Dawson-Miller, C.J.The matter comes before us on a reference made by the Commissioner of Income Tax u/s 66(1) of the Income Tax Act, 1922. The question for our decision, as stated by the Commissioner, is

whether, when an assessee was appointed to a salaried post for five years (though without any contract or agreement) and was allowed to resign before the expiry of five years and was granted an honorarium in a lump sum equal to the salary which he would have drawn if he had served for the whole five years, this sum is liable to taxation.

2. The question thus stated in somewhat general terms must be answered with reference to the particular facts found in the case. Two points were argued on behalf of the assesses, first, that the sum so paid was not salary within the meaning of Section 7(1) of the Income Tax Act, 1922, and, secondly, if this should be decided against him, that the sum which was directed by the employer to be paid to the assessee through the Patna branch of the Imperial Bank of India, but was first paid to the Hyderabad branch of that Bank and from there transferred to the assessees account at Patna is to be regarded as having been received at Hyderabad and not in British India. It will be convenient to deal with the second point first.

3. The assessee, Sir Ali Imam, according to the facts found, was offered and accepted the post of President of the Executive Council of H.E.H. the Nizam of Hyderabad for five years on a salary of Rs. 7,000 per month, His employment began on the 20th August, 1919. After serving for just over three years, namely, on the 4th September, 1922, he resigned his office. His resignation was accepted and he made over charge of his office on September 6th, 1922 to his successor. Subsequently, on the same day, the Nizam issued a Firman in the following words:

As owing to certain seasons, Sir Ali Imam has asked to be relieved of his duties, I have accepted his resignation. I take this occasion to express my appreciation of the loyal devotion with which he has performed the duties of his high office during the past three years.

4. He then directs Sir Faridoon Mulk to act as his successor until permanent arrangements are made for filling up the appointment. The document then continues as follows:

I also hereby order that payment should be made to Sir Ali Imam, through the Imperial Bank of India, of the honorarium at the rate of seven thousand B.G. rupees per mensem due to him for the two years which will remain to be completed out of his term of office of five years and a formal receipt obtained.

5. Then follow certain directions as to minor arrangements connected with the Presidents office, which are not material, and the document ends thus:

Ordered that this my Firman be read out by Sir faridoon Mulk on Thursday, the 14th of the present month of Moharram, in the Executive Council in the presence of the Members, and that it should be published immediately by Notification in Jarida Extraordinary.

6. On the evening of the 6th September, Sir Ali Imam left Hyderabad for Patna where he arrived a day or two later. On the 8th September, the Finance Member of the Nizams Government asked the Agent of the Hyderabad branch of the Imperial Bank to arrange to pay the sum in question, which amounted to Rs. 1,63,333-5-4 to Sir Ali Imam through their Patna branch and to take a formal acknowledgment from him. On the 9th September, the Agent of the Hyderabad branch wrote to the Agent of the Patna branch of the Bank enclosing duplicate receipts to be signed by Sir Ali Imam and requesting him to pay the amount named to Sir Ali Imam and return the receipts signed in duplicate. On the 13th September, the Patna branch sent the receipts to Sir Ali Imam who was at that time in Patna requesting him to sign and return the same. The receipts were in the following form:

Received from the Imperial Bank of India the sum of rupees one lac sixty three thousand three hundred and thirty-three, annas five and pies four only, being amount placed at my disposal by Imperial Bank of India, Hyderabad, Deccan, under instructions From the Finance Member, H.E.H. the Nizams Government, vide their letter No. 555, dated 8th September, 1922, being my pay for the unexpired portion of my term.

7. The receipts were duly signed by Sir Ali Imam, who on the 16th September enclosed them with a letter to the Patna branch of the Bank, requesting them to instruct the Hyderabad branch to place the money to his credit at the Hyderabad branch until further instructions. On the same day the Patna branch wrote to Hyderabad forwarding a copy of the letter received requesting the money to be placed to the assessees credit with the Hyderabad branch of the Bank. They added in that letter that no entry had been passed at the Patna Branch which I take to mean that the money had not been credited to Sir Ali Imam by any book entry at the Patna branch. About a fortnight later, on the 30th September, 1922, Sir Ali Imam wrote to the Agent of the Imperial Bank of India at Hyderabad to transfer the balance standing to his credit at their branch to his account with the Patna branch. On the 4th October, the Hyderabad branch instructed the Patna branch to place the sum in question to Sir Ali Imams credit in Patna which was accordingly done. It is conceded by the Government Pleader on behalf of the Commissioner of Income Tax that salaries earned by a British subject outside British India are not ordinarily chargeable under the Indian Income Tax Act and it is not contended that the income earned by Sir Ali Imam as President of the Nizams Executive Council before his resignation was taxable. Section 1 of the Act which limits the area to which the Act applies provides in Sub-section (2) as follows:

