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PETITIONER: STANDARD TRIUMPH MOTOR CO.  LTD.

       Vs.

RESPONDENT: COMMISSIONER OF INCOME TAX, MADRAS

DATE OF JUDGMENT25/02/1993

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) VENKATACHALA N. (J)

CITATION:  1993 SCR  (2)  96        1993 SCC  Supl.  (3) 315  JT 1993  Supl.     46    1993 SCALE  (1)699

ACT: Income Tax Act 1961: Sections  5(2) and 145-Non Resident Company and Indian  Com- pany--Collaboration agreement-Indian Company to apy  royalty to non resident company on all sales-Royalty to be  remitted to  non  resident  in pounds  Sterling-Royalty  credited  by Indian  Company to non resident in its account  books-Credit entries-Whether  amount  to receipt  of  income-whether  non resident  liable  to  method of  accounting  adopted-Whether relevant.

HEADNOTE: The  assessee-appellant  in  the appeal is  a  non  resident company having its place of business at Coven" in the United Kingdom.  It entered into a collaboration agreement with  an Indian company in November, 1939 the assessee being entitled to  royalty  of  5%  on all sales  effected  by  the  Indian Company,  and  this  amount less the Indian tax  had  to  be remitted   by  the  assessee  in  Sterling  currency.    The assessee’s   accounting  year  was  the  year  ending   30th September  and  with respect to its Indian  income,  it  was filing   its  returns  through  the  Indian  Company.    The aforesaid collaboration agreement expired in the year  1965, but it was renewed and the renewed agreement also expired in November, 1970. For  the assessment years 1967-68 and 1968-69  the  assessee riled returns in which it stated that it was maintaining its accounts  on  mercantile  basis, and  did  not  dispute  its liability  to assessment.  In these returns, it disclosed  a royalty   income   of   Rs.  7,21,600   and   Rs.   4,57,311 respectively.  When it came to the filing of the return  for the assessment year 1969-70 the assessee admitted a  royalty of  Rs. 9,25,357 but filed a nil return saying that  it  was maintaining its accounts on cash basis and not on mercantile basis, that no part of the royalty amount had been  received by  it  and, therefore, nothing was taxable.  For  the  next assessment year 1970-71 as well, the same stand was taken by the assessee. The  Income-Tax  Officer completed the  assessment  for  the first two 97 assessment  years on the basis of the returnes, but for  the

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assessment  years 1969-70 and 1970-71, he refused to  accept the  plea  of  the  assessee; and  held  that  the  assessee maintaining its accounts on mercantile basis alone and  that the royalty amount disclosed be brought to tax. The assessee filed appeals against the assessments  relating to  all  the  four years, taking the stand  that  even  with respect  to the accounting year relevant to  the  assessment years 1967-68 and 1968-69, it had been maintaining  accounts on  cash  basis and since it did not  actually  receive  any income  in  all  these  4 years no  tax  was  payable.   The Appellate  Assistant  Commissioner  dismissed  the   appeals holding that the assessment orders for the past years reveal that  the method of accounting was mercantile, that for  the assessment  year 1967-68, the assessee never  contested  its liability  to be taxed on the amounts disclosed and  further it  was  not open to the assessee to change  the  method  of accounting to suit its convenience, without the approval  of the Income Tax Officer. The  assessee carried the matter In further appeals  to  the Tribunal  and  contended  that  it  was  not  following  any particular method of accounting regularly in the past  years that it was the Indian Company which was finally filing  the returns of income on behalf of the assessee by incorporating the  figures  as per its profit and loss account,  that  the Indian  Company  was not aware of the assessee’s  system  of accounting in regard to royalty and that, therefore, it  had committed a mistake in filing the returns for the assessment years  1967-68 and 1968-69, that as soon as the mistake  had been   noticed,  it  was  corrected  and  returns  for   the assessment  year 1969-70 on correct basis showing  that  the method of account cash receipt basis was filed.  ’Me appeals were  allowed the Tribunal which held that as  the  assessee had  not been following any particular method of  accounting regularly over the past years, the question of the method of accounting  adopted by the assessee must be examined  afresh and for that purpose remanded the matters to the Income  Tax Officer. On  a  reference made at the instance. of the  Revenue,  the High  Court answered the reference in favour of revenue  and against   assessee.   The  High  Court  held  that  it   was ’immaterial whether the assessee was keeping his accounts in regard  to a particular income regularly on the cash  basis; that  even if the assessee was keeping his accounts  on  the cash  basis in regard to his income the assessee was  liable to tax under Section 5 (2) (a); to hold 98 otherwise would be to take the income outside the purview of taxation  under the Act, though such income had  accrued  in India  to  a  non-resident, and under  Section  5(2)(b)  the charge to tax had taken effect; and, therefore, there is  no possibility  of Section 5(2)(b) ever coming  into  operation and  that Section 145(1) cannot be given such an  overriding effect  so  as to defeat the charge and  the  provisions  of Section 5(2)(b). The  assessee appealed to this Court contending that so  far as  the  royalty  income was  concerned,  the  assessee  was maintaining  its accounts at Coventry in the United  Kingdom on  receipt  basis, that the accounting year  was  the  year ending  30th September of each year, whereas the  accounting year  for the Indian Company was the Calendar year and  that notwithstanding   the  stipulation  in   the   collaboration agreement for half yearly remittances, the practice was that the Indian Company was determining the amount of royalty  at the  end  of its accounting year and that  this  amount  was credited to the account of the assessee in the account books

