was followed by our Court in Commissioner of Income-tax, Madras v. Murugappa Chettiar and by the Bombay High Court in Sarupchand Hukamchand, In re. The claim falls within the scope of the rule in Multanchand Johurmul v. Commissioner of Income-tax, Bengal, which was followed by our Court in Commissioner of Income-tax, Madras v. Murugappa Chettiar and by the Bombay High Court in Sarupchand Hukamchand, In re. The case law on the subject was exhaustively reviewed by Kania, C.J., in Sarupchand's case. It may not therefore be necessary to traverse the whole ground again. In Multanchand Johurmul's case. one Joychandlal Kothari resided in Cooch Behar. He sent jute for sale to the Calcutta business of the assessee. The sold it, and a certain amount was due to him by the Calcutta business, instead of sending money from Calcutta to Joychandlal Kothari, the assessees got their Cooch Behar branch or branches to pay to Joychandlal Kothari in Cooch Behar the debt which was really due from the Calcutta business. On these facts the learned Judges held that the amounts paid at Cooch Behar by the Cooch Behar branches of the assessee firm to the creditor Joychandlal Kothari were not received in British India even constructively. In the present case, no doubt, the assessee's liability to the Calico Printers Association Ltd., Manchester, was reduced to the extent of Rs. 40, 070 by the remittance from Bhopal to Manchester. The situs of the debt was Madras, in the sense that the Calico Printers Association Ltd., to whom the dividend was payable, could enforce payment of that amount at Madras. But then the assessee had the legal right - it was also an obligation - to seek out the creditor and pay the debt due to him at Manchesters. It was in the exercise of that right and in discharge of that obligation that the payment was made at Manchester by the Bhopal branch of the Imperial Bank of India under instructions from the assessee company. A mere lessening of the assessee's liability enforceable at Madras, and with nothing more, cannot amount to "receipt" of the money at Madras. That was the principle laid down in Multanchand Johurmul's case. A mere lessening of the assessee's liability enforceable at Madras, and with nothing more, cannot amount to "receipt" of the money at Madras. That was the principle laid down in Multanchand Johurmul's case. The ratio decidendi of Multanchand Johurmul's case was explained by Kania, C.J., in Sarupchand's case :- "The short point which was decided was that as the money was lying in Cooch Behar and paid to creditors in Cooch Behar, no portion thereof was received in British India." * In the present case money lying at Bhopal outside (what was then) British India was transferred to Manchester. Also outside British India, and the payment to the creditor to whom a dividend was due was at Manchester. The liability of the assessee, no doubt enforceable at Madras, was reduced by the amount of that remittance of Rs. 40, 070. Since that was all that was proved, it could not amount to a receipt of Rs. 40, 070 at Madras. Mr. Rama Roa Saheb referred to Hall v. Marians and Wild v. King Smith and pointed out that in both these cases the debt itself was transferred from London to Colombo before it was discharged by payment at Colombo from out of the monies of the assessee held at Colombo. We are unable to find anything in those judgment to sustain the contention to Mr. Rama Rao Saheb, that there must be a transfer of the debt antecedent to its discharge, to treat such a discharge abroad as non-receipt of money within the taxable territory. In Sarupchand's case at P. 257, also there was apparently such an antecedent transfer outside British India. The facts set out at page 257 of the report were :- "In the Bombay books two persons of the name of Pannalal Khupchand and Parasram Dulichand were creditors of the firm. The accounts of these two creditors were started in the Bombay books in Samvat year 1989-90 and at the beginning of the year of account in question Rs. 81, 603 and Rs. 38, 145 respectively stood to their credit. On December 27, 1933, their accounts were debited with Rs. 80, 000 and Rs. 9, 000 respectively by havalas passed on that date and corresponding amounts were credited to the Indore shop account. 