Law:

Section:

Section 9 of the Income-tax Act, 1961 [Corresponding to section 4(1)(b)(iii) of Indian Income-tax Act, 1922] - Income deemed to accrue or arise in India - Assessment year 1953-54 - Assessee closed down his timber business during war in Thailand, sold assets and stock-in-trade for nominal price and returned to India - He received compensation from Govt. of Thailand for damage to property and for personal prejudice - Whether aforesaid amount being accumulated profits of assessee's business in Thailand was undoubtedly assessable to tax under section 4(1)(b)(iii) of 1922 Act - Held, yes FACTS The assessee had closed down his timber business in Thailand during the war, sold the assets and stock-in-trade for nominal amounts and returned to India. Subsequently, he received certain compensation amount from the Govt. of Thailand through the Govt. of India, for damage to property and for personal prejudice for the assessment year 1953-54 the ITO brought a part of the said amount to tax under section 4(1)(b)( iii) of 1922 Act. On appeal, the AAC confirmed the assessment. On second appeal, the Tribunal concluded that during the period between 1925 and 1948 the assessee earned considerable profits from the business, part of which had been temporarily converted into capital assets in the shape of saw mill, machinery, etc., but upon sale thereof, forced and voluntary, they were reconverted into cash. In the opinion of the Tribunal the whole of the amount of the sale proceeds 'had the character of income earned outside the taxable territories'. The Tribunal noticed that under section 4(1)(b)(iii ) of 1922 Act foreign income earned before the 1-4-1933, was exempt but it held that the assessee having not produced any documentary or other evidence to show what was the amount of income earned by him before 1933, the amount assessed in his hands was only a small portion of the total amount received by him and the whole of it was attributable to income earned after year 1933 and taxable under section 4(1)(b)(iii ) of 1922 Act. On reference : HELD Admittedly, the compensation had been claimed by the assessee from the Government of Thailand for loss sustained by him on account of the…

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