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of  the  Indian Company and that receipt is  only  when  the amount is remitted to the United Kingdom in accordance  with the Company. Dismissing the appeals, this Court, HELD:     The  collaboration agreement between the  assessee and the Indian Company was as old as 1939.  The assessee had been  riling  its  income-tax return in  India  through  the Indian   Company.    Though  the   collaboration   agreement contemplated  the royalty amount being remitted in  Sterling Currency  to  U.K., it cannot be said that until it  was  so remitted  to and received in the U.K., the assessee had  not received  the income.  The practice evidently was  that  the Indian Company was maintaining an account pertaining to  the assessee in its Books.  After it made up its accounts at the end  of the calender year and determined the royalty  amount payable  to the assessee, the Indian Company  was  crediting the said amount to the account of the assessee in its Books, and  this  was recorded as income by the assessee  over  all these  years.  The returns riled by the assessee  even  with respect  to  the assessment years 1967-68 and  1968-69  were based upon this premise.  In the said returns, the  assessee declared a particular amount of income and offered the  same for  taxation.   It  did not take the stand  that  the  said credit entry in the Books of the Indian Company did not give rise to income in India nor did it ever say that the receipt in U.K. in the shape of sterling pounds alone constitutes 99 income or for that matter receipt of income.  It can also be noticed that in its returns relating to the assessment years 1967-68  and  1968-69,  the  assessee  stated  that  it  was maintaining its accounts on mercantile basis, and that  only in the returns relating to the assessment year 1968-69,  did it  raise the plea that it was maintaining its  books,  with respect  to the said royalty amount, on cash receipt  basis. [105E-H] The  receipt of the said income in the U.K., is  immaterial. It may happen that a non-resident assessee may choose not to repatriate his income/profits to his parent country; he  may choose  to  plough back the said amount in  India  for  such purposes as he may choose.  It, therefore, cannot be said in such  a  situation that he has not received  the  income  in India. [106H] Raghava Red& v. C.I.T, Andhra Pradesh, 44 I.T.R. 720; relied on. [107A] The credit entry to the account of the assessee in the Books of the Indian Company does amount to receipt by assessee and is  accordingly  taxable.   It is  immaterial  when  it  was actually received in U.K. [108C] The  method  of accounting adopted by the assessee  for  the relevant  accounting years Is really irrelevant.   Thi  very concept  of  ’receipt"  as  espoused  by  the  assessee   is untenable and unacceptable.  The order of remand made by the Tribunal  was unnecessary.  It is not necessary  to  express any  opinion  either on the question whether  there  is  any conflict  or inconsistency between Section 5(2) and  Section 145  of the Act or on the view expressed by the  High  Court that  in  the  case  of a  non-resident  assessee  like  the appellant clause (a) of sub-section (2) of Section 5 has  no application  whatsoever and that Section 5(2)(b) governs  it irrespective  of the fact whether it maintains its  accounts on  cash basis or mercantile basis.  The  question  referred did  not really arise in the facts and circumstances of  the case  and need not have been answered.  The  Tribunal  shall complete the assessments in question. [108D-F]