It extends to the whole of British India, including British Baluchistan, and the Sonthal Parganas, and applies also, within the dominions of Princes and Chiefs in India in alliance with His Majesty, to British subjects in those dominions who are in the service of the Government of India or of a local authority established in the exercise of the powers of the Governor-General-in-Council in that behalf, and to all other servants of His Majesty in those dominions.

8. It appears therefore that although the Act extends to certain classes of persons within the dominions of the ruling Princes and Chiefs in India, the assessee was not one of the persons named in the sub-section. He was neither in the service of the Government of India or of the local authority there mentioned nor was he a servant of His Majesty in those dominions. It was the opinion, however, of the Commissioner of Income Tax that, in the circumstances which I have already referred to, the sum in question must betaken as having been received by the assessee in British India within the meaning of Section 4(1) of the Act. That section provides as follows:

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.

9. There are two cases and only two referred to in the Act where profits received outside British India are deemed to have been received in British India. The first appears in Section 4(2) and relates to the profits and gains of a business accruing without British India to a person resident within, where such profits or gains are brought in within three years of receipt. The second appears in Section 11 which provides that professional fees paid in any part of India to a person ordinarily resident in British India shall be deemed to be professional earnings which are taxable u/s 6. Neither of these provisions apply to the present case, nor was it so contended. The sum in question in the present case was neither the profits of a business nor professional fees. The question for determination, therefore, is whether in the circumstances stated the sum in question can be said to have been received in British India within the meaning of Section 4, Sub-section (1). It should be stated, as would appear from the correspondence which has been printed with the record, and indeed it is not disputed, that at all material times the assessee as well as the Nizam had an account with the Hyderabad branch of the Imperial Bank of India although this fact is not specifically mentioned in the statement of the case. The opinion of the Commissioner of Income Tax is expressed thus:

In my opinion the sum is taxable because it was really received by the assessee in British India on September 16th. The instructions of the Finance Member show the intention of the employer and the assessees acknowledgment, signed at Patna, constitutes a receipt in British India, The effect of his instructions of September 16th was to transfer the amount back to Hyderabad; if he had not given these instructions, the amount would dearly have remained, at Patna.

10. This passage quoted from the case submitted is merely an expression of opinion. It is not conclusive as a finding of fact. The fact found in the earlier part of the case is that the sum was first paid to the Hyderabad branch and from there transferred to the assessees account at the Patna branch. The question for our decision is as to the meaning which should be given to the word "received" in Section 4 of the Act and it is still open to us to consider that question, notwithstanding that in the opinion of the Income Tax Commissioner the money was received in British India on September 16th. It is true that the money was eventually received by the assessee in British India in the sense that it was transferred from his account at Hyderabad to his account at Patna, but the receipt of the income referred to in Section 4, must, in my opinion, refer to the first occasion upon which the recipient got the money under his own control. This question was considered by the Pull Bench of the Lahore High Court in 1922 [see Sunder Das v. Crown AIR 1923 Lah. 14 ] where it was held, under the Income Tax Act of 1918, Section 3, Sub-section (1), that income earned and received in British Baluchistan (which at that time was exempt from the operation of the Act except as to salaries paid by Government) and subsequently brought into or transmitted into the Punjab was not liable to be assessed to Income Tax not having been received in the Punjab within the meaning of Sub-section (1) of Section 3 of the Act of 1918, which is similar in terms to Section 4, Sub-section (1) of the Act of 1922. The same view was also taken by a Special Bench of the Madras High Court in the following year in the case of The Secretary, Board of Revenue (Income Tax) Vs. Ripon Press and Sugar Mills Company, Ltd., where the decision of the Lahore High Court was approved and followed. I entirely agree with the judgement pronounced in those cases.