81, 603 and Rs. 38, 145 respectively stood to their credit. On December 27, 1933, their accounts were debited with Rs. 80, 000 and Rs. 9, 000 respectively by havalas passed on that date and corresponding amounts were credited to the Indore shop account. In the journal, the entries were made as follows : 'Debited to your account as per your instructions and credited to the Indore shop.' These creditors were paid at Indore the said two sums out of the cash of the Indore firm. In addition to these facts, the Commissioner has pointed out that on November 29, 1933, a sum of Rs. 85, 000 in currency notes was sent by the Bombay firm to the Indore firm and on February 5, 1935. another sum of Rs. 50, 000 was similarly sent from Bombay to Indore. The question is whether in these circumstances the two sums of Rs. 80, 000 and Rs. 9, 000 are to be treated as profits arising without British India to persons resident in British India and received or brought by them into British India." * The question was answered in the negative and in favour of the assessee. Despite the fact that there was a havala, that is, that by an agreement between the creditor at Indore and the debtor at Bombay there was a transfer of the liability, which had arisen at Bombay, to Indore antecedent to the discharge of that liability. Kania, C. J., held that the fact's of Sarupchand's case were similar to those in Multanchand Johurmul's case Cal. There was no such antecedent transfer of liability either in Multanchand Johurmul's case or in Murugappa Chettiar's case. In all the five cases we have referred to so far, the creditor accepted payment made abroad at a place other than the original situs of the debt, and that was what really mattered - the discharge of the obligation outside the taxable territory with monies held outside the taxable territory. That there was also an antecedent arrangement between the creditor and the debtor to transfer the situs of the debt to the place abroad where it was ultimately discharged in no way affected the principle on which was decided the question, whether such a discharge amounted to receipt of the money within the taxable territory. That there was also an antecedent arrangement between the creditor and the debtor to transfer the situs of the debt to the place abroad where it was ultimately discharged in no way affected the principle on which was decided the question, whether such a discharge amounted to receipt of the money within the taxable territory. That was apparently what Kania, C.J., meant when he observed that the facts in Sarupchand's case were identical with those in Multanchand Johurmul's. As we have pointed out already, there was an antecedent arrangement in Sarupchand's case and none in Multanchand Johurmul's case. An antecedent arrangement between a creditor and a debtor to transfer the liability itself, that is, the situs of the debt itself, to a place outside the taxable territory is not indispensable. Even without it, the debtor has the right to seek out the creditor to pay. If the creditor lives outside the taxable territory, it is the payment abroad, accepted by the creditor in discharge of the liability incurred within the taxable territory that matters in deciding the question, whether such a payment amounts to receipt of money by the debtor (assessee) within the taxable territory. A payment abroad from out of monies held abroad which results in extinguishment of the assessee's liability, total or partial, will not by itself amount to receipt by the assessee within British India of income etc., which had accrued to the assessee outside British India within the meaning of Section 4(I)(iii) of the Income-tax Act.Mr. Rama Rao Saheb also referred to Subramaniam Chettiar v. Commissioner of Income-tax, Madras. The facts of that case were : The assessee carried on business at Tinnevelly in British India and at Penang, outside British India. In or about July 31, the trustee of a Patasala at Kunnakudi in British India deposited certain monies with the Tinnevelly shop of the assessee. When the trustee applied for repayment of the money, the assessee issued two hundies on his Penang shop for the amount due. The Penang shop paid those amounts at Penang. The transactions were recorded in the Penang folio of the Tinnevelly books and the Tinnevelly folio of the Penang books. When the trustee applied for repayment of the money, the assessee issued two hundies on his Penang shop for the amount due. The Penang shop paid those amounts at Penang. The transactions were recorded in the Penang folio of the Tinnevelly books and the Tinnevelly folio of the Penang books. The learned Judges held that the sum of money so paid at Penang should be treated as a remittance of foreign profits to British India and was assessable to income-tax under Section 4 of the Indian Income-tax Act as income received by the assessee within British India. In distinguishing the