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C.I.  T. v. Machillan & Co., 33 I.T.R. 182 and Keshav  Mills Ltd. v. C.I T., Bombay, 23 I.T.R. 230, distinguished. [108G]

JUDGMENT: CIVIL  APPELLATE JURISDICTION: Civil Appeal Nos.  1022-24  & 423 of 1982. 100 From  the Judgment and Order dated 14.3.78 & 2.7.79  of  the Madras High Court in Tax Case Nos. 228/74 & 215 of 1975. Uttam  Reddy, Atul Sharma, A.V. Palli and Ms. Reena  Agarwal for E.C. Agrawala for the Appellant. G.   Vishwanatha, P. Parmeshwaran and Ms. A. Subhashini (NP) for the Respondent. The Judgment of the Court was delivered by B.P.  JEEVAN  REDDY, J. These appeals are preferred  by  the assesagainst the judgment of the Madras High Court answering the Income Tax reference   made  at  the  instance  of   the Revenue, against the assessee. The assessment          years concerned are 1967-68, 1968- 69, 1969-70 and 1.970-71. The question  of law which was referred for the opinion  of  the High Court under Section 256(2) of the Income Tax Act is:               "Whether,   on   the   facts   and   in    the               circumstances  of  the  case,  the   Appellate               Tribunal was right in holding that the royalty               amounts  should be assessed on cash basis  for               1967-68. 1968-69 and 1969-70 assessment if the               books and balance sheet of such receipts  were               found  to  be  maintained on  cash  basis  and                             directing fresh assessment on such basis?" In  the  paper-book supplied by the  assessee-appellant  the Statement of the Case is not available nor are the orders of any of the authorities supplied.  We are, therefore, obliged to draw the facts from the judgment of the High Court  which we  presume are drawn from the Statement of the Case.  As  a matter of fact, the facts require to be appreciated  clearly for a proper decision of the question arising herein. The  assessee,  Standard Triumph Motor Co. Ltd.  is  a  non- resident  company, having its place of business at  Coventry in  the  United Kingdom.  It entered  into  a  collaboration agreement  with  the Standard Motor Products of  India  Ltd. (Indian  Company) in November, 1939 whereunder the  assessee was  entitled  to  royalty of five per  cent  on  all  sales effected  by  the Indian Company.  This amount of  five  per cent less the Indian tax had to be remitted to the  assessee in  the Sterling currency.  The assessee’s  accounting  year was the year ending 30th of September.  With respect to 101 its  Indian  income, it was filing its returns  through  the Indian Company. The  collaboration  agreement between the assessee  and  the Indian  Company expired in the year 1965.  It  was  renewed. The renewed agreement too expired in November, 1970. For the assessment years 1967-68 (year ending 30.9.1966) and 196869 (year ending 30.9.1967) the assessee filed returns in which  it  stated that it was maintaining  its  accounts  on mercantile  basis.   It  did not dispute  its  liability  to assessment.  In these returns, it disclosed a royalty income of Rs. 1,600 and Rs. 4,57,311 respectively.  When it came to filing  of the return for the assessment year 1969-70  (year ending  30.9.1968), the assessee admitted a royalty  of  Rs. 9,25,257  but  filed  a  nil  return  saving  that  it   was maintaining   its  accounts  on  cash  basis   and  not   on mercantile  basis,  that no part of the royalty  amount  has