11. It remains to consider, however, upon the facts stated at what period of time did the assessee actually receive the money. The Commissioner was of opinion that the instructions of the Finance Member of the Hyderabad State to the Hyderabad branch of the Bank to arrange for payment to the assessee through their Patna branch shewed the intention of the employer, but the question for determination is not what the intention of the employer was but what the actual fact is. Incidentally, I may remark that it was of no moment to the employer whether the money was placed to the assessees credit at Hyderabad or at Patna; but the Commissioner further considers that the assessees acknowledgment signed at Patna constitutes a receipt in British India. The written acknowledgment of receipt is undoubtedly evidence of the fact that the money has been received, but it is not conclusive. Such receipts are frequently demanded before actual payment of the money and there can be no question that in the present instance nothing was credited to the assessee in the books of the Patna branch of the Bank up to the time the acknowledgment was signed on the 16th September or at any subsequent time until after the money had been placed at the credit of the assessee in his account with the Hyderabad branch. The Commissioner has expressed the view that the effect of the instructions given by the assessee to the Patna branch of the Bank on the 16th September was to transfer the amount back to Hyderabad and that otherwise it would have remained at Patna. This argument appears to me, with due respect to the Commissioner, to be fallacious. There was nothing to transfer. The money had not been paid and no credit entry in favour of the assessee had been made in the books of the Patna branch of the Bank. The fact is, that sometime in September, the money was first credited to the account of Sir Ali Imam in Hyderabad and was subsequently, by a letter, dated the 4th October, transferred from the branch of the Imperial Bank there to the Patna branch. In this state of affairs, I have no hesitation in finding that the sum in question which it is sought to charge was received by the assessee at Hyderabad outside British India and that Section 4, Sub-section (1) of the Act has no application.

12. The further point was also argued by the assessee, viz., that even if the money was received at Patna it was not taxable as salary within the meaning of Section 7(1) of the Act. That section provides as follows:--"The tax shall be payable by an assessee under the head salaries in respect of any salary or any wages, any annuity, pension or gratuity and any foes, commissions, perquisites or profits received by him in lieu of, or in addition to, any salary or wages, which are paid by or on behalf of Government, a local authority, a Company, or any other public body, or association, or by or on behalf of any private employer." It was contended on the authority of the English cases of Turner v. Cuxon (1888) 22 Q.B. 150 and Cowan v. Sepmour (1920) 1 K.B. 500 and the Scotch case of Duncans Trustees v. Inland Revenue (1909J 8.0. 1212, that voluntary payments made in circumstances such as the present to the holder of an office did not accrue by reason of his office or employment. These cases were decided under the English Income Tax Acts of 1842 and 1853 in which the wording is not similar to that of Section 7(1) of the Indian Income Tax Act of 1922. The section of the Indian Income Tax Act is very wide and includes fees, commissions, perquisites or profits received in lieu of or in addition to any salary or wages. The question whether the payment made in the present case was made as a gratuity in addition to the assessees salary or was merely in the nature of a testimonial or mark of affection or respect to the recipient raises points of some difficulty, but in view of the opinion already expressed on the other point it is unnecessary to decide this question, for even assuming, without deciding, that the sum received was salary within the meaning of Section 7(1) of the Act, it was not received in British India within the meaning of Section 4(1) and is therefore not chargeable to Income Tax.

13. The answer to the question upon which our decision is asked should, in my opinion, be in the negative with reference to the facts found in the case. The Petitioner is entitled to his costs including the costs incidental to printing the paper book. The hearing fee is assessed at Rs. 300.

Mullick, J.

14. I agree. I think the reference must be decided in favour of the Petitioner on the ground that the income was neither received in British India nor was such as can be deemed to have been so received. If it be urged that it is sufficient that the money was brought into British India, the reply is that it is not permissible to base an argument on the English Acts and on the case of Gresham Life Assurance Society, Ltd. v. Bishop (1902) 4 A.C. 287. The Indian Act seems clearly to contemplate that income accruing outside British India shall not be taxable (1) unless it is received in British India or is deemed to accrue, or arise, or to be received in British India, or (2) unless it constitutes the profits and gains of a business received or brought into British India within the meaning of Section 4, Clause (2) of the Act. Whatever the English Law may be upon the subject, I think the Indian Act requires that the income earned by the petitioner at Hyderabad should have been actually received in British India and on the evidence I think it is clear that it was not so received; nor is there any provision in the Act, such as Section 11 by reason of which it can be deemed to have been received in British India. Further not being profits and gains arising from a business, it was not sufficient merely to bring the money after receipt.

15. With regard to the question whether the income was derived from salaries, I agree that it is unnecessary to decide the point.