facts of this case, Kania, C.J., quoted with approval in Sarupchand's case the observations of the learned Judges in Murugappa Chettiar's case XAFE :- "There the creditor and the debtor both resided in British India and the creditor was paid by a hundi delivered to him in British India." A hundi as a negotiable instrument is money's worth, and that was delivered to the creditor within British India in discharge of the liability to the debtor, a liability enforceable within British India. As pointed out in Gresham Life Assurance Society Ltd. v. Bishop, receipt of income need not necessarily be in specie. In invoking the principle laid down in Subramaniam Chettiar case, Mr. Rama Rao Saheb pointed out that the assessee in addition to issuing instruction to the Bhopal branch of the Imperial Bank of India to remit the amount to Manchester drew a cheque on the Imperial Bank of India at Bhopal and that that cheque was drawn at Madras and sent to Bhopal. But quite obviously that cheque was not really a negotiable instrument to the creditor. The cheque was in favour of an agent of the assessee. That was the position of the Imperial Bank of India at Bhopal, and the agent's instructions were to remit the money to Manchester : it was not as a negotiable instrument that the cheque was sent to that agent. The cheque was only really in confirmation of the instructions issued by the assessee to his agent. Further, the issue of a cheque was not one of the facts relied upon by the Appellate Tribunal in the statement of the case it prepared for submission to this Court.Mr. The cheque was only really in confirmation of the instructions issued by the assessee to his agent. Further, the issue of a cheque was not one of the facts relied upon by the Appellate Tribunal in the statement of the case it prepared for submission to this Court.Mr. Rama Rao Saheb sought to distinguish the assessee's case from Multanchand Johurmul's case by the fact that cross-entries were made in the assessee's books at Madras. That is, the Imperial Bank of India at Bhopal was credited with Rs. 40, 070 and the profit and loss account or the dividend account was debited with this amount. That was what was recorded in the order of the Appellate Tribunal. The entry in the statement of the case prepared by the Appellate Tribunal, that the Calico Printers Association Ltd., Manchester, was debited with this amount of Rs. 40, 070 therefore appears to be incorrect. The entries merely evidenced the payment at Manchester, that is, the extinguishment of the liability in part by such a payment, in Commissioner of Income-tax, Bombay v. New India Assurance Co., Ltd., Beaumont, C.J., Observed at page 615 :- "If, for example, it were shown that a sum representing income received abroad had been exchanged, by appropriate book entries, for an asset in India, and had then been applied as income in India, I should say that the foreign income had then been received in India." * Commenting upon that Kania, C.J., observed in Sarupchand's case XBXG :- "I have noticed this sentence in particular because it brings out clearly what is intended to be conveyed by the word 'received' in the section. It does not amount to merely 'lessening of liability in British India' as contended by the Commissioner. It means 'receipt in British India of the amount, or by appropriate book entries, of an asset, which can be pointed out as resulting from the receipt'." * It is not therefore every cross-entry that would amount to a receipt within British India within the meaning of Section 4(1)(iii) of the Income-tax Act.In Commissioner of Income-tax, Madras v. Mysore Chromite Ltd., a judgment to which one of us was party, it was laid down at page 560 : "The effect of the adjustment was only to lesson the liability of the assessee in British India to the Eastern Bank Ltd., Madras. That cannot be treated as a receipt of the profits in British India. As has been pointed out by Kania, J., as the officiating Chief Justice, as he then was, in Sarupchand Hukamchand In re. a mere lessening of liability in British India is not a receipt. To constitute a receipt there must be a receipt of the amount or at least by appropriate book entries of an asset which can be pointed out as resulting from the receipt." * As we have already pointed out, the assessee's claim falls within the scope of the rule in Multanchand Johurmul's case We therefore answer the question referred to in the negative and in favour of the assessee. The assessee is entitled to the costs of this reference, which we assess at Rs. 250. Reference answered in the negative.