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been received by it and, therefore, nothing is taxable.  For the next assessment year 1970-71 (year ending 30.9.1.969) as well,  it  took the same stand.  The  I.T.O.  completed  the assessment  for the first two assessment years on the  basis of the returns.  For the assessment years 1969-70 and  1970- 71,  however, he refused to accept the assessee’s plea  that it was maintaining its accounts on cash basis.  He held that it  was maintaining its accounts on mercantile  basis  alone and accordingly brought to tax the royalty amount disclosed. The assessee filed appeals against the assessments  relating to all the four years.  In these appeals, it took the  stand that  even with respect to the accounting years relevant  to the  assessment  years  1967-68 and  1968-69,  it  has  been maintaining  accounts  on cash basis and since  it  did  rot actually receive any income in all these four years, no  tax is  payable by it.  Its case was that there was  ’no  actual payment’  of the royalty by the Indian Company.   It  stated that though the Indian Company had credited to the  assessee in its account books for the relevant years (accounting year for  the Indian Company is stated to be the calendar  year), the assessee did not actually receive the amount nor did  it take  credit for the said amounts in its Books at  Coventry. The  Appellate Assistant Commissioner dismissed the  appeals holding  that  the  assessment orders  for  the  past  years relating   to  the  assessee  reveal  that  the  method   of accounting  was mercantile, that for the A.Y.  1967-68,  the assessee did never contest its liability to be taxed on  the amounts disclosed and further that it was not open to it  to change  the  method of accounting to suit  its  convenience, without the approval of 102 the Income Tax Officer.  The assessee carried the matter  in further  appeals  to the Tribunal.It was  contended  by  the assessee  before the Tribunal that it was not following  any particular method of accounting regularly in the past years, that it was the Indian Company which was finally filing  the returns of income on behalf of the assessee by incorporating the  figures  as per its profit and loss account,  that  the Indian  Company  was not aware of the assessee’s  system  of accounting in regard to royalty and that, therefore, it  had committed a mistake in filing the returns for the assessment years  1967-68 and 1968-69.  The assessee submitted that  as soon  as it noticed that said mistake it corrected the  same and  filed  the return for the assessment  year  1969-70  on correct  basis,  showing that the method of  accounting  was cash  receipt  basis.   The  appeals  were  allowed  by  the Tribunal.  The Tribunal held that the assessee had not  been following any particular method of accounting regularly over the  past years.  For example, it said, for  the  assessment year 1963-64 it did not say anything regarding the method of accounting.   For the assessment year 1.964-65, it  said  it was  on  cash basis.  For the assessment years  1967-68  and 1968-69 it stated it was maintaining accounts on  mercantile basis  and again for the two subsequent years it  stated  as cash  basis.   The Tribunal was, therefore, of  the  opinion that  the  question of method of accounting adopted  by  the assessee  must  be  examined afresh  and  for  that  purpose allowed  the appeals and remanded the matters to the  Income Tax  Officer.  The Tribunal gave liberty to the  parties  to adduce  additional  evidence in that  behalf.   It  directed further   that  if  it  is  found  that  the  assessee   was maintaining its accounts and balance sheets on cash basis in respect of the royalty it should be assessed on cash basis. On  a  Reference made at the instance of Revenue,  the  High Court answered the question in the negative, i.e., in favour

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of  the  revenue  and against the  assessee.   It  would  be appropriate at this stage to notice the contentions urged by the  assessee  and  how they were met  by  the  High  Court. Though  the High Court has not set out the arguments of  the assessee  as  such,  the arguments advanced  can  easily  be gleaned  from  the judgment.  The  assessee  reiterated  his contention  that  though the Indian Company  made  a  credit entry  in the account of the assessee in its Books,  it  did not actually receive the amount.  The argument appears to be that  the assessee can be said to have received the  royalty amount  only when it receives the same in U.K. in the  shape of pounds and makes an entry to that effect in its own Books at  Coventry.   Since it is maintaining its  accounts,  with respect  to  the  said royalty on  cash  basis,  it  argued, receipt means receipt in U.K. Section 145 was relied upon by the 103 assessee  to  say that the method  of  accounting  regularly adopted  by an assessee is binding upon the  department;  on that  basis it was argued that if the assessee is proved  to have maintained its accounts with respect to royalty  amount on cash basis, then there is no receipt until it is received by  it in U.K. It is this argument which led the High  Court to  say  that  acceptance of the said  argument  would  mean escapement  of  income from taxation  in  India  altogether. This is what the High Court said : "If the contention of the assessee  that the royalty should be assessed to  income-tax only on its actual receipt under Section 5(2)(a) of the  Act on  the ground that it maintains its accounts on cash  basis is  accepted,  the income could not be taxed at  all  as  it would  be  received  in  England  and  not  in  India.   The assessee-company,  a  non-resident,  receiving  its   income outside  India could be assessed to tax only  under  Section 5(2)  (b)  of the Act on accrual basis.   Section  5(2)  (a) cannot be made applicable to such an assessee.  In the  case of a non-resident, to whom income accrues in India,  Section 5(2)(a)  will have no application. unless  the  non-resident receives  income in India.  On the facts of this case it  is clear  that  eventuality will never arise in regard  to  the income  with which were are concerned, because  that  income will have to be remitted to the nonresident by obtaining  an irre-vocable letter of credit and will thus be received only outside  India." Pursuing the said reasoning the High  Court held further:               "So  it  is clear that there can be  cases  of               non-residents  to  whom section  5(2)(a)  will               never apply in regard to a particular  income.               The   question  then  is,  whether   in   such               circumstances  the  assessee  concerned  (non-               resident to whom income had accrued in  India)               can insist it, since )has kept his accounts in               regard to that income on the cash basis, he is               not  liable to be taxed on the accrual  basis.               In    other    words,    the    question    is               Sec   145(1)   can   be   applied   in    such               circumstances.   The effect   of  applying the               section  would be to take the  income  outside               the  purview of taxation though the charge  to               tax  on  that income had taken effect  on  the               accrual  basis.   Further,  no  occasion   for               imposing  tax on receipt outside  India  would               arise  in the case of a non-resident,  because               Section 5(2)(a) will apply only to receipt  in               India.    In  such  circumstances,  to   apply               Section  145(1) would be to defeat the  charge

