TMI Blog1953 (1) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... e Department that the income accrued or arose in India. The Tribunal did not hold that the income is income which should be deemed to accrue or arise in India. The part of the question which states that the Tribunal did so is not in accordance with fact. We find that the income, profits and gains must be deemed to have arisen or accrued in India so far as excess profits tax is concerned and that Section 42(3) of the Income-tax Act applies to the levy of excess profits tax by virtue of Section 21 of the Excess Profits Tax Act. Question (3). The Tribunal was right in rejecting the contention that the income, profits and gains are chargeable to tax under Section 42 only. They are also chargeable to income-tax as falling within the purview of Section 4(1)(a) of the Income-tax Act as income received in India on behalf of the assessee company. In such a case Section 42 of the Income-tax Act would have no application. Appeal dismissed. - - - - - Dated:- 16-1-1953 - Judge(s) : MEHR CHAND MAHAJAN., N. H. BHAGWATI., S. R. DAS., VIVIAN BOSE JUDGMENT The judgment of the Court was delivered by DAS, J.--This appeal arises out of six references made by the Calcutta Bench of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Income-tax Act and assessed them to income-tax for the two assessment years mentioned above under Section 4(1)(a) or, alternatively, under the first part of Section 4(1)(c). They were also assessed to excess profits tax for the four chargeable accounting periods hereinbefore mentioned. Turner Morrison .Company Ltd., (hereinafter referred to as the Agents) preferred appeals against the aforesaid assessment orders to the Appellate Assistant Commissioner who, however, dismissed the appeals. The Agents took a further appeal to the Income-tax Appellate Tribunal. The submission of the Agents before the Tribunal was that the assessment under Section 4(1)(a) was bad and that the assessment should have been made under Section 42 of the Act. The Tribunal, on a consideration of the facts, came to the conclusion that the assessment was properly made under Section 4(1)(a) and incidentally the Tribunal also came to the conclusion that the alternative contention of the Income-tax authorities that the assessment should be made under the first part of Section 4(1)(c) was also well-founded and that Section 42 had no application to the case. The result was that the Tribunal confirmed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 42 of the Income-tax Act would have no application. " It will be noticed that the agents succeeded in their contentions so far as they related to the assessment of excess profits tax. The answers given by the High Court, however, went against them in so far as they related to the assessment of income-tax for both the assessment years. The Agents thereafter made two applications to the High Court under Section 66A for leave to appeal to this Court in respect of the income-tax assessments for each of the two assessment years. The High Court certified that the cases were fit for appeal to this Court and granted leave to appeal and directed that the two appeals be consolidated. The Commissioner of Income-tax, West Bengal, however, has not preferred any appeal from that part of the judgment of the High Court which sets forth its opinion on the questions in so far as they relate to the assessment of excess profits tax. This appeal is, therefore, concerned only with the answers given by the High Court to the questions in so far as they relate to the assessments of income-tax only. The first main contention urged by Mr. S. Mitra appearing in support of this appeal is that no inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... became a purchaser at any stage. They could not sell the goods at any price they liked, for they had to sell them at or above the price approved by the Association. If the sale was at a rate above the approved price the excess was never retained and appropriated by the Agents as their own profits. Mr. Mitra thereupon contends that assuming that the Agents had sold the goods as agents of the Association they did not necessarily have the authority to receive payment of the price. Reliance is placed on Butwick v. Grant in support of the proposition that an authority to sell does not of necessity imply an authority to receive payment of the price. The argument is then formulated that as the Agents had no authority to receive the price, it cannot be said that the receipt was by or on behalf of the Association. This argument again overlooks the course of business as found by the Tribunal which clearly implies that the Agents were not only agents for selling the salt but also for collecting the sale proceeds. The third ground urged in support of the first main contention is that the entire amounts collected by the Agents were not receivable by the Association, for the Agents were enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred, in support of this contention, to certain observations in the cases of Commissioner of Taxes v. The Melbourne Trust Ltd., Russell v. Aberdeen Town and County Bank, Re Rogers Pyatt Shellac Co. v. Secretary of State for India, Commissioner of Income-tax, Bombay City v. Agarwal Company, Bombay, In re Govind Ram Tansukh Rai, and other cases. The observations in those several cases have to be read in the light of the facts of those cases and the subject which was then under discussion. So read those observations can have no application to the facts of this case. The case Morley v. Tattersall also relied on by Mr. Mitra is clearly distinguishable because the liability for the sale proceeds received by the auctioneers continued to exist even after the unclaimed balances were transferred to the account of the partners and, therefore, they could not be regarded as trade receipts. On the other hand, the case of Grainger Son v. William Lane Gough will clearly show that the moneys received by an agent on behalf of his foreign principal could be regarded as including trade profits within the meaning of Section 41 of the English Income Tax Act of 1842 (See per Lord Herschell at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other alternative, i.e., Section 4(1)(a), is no longer applicable. In other words, according to Mr. Mitra's contention, Section 4(1)(a) becomes a dead letter so far as income, profits and gains arising or accruing to a non-resident are concerned. We are unable to accede to this contention. Section 42 only speaks of deemed income. The whole object of that section is to make certain income, profits and gains to be deemed to arise in India so as to bring them to charge. The receipt of the income, profits and gains being one of the tests of liability, where the income, profits and gains are actually received in India it is no longer necessary for the revenue authorities to have recourse to the fiction and this has been held quite clearly in Hira Mills Ltd. v. Income Tax Officer, Cawnpore, and in Burugu Nagayya and Rajanna v. Commissioner of Income-tax, Madras. This is also implicit in the decision of the Privy Council in Pondicherry Railway Company Ltd. v. Commissioner of Income-tax, Madras, to which reference has already been made. Section 4(1)(a) in terms is, unlike Section 4(1)(b) or 4(1)(c), not confined in its application, to any particular category of assessees. Section 4(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such income, profits and gains are made chargeable to income-tax either in his name or in the name of his agent who is to be deemed to be for all the purposes of this Act the assessee in respect of such income-tax. Section 43, however, refers to a person (a) employed by or on behalf of a non-resident, (b) having any business connection with such non-resident, or (c) through whom such non-resident is in receipt of any income, profits or gains. A person who comes within one or other of these three categories may, under this section, be treated by the Income-tax Officer as agent of the non-resident and such person is for all the purposes of this Act to be deemed to be such agent. The third category refers to a person through whom the non-resident is in receipt of any income, profits or gains. The portion of Section 43 which refers to the person through whom the non-resident is in receipt of any income, profits or gains does not necessarily attract the provisions of Section 42, for the income, profits and gains received by the person who is treated as agent under Section 43 may not fall within any of the several categories of income, profits or gains referred to in Section 42. The lang ..... X X X X Extracts X X X X X X X X Extracts X X X X
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