Judgment:
ORDER
Dr. B.P. Saraf, J.
1. By this reference under section 256(1) of the Income-tax Act, 1961, read with section 18 of the Companies (Profits) Surtax Act, 1964, the Income-tax Appellate Tribunal, at the instance of the Revenue, has referred the following question of law to this court for opinion :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in computing the chargeable profits for purposes of the Surtax Act, by excluding the interest received from the Indian branches of foreign banks as falling within the Schedule to the Companies (Profits) Surtax Act, 1964 ?'
2. The assessee is a non-resident company which had not made the prescribed arrangements for the declaration and payment of dividends within India. During the previous year relevant to the assessment years 1072-73, 1973-75, the assessee received certain amounts by way of 'interest' from the First National City Bank and the Chartered Bank. The assessee claimed exclusion of the said amounts in the computation of its 'chargeable profits' under the Companies (Profits) Surtax Act, 1964. The claim of the assessee was rejected by the Inspecting Assistant Commissioner who made the assessment. The assessee went in appeal be fore the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) upheld the order of the Inspecting Assistant Commissioner. On further appeal to the Income-tax Appellate Tribunal, the Tribunal decided in favour of the assessee. It was held that the assessee was entitled to the exclusion of the amounts received by it from the Indian branches of the two foreign banks in the computation of its 'chargeable profits' by virtue of clause (x) of rule 1 of the First Schedule to the Surtax Act. Hence this reference at the instance of the Revenue.
3. The controversy before us revolves round the interpretation of clause (x) of rule 1 of the First Schedule to the Surtax Act. The facts of the case are not in dispute. The assessee is a non-resident company which had not made the prescribed arrangements for the declaration and payment of dividends within India. During the assessment years under reference, the assessee received certain amounts by way of interest from the Indian branches of two foreign banks situated in India. Whether such interest falls within clause (x) of rule 1 of the First Schedule to the Surtax Act, 1964, or not is the point at issue. The relevant portion of the First Schedule to the Surtax Act reads as under :
'THE FIRST SCHEDULE
(See section 2(5))
RULES FOR COMPUTING THE CHARGEABLE PROFITS
4. In computing the chargeable profits of a previous year, the total income computed for that year under the Income-tax Act shall be adjusted as follows :
1. Income, profits and gains and other sums falling within the following clauses shall be excluded from such total income, namely :- ...
(x) in the case of a non-resident company which has not made the prescribed arrangements for the declaration and payment of dividends within India, its income by way of any interest or fees for rendering technical services received from Government or a local authority or any Indian concern;...;...'
5. A reading of clause (x) of rule 1 makes it abundantly clear that in computing the chargeable profits of a non-resident company which has not made the prescribed arrangements for the declaration and payment of dividends within India, its income by way of any
(i) interest, or
(ii) fees for rendering technical services, received from :
(a) Government, or
(b) a local authority, or
(c) any Indian concern is to be excluded from its total income. The contention of the assessee is that the words 'any interest' appearing in clause (x) of rule 1 of the First Schedule to the Surtax Act stand by themselves and are not subject to the condition appearing thereafter, viz.,'received from Government or a local authority or any Indian concern'. According to the assessee, the above condition applies only to 'fees for rendering technical services' and not to 'interest'. As a result, any interest received by the assessee falls in clause (x) irrespective of the source of the receipt. On the other hand, the contention of the Revenue is that the condition regarding the source of the receipt is applicable to both types of incomes, i.e., 'interest' and 'fees'.
6. We have carefully considered the rival submissions. We find it difficult to accept the contention of the assessee that the condition regarding the source of receipt is not applicable to 'interest'. The expression 'any' preceding the word 'interest', in our opinion, is common to both 'interest' and 'fees'. It is a well-settled rule of interpretation that a statutory provision has to be read as a whole in the context in which it appears. Words indicative of any exclusion or condition, in the absence of any intention to the contrary, have to be given full effect. If we read clause (x) of rule 1 of the First Schedule as a whole, it is abundantly clear that it deals with two types of receipts - one, receipts by way of 'any interest' and another, receipts by way of 'fees for rendering technical services'. The condition specified therein that such receipts should be from Government or a local authority or any Indian concern applies to both types of receipts. This qualifying phrase is not intended to qualify 'fees' alone but applies equally to 'interest' referred to in the said rule. The expression 'any' applies to both 'interest' and 'fees' which means 'any interest' or 'any fees for rendering technical services'. The condition in regard to source of receipt thus equally applies to incomes falling under both the heads. We are, therefore, of the clear opinion that interest received from a Government or a local authority or any Indian concern only can be excluded under clause (x) of rule. 1.