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             under   Section  4  and  to   obliterate   the               provisions  of  section 5(2)(h)  and  let  the               income which is taxable escape Such a               104               result  is  not  certainly  intended  by   the               statute.   Section 145(1) is only an  enabling               provision  to  effectuate  the  charge.    The               section  cannot  be used  for  destroying  the               charge  to  tax  and the  provisions  of  Sec.               5(2)(b),  though  by  merely  looking  at  the               wording  of Section 145(1) it may appear  that               in all cases the method of accounting must  be               followed,   unless  in  any  case  where   the               accounts  are correct, but the method is  such               that,   in  the  opinion  of  the   Income-Tax               Officer, the income cannot properly be deduced               therefrom.               But  it  must be remembered that Sec.  145  is               only a machinery provision and cannot  qualify               the charging section so as to make the  latter               otioss.   So  Section  145(1)  should  not  be               permitted to be applied in such  circumstances               as  those while arise from the facts  of  this               case.  it is therefore immaterial whether  the               assessee is keeping his accounts in regard  to               a  particular  income regularly  on  the  cash               basis.   Even if the assessee is  keeping  his               accounts  on the cash basis in regard  to  his               income,  the assessee is liable to  tax  under               Sec.  5(2)(b).  To hold otherwise would be  to               take   the  income  outside  the  purview   of               taxation under the Act, though such income had               accrued  in India to a nonresident  and  under               Sec.  5(2)(b)  the  charge to  tax  had  taken               effect  and  there is no possibility  of  Sec.               5(2)(b) ever coming into operation.  We cannot               give to Sec. 145(1) such an overriding  effect               as to defeat the charge and the provisions  of               Section 5(2)(b)." In  this  court,  the  learned  counsel  for  the   assessee contended  that so far as the royalty income  is  concerned, the assessee was maintaining its accounts at Coventry in the United  Kingdom on receipt basis.  Its accounting years  was the  year ending on 30th of September of each  year  whereas the  accounting year of the Indian Company was the  calendar year.  Notwithstanding the stipulation in the  collaboration agreement for half-yearly remittances, the practice was that the Indian Company was determining the amount of royalty  at the end of its accounting year.  This amount was credited to the  account  of the assessee in the account  books  of  the Indian  Company,  but mere crediting to the account  of  the assessee in the Books of the Indian Company does not 105 amount  to  receipt of income by the assessee.   Receipt  is only  when  the  amount is remitted  to  United  Kingdom  in accordance  with the agreement.  Counsel submitted that  the assessee  was  not  maintaining  any  particular  method  of accounting  regularly in respect of the said royalty  amount and  that the alleged statement in the returns  relating  to the assessment years 1967-68 and 1968- 69 to the effect that it was maintaining its accounts on mercantile basis, was  an incorrect statement made by the Indian Company which was not aware  of  the  true  state  of  affairs  relating  to   the assessee’s accounts.  The learned counsel submitted that all that  the Tribunal has done is to direct an inquiry to  find

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out the true state of affairs viz., whether the assessee was maintaining  its  accounts on mercantile basis  or  on  cash receipt basis in so far as the royalty amount is  concerned. He  submitted  further that since  the  Appellate  Assistant Commissioner  exercises  all  the powers  of  the  assessing authority,  it was perfectly open to the assessee  to  raise the  contention  relating to the method of  accounting  even with respect to the assessment years 1967-68 and 1968-69, in the  appeals.  When the assessee has not  actually  received any  royalty  income  from the Indian  Company,  it  is  not expected  to bring money from the United Kingdom for  paying its taxes in India, the learned counsel contended. The  collaboration  agreement between the assessee  and  the Indian  Company  is as old as 1939.  According  to  its  own case, the assessee has been filing its income-tax returns in India  through  the  Indian Company.  It is  true  that  the agreement  contemplated  royalty amount  being  remitted  in Sterling currency to U.K., but it cannot be said that  until it is so remitted to and received in the U.K., the  assessee has  not  received the income.  The practice  evidently  was that   the  Indian  Company  was  maintaining   an   account pertaining  to the assessee in its Books.  After it made  up its accounts at the end of the calendar year and  determined the  royalty amount payable to the assessee, the the  Indian Company was crediting the said amount to the account of  the assessee  in its Books.  This was treated as income  by  the assessee  over  all these years.  The returns filed  by  the assessee  even with respect to assessment years 1967-68  and 1968-69  were  based  upon the said premise.   In  the  said returns, the assessee declared a particular amount of income and  offered  the same for taxation.  It did  not  take  the stand that the said credit entry in the Books of the  Indian Company  does  not give rise to income in India nor  did  it ever  say that the receipt in U.K. in the shape of  Sterling pounds  alone constitutes income or for that matter  receipt of  income.   It  may also be noticed that  in  its  returns relating  to the assessment years 1967-68 and  1968-69,  the assessee stated that it was maintaining its 106 accounts on mercantile basis.  Only in the returns  relating to  the assessment year 1968-69, did it raise the plea  that it  was  maintaining  its books, with respect  to  the  said royalty amount, on cash receipt basis. (The Tribunal appears to  have stated that for the year 1964-65 too, the  assessee had stated ,cash basis’ but it is not clear for what purpose the said plea was raised.  One thing is clear: the  assessee did not say at any time earlier to A.Y. 1968-69 that receipt of money in U.K. alone is receipt by it).  It also took  the rather strange plea that the Indian Company was not aware of the  method  of  accounting adopted  by  the  assessee  and, therefore, it made the aforesaid incorrect statement in  the returns  relating  to the years 1966-67 and  1967-68.   This plea,  the  Appellant  Assistant  Commissioner  refused   to countenance.  It is significant to notice that the  assessee did not say that the method of accounting adopted by it  for all its income was on cash basis.  It confined the said plea to  its  Indian income alone.  The said plea, it  should  be noticed,  had no significance by itself.   Its  significance lies  when  we  examine the said plea in the  fight  of  the further contention of the assessee that it did not  actually receive  the  amount  from the Indian  Company.   We  put  a pointed  question  to the learned counsel for  the  assessee whether  it  was the assessee’s case at any stage  that  the credit entry made in the account books of the Indian Company in favour of the assessee was a bogus or a mere make-believe