7. The next question that falls for determination is whether the branch of a foreign bank situated in India can be said to be an 'Indian concern'. We had occasion to examine the true meaning of the expression 'concern' in a recent decision in Income-tax Reference No. 98 of 1983 delivered on July 13, 1993 Dr. J. M. Mokashi v. CIT [1994] 207 ITR, wherein it was held (headnote) :
'..... The word 'concern' is a word of wide import and takes within its sweep and ambit all organisations or establishments, engaged in business or profession, whether owned by a company, partnership or individual or any other entity.'
8. We are to find out here the true meaning of the expression 'Indian concern'. The question is whether 'every concern in India' can be held to be 'Indian concern' for the purposes of clause (x) of rule 1 of the First Schedule to the Surtax Act or it must be a concern which is Indian in character. On a careful consideration, we are of the opinion that the word 'Indian concern' means a concern which is Indian in character. A concern, which is not Indian, cannot be termed an 'Indian concern' merely by reason of its location in India. Just as a foreign citizen cannot be said to be an Indian citizen by reason of his residence in India, the branches of a foreign concern situated in India cannot be held to be 'Indian concerns'. This view of ours gets full support from the decision of the Madras High Court in CIT v. Craigmore Land and Produce Co. Ltd. : [1977]110ITR730(Mad) . In that case, the Madras High Court was also required to interpret the expression 'Indian concern' used in the very same clause (x) of rule 1 of the First Schedule to the Surtax Act. The facts of that case are also identical with the facts of the case before us. The controversy in that case was also in regard to the exclusion of the amount of interest received by the assessee from a branch of a foreign bank in India in the computation of the chargeable profits for the purposes of the Surtax Act. The question was whether the Indian branch of a foreign bank can be held to be an 'Indian concern'. The Tribunal held that the Indian branch of the Mercantile Bank Ltd., which was a non-resident company incorporated outside India, was a unit by itself managed by a local manager who had sufficient powers to manage it and hence this unit which carried on business in India can be held to be an 'Indian concern'. On a reference at the instance of the Revenue, the High Court reversed the finding of the Tribunal and held that the Mercantile Bank Ltd. being incorporated outside India and it being a non-resident company, its branch cannot be treated as an 'Indian concern'. It was observed (at page 737) :
'......... the expression used in the statutory provision is 'Indian concern' and not 'concern in India'. If the expression used is 'a concern in India', it may be said that a mere geographical location in India or the situs of the concern in India is sufficient to bring the concern within the scope of the expression 'Indian concern'. On the other hand, the expression used is not 'a concern in India', but 'an Indian concern'. This different expression derives significance from the fact that there are provisions in the Income-tax Act where the statute uses the expression 'industrial undertaking in India' and not 'Indian industrial undertaking'. (see section 10(15)(iv)(b) of the Income-tax Act, 1961). Consequently, we have to give a meaning to the expression, 'Indian concern' as distinguished from 'a concern in India' As we have pointed out already, if the expression is 'a concern in India', irrespective of the ownership, management or control, the mere location or situation of the concern in the geographical area of India will be sufficient to make the concern fall within the scope of expression. On the other hand, the word 'Indian' means 'belonging or relating to India' or 'of India'. The expression 'of India' is indicative of a much stronger and firmer relationship with India than the expression 'in India'. Consequently, for the purpose of applying the provision in question, it is not enough if the concern is functioning or working in India, but the ownership, management and control of the concern must be substantially in India. Admittedly, in this case, the Mercantile Bank Ltd. is incorporated outside India and it is a non-resident company. Hence, simply because it has got a branch in India, that branch cannot be termed to be an Indian concern.'