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entry.  The counsel replied that it was not its case at  any point  of time.  His contention was that the mere  entry  in the  account books of the Indian Company does not amount  to receipt  of income by the assessee.  The assessee  had  been very  careful  not to say that the Indian  Company  did  not place  the  said  amount at the disposal  of  the  assessee. Indeed, he replied to a further question by us that even  if the said amount were put by the Indian Company in a Bank  to the credit of the assessee, it could not have been said that the  assessee  has  received the amount.   In  other  words, according  to the learned counsel, the said  royalty  income can be said to have been received by the assessee only  when it  received  the same in U.K. It is this  extreme  argument which  led  the High Court to make the  observations  quoted hereinbefore.  It would immediately be evident that this was not  the basis put forward by the assessee at any  point  of time till it to the filing of return for the assessment year 1969-70.   We  are not suggesting that it is  estopped  from doing so.  We are only saying that the said plea was not and is  not acceptable.  The receipt of the said income  in  the U.K.,  in our opinion, is immaterial.  It may happen that  a non-resident  assessee  may  choose not  to  repatriate  his income/profits to his parent 107 country;  he  may choose to plough back the said  amount  in India for such purposes as he may choose.  It cannot be said in  such a situation that he has not received the income  in India.  In Raghava Reddi v. CL T., Andhra Pradesh, 44 I.T.R. 720  the  non-resident company instructed the  assessee,  in view  of the difficulties in this country in  remitting  the monies abroad, to credit the amount due to it on account  of commission  in  the account Books of the  assessee  awaiting further instructions regarding its remittance.  The assessee was  assessed  as the statutory agent  of  the  non-resident company.   The I.T.O. assessed the amounts credited  in  the accounts  of the assessee as the income of the  non-resident company.  The contention of the assessee was that mere entry in  the Books of the assessee cannot amount to  receipt  and that the amounts cannot be assessed until they were actually paid  over  to  the  non-resident  company  or  dealt   with according  to its directions.  Rejecting the contention,  it was  held  by  this court that as soon as  the  monies  were credited to the account of the non-resident (Japanese)  com- pany,  it must be held that it "received" the same  and  are taxable.   Hidayatullah,  J. speaking for  the  Constitution Bench observed:               "This  leaves  over  the  question  which  was               earnestly argued, namely, whether the  amounts               in  the  two account years can be said  to  be               received  by  the  Japanese  company  in   the               taxable territories.  The argument is that the               money  was  not  actually  received,  but  the               assessee firm was a debtor in respect of  that               amount  and unless the entry can be deemed  to               be  a  payment or receipt, clause  (a)  cannot               apply.  We need not consider the fiction,  for               it  is not necessary to go to the  fiction  at               all.  The agreement, from which we have quoted               the relevant term, provided that the  Japanese               company desired that the assessee firm  should               open  an account in the name of  the  Japanese               company in their books of account, credit  the               amounts  in that account, and deal with  those               amounts  according to the instructions of  the               Japanese  company.   Till  the  money  was  so

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             credited, there might be a relation of  debtor               and  creditor;  but  after  the  amounts  were               credited,  the money was held by the  assessee               firm as a depositee.  The money then  belonged               to  the japanese company and was held for  and               on  behalf  of  the company  and  was  at  its               disposal.  The character of the money  changed               from a debt to a deposit in much the same               108               way  as  if  it was credited in  bank  to  the               account of the company.  Thus, the amount must               be  held,  on the terms of the  agreement,  to               have  been received by the  Japanese  company,               and  this attracts the application of  section               4(1)(a).   Indeed,  the Japanese  company  did               dispose  of a part of amounts  by  instructing               the  assessee firm that they be applied  in  a               particular  way.   In our  opinion,  the  High               Court  was  right in  answering  the  question               against the assessee." Applying  the above principle, it must be held in this  case that the credit entry to the account of the assessee in  the Books  of the Indian Company does amount to its  receipt  by assessee   and  is  accordingly  taxable  and  that  it   is immaterial when did it actually receive it in U.K. In  this  view of the matter, it must be held  that  in  the circumstances of the case. the method of accounting  adopted by the assessee for the relevant accounting years is  really irrelevant.  As explained hereinbefore, the very concept  of "receipt"  as  espoused  by the assessee  is  untenable  and unacceptable.  The order of remand made by the Tribunal  was thus unnecessary.  In the circumstances, we do not think  it necessary  to  express any opinion on the  question  whether there is any conflict or inconsistency between Section  5(2) and  Section 145 of the Act nor is it necessary  to  express ourselves  on the view expressed by the High Court  that  in the  case  of a non-resident assessee  like  the  petitioner clause   (a)  of  sub-section  (2)  of  Section  5  has   no application  whatsoever and that Section 5(2)(b) governs  it irrespective  of the fact whether it maintains its  accounts on  cash basis or mercantile basis.  The  question  referred did  not really arise in the facts and circumstances of  the case  and need not have been answered.  The  Tribunal  shall complete  the assessments in question in the light  of  this judgment. In view of the above, it is unnecessary for us to deal  with the decisions cited by the learned counsel for the assessee. The first decision cited by him is in C.I.T v. Macnzillan  & Co.,  33  I.T.R. 182 regarding the powers of  the  Appellate Authority.   The second decision is in Keshav Mills Ltd.  v. CL T., Bombay 23 I.T.R. 230.  The principle of this decision does  in no way support the principle contended for  by  the appellant. The appeals accordingly fail and are dismissed.  No costs. N.V.K. Appeals dismissed. 109