9. Learned counsel for the assessee referred to clause (viii) of rule 1 wherein the words 'Indian company' have been used to show that wherever the Legislature intended to confine the expression to 'Indian company', it had specifically used the expression 'Indian company'. The submission of learned counsel, in other words, is that the 'Indian concern' in this context has to be read as 'concern in India'. We do not find any force in the above submission of learned counsel for the assessee. The expression 'Indian company' has been defined in section 2(26) of the Income-tax Act, 1961, to mean 'a company formed and registered under the Companies Act, 1956 (1 of 1956).' The above definition clearly goes to show that the Legislature by the use of the expression 'Indian company' really intended to mean 'companies which are registered in India' and not 'companies which are carrying on business in India'. If we take the analogy of the above definition of 'Indian company' into consideration, the expression 'Indian concern' will also mean a 'concern' - Indian in character.
10. In that view of the matter, we are of the opinion that the interest received by the assessee from the branches of the two foreign banks located in India cannot be deducted under clause 9x) of rule 1 of the First Schedule to the Surtax Act.
11. In that view of the matter, we answer the question in the negative, i.e., favour of the Revenue.
12. Before parting with the case, we deem it necessary to deal with one more contention of the assessee that the Tribunal having not given any decision on the interpretation of the expression 'Indian concern' appearing in clause (x) of rule 1, this court should not decide this point itself but remand the matter to the Tribunal with a direction to decide it afresh. We have considered the above submission of learned counsel for the assessee. We, however, do not find any merit in it. The question of law in issue between the parties in this case is whether the interest received by the assessee from the Indian branches of foreign banks could be excluded in computing the chargeable profits for the purpose of surtax under clause (x) of rule 1 of the First Schedule. The answer to this question depends on the interpretation of clause (x) of rule 1. Whether the branches of foreign banks situated in India can be said to be 'Indian concerns' or not is one of the essential aspects of the question which was also urged before the Tribunal. Once such a broad question is referred, the High Court is not required to limit itself only to the particular aspect on which decision was given by the Tribunal. It is well-settled that once a question has been referred to the high Court, there is no limitation that the reference should be limited to those aspects of the question which were argued before the Tribunal or decided by the Tribunal. All aspects may be argued and considered where the question involves more than one aspect. As observed by the Supreme Court in CIT v. Scindia Steam Navigation Co. Ltd. : [1961]42ITR589(SC) , a question of law might be a simple one, having its impact at one point, or it may be a complex one, trenching over an area with the approaches leading to different points therein. Such a question might involve more than one aspect, required to be tackled from different standpoints. It will be an over-refinement of the position to hold that each aspect of a question is itself a distinct question for the purpose of section 256 of the Act. Once such a question is referred, it is open to the High Court to consider all aspects thereof. Reference may also be made to the decision of the Supreme Court in Indore Malwa United Mills Ltd. v. CIT : [1966]59ITR738(SC) . In this case, the question of law in issue between the parties and referred to the High Court was the broad question whether or not the assessee was liable to pay tax on the ground that the sale proceeds including the profits of the sales were received by the assessee in British India. The Supreme Court held that in such a case, the Revenue authorities might be permitted to argue for the first time at the hearing of the reference that, on the facts found by the Tribunal, the post office was the agent of the assessee for the purpose of receiving the cheques representing the sale proceeds and the assessee received the sale proceeds in British India where the cheques were posted, though this aspect of the question was not argued before the Tribunal and that the only point argued there was that the sale proceeds were received at Bombay where the cheques were encashed. The Supreme Court held that the question referred was not such a narrow one so as to exclude the consideration of the contention that the assessee received the sale proceeds through its agent, the post office in British India. It was, therefore, held that the Revenue authorities can raise this contention for the first time in the High Court. In the instant case, the true meaning of the expression 'Indian concern' was specifically urged before the Tribunal and it is an important aspect of the question referred to this court. We have, therefore, no hesitation in holding that such an aspect can be gone into and decided by the High Court even if it had not been decided upon by the Tribunal.
13. Accordingly, this reference is answered in favour of the Revenue. No order as to costs.