TMI Blog1937 (2) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, Fenchurch Street in the City of London. Mr. Every is employed by that company under the terms of an agreement in writing, a certified copy of which has been placed before us. This agreement which is dated 17th February 1933 provides for a term of service for a period of four years calculated from the 1st January 1933. The provisions of the agreement which are relevant for our present purpose are those in clause 7 which runs as follows:-- In consideration of the due observance and performance by the said employee of the several terms and stipulations which by him ought to be observed and performed and in consideration of the premises the said Company shall pay the said Employee during the continuance of this agreement a monthly salary to commence from 1st January 1933 and to be paid monthly as follows:-- Salary: ₹ 800 per mensem. Pony allowance ₹ 75 per mensem. Commission: 5 per cent. on the nett profits of the Pathini and Champabarie Divisions as may be determined by the Secretaries of the Company. Furlough: Six months of full pay will be granted during the currency or at the expiry of this agreement as may suit the convenience of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accounting period 1st January to 31st December 1932. This matter has come before us in a rather unusual way because, originally it was never intended by the assessee that any question should come before a Court at all. The local Income Tax Officer made an assessment against Mr. Every on the 20th September, 1935, and that was for the year 1935-36 on the basis of income received by the assessee during the previous year 1934-35. The assessment was for a sum of ₹ 7,702 made up as follows:-- Salary ₹ 4,400. Commission ₹ 2,902. Other sources ₹ 400. Total ₹ 7,702. The Income-tax Officer had taken the view that as regards the commission earned by the assessee seven-twelfths was not liable to tax but only five-twelfths, because the assessee had been on leave in the United Kingdom for a period of seven months. After receiving the assessment Mr. Every wrote a letter dated 28th September 1935, to the Assistant Commissioner and requested him to go into the correctness of the assessment which he had made. We are told that the assessee merely took this course because he did not understand how the figure ₹ 400 as being income from other sources had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence has been claimed, because it is not correct to say that the Assistant Commissioner passed his order, dated 7th July 1936, under Sec. 31 on an appeal petition which was not properly stamped and not duly verified. The application dated the 11th August 1936, for a reference to the High Court under Sec. 66(2) of the Income Tax Act is with regard to the above order which the Assistant Commissioner passed on 16th December 1935 and the appeal petition on which he passed that order was properly stamped and duly verified. The order of the Assistant Commissioner on the assessee's petition, dated 28th September 1935 was passed on 15th October 1935 and it was not an order under Sec. 31 but only an advice to the assessee to file his objection in the proper appeal form which the appellant did on 29th October 1935. I do not, in the circumstances, refer this question to the Hon'ble High Court . Then he proceeds thus: As regards the second question, the contention of the assessee is that the amount of commission having been received in the United Kingdom should be exempt from tax. The assessee did not bring this commission or any part of it to British India so as to attract liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in British India, or deemed under the provisions of this Act to accrue, or arise, or to be received in British India . Mr. Ormond has asked us to take the view that in the circumstances of this case commission which was received by Mr. Every in London in the year 1934 was not income, profits or gains which had accrued or arisen in British India. Mr. Ormond based a good deal of this argument upon observations in the judgment in the case of Rogers Pratt Shellac Co. v. Secretary of State for India in Council (I.L.R. 52 Cal. 1). There the facts were that the assessee, which was a company incorporated in the United States of America having its Head Office in New York and branches and agencies in various States had a branch office in Calcutta for the purpose of purchasing shellac. The goods as purchased were, I think, sold in the open market in America, on account of another company in America which was to pay the purchasing company a commission of 6 per cent. on the purchase price plus expenses. The assessee company had also a factory in the United Provinces where produce purchased locally was worked up into a form suitable for export. No sales were conducted in India by the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore or less inchoate . Mr. Ormond, on the strength of the view expressed by Mr. Justice Mukherjee in that passage, invited us to come to the conclusion, as I have stated, that where it is a question of salary or something in the nature of salary, no distinction or no effective distinction can be drawn between the position which exists when the right to receive arises, and the position which exists when the income is actually received or, to put the matter in another way Mr. Ormond wishes us to take the view that the words accruing or arising have nothing to do with the place of origin of the income, i.e., the place at which the income is earned by the proposed assessee. Mr. Ormond suggested that the presence of the words from whatsoever source derived in sec. 4, sub-sec. (1) indicates that that is the true view of the matter. That, however, is not the opinion of the Bombay High Court as expressed in the case of The Commissioner of Income-tax, Bombay v. Raja Bahadur Banilal Motilal (I.L.R. 54 Bom. 460). There are two passages in the judgment of Mr. Justice Blackwell to which I will first refer. At page 467 the learned Judge said; In Section 4(1) of the Indian Income-tax Act of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a Mill Company registered at Indore, that is to say, outside British India. Under the terms of their agreement with the Company the assessees were entitled to charge and receive as selling agents of the mill commission on the gross sale proceeds of all cloth produced by the mill . The agreement further provided that the assessees were at liberty to retain, reimburse, and pay themselves out of the moneys of the company all sums due to the assessees for commission or otherwise. It appears that the company opened a shop at Bombay for the sale of cloth produced by the company and that the shop at Bombay was managed by the assessee. The sale proceeds, i.e., the proceeds of the sales made in that shop at Bombay, were sent to Indore and subsequently, the assessees were paid the commission to which they were entitled in respect of such sales at Indore. The question arose as to whether the commission earned by the assessees on the sale of cloth at the Bombay shop was liable to be assessed to income-tax in Bombay. The Chief Justice and Mr. Justice Barlee took the view that having regard to the terms of the agreement, as the income was commission on sales made in Bombay, that income accrue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Secretaries of the company . We must, I think, take it that for practical purposes and for the purposes of this case what was really intended was that although the commission might be payable in lump sum after the accounts of the company had been made up and an appropriate part of the proceeds assigned to the two divisions named, the commission, though paid in a lump sum, was nevertheless to be treated as if it were the same thing as salary paid upon a monthly footing. We must, therefore, deal with the question before us by reading Cl. 7 of the Agreement in the light of Sec. 7 of the Act and so upon the/ footing that salary was being earned by Mr. Every for services rendered by him to the company in their garden or tea plantation at Pathini and that he was only entitled, as the Commissioner of Income-tax, Assam, has suggested, to receive the commission as well as salary properly so called upon the basis, that he did in fact, render these services. Mr. Ormond endeavoured to find some support for his contention that the question should be answered in the negative by reference to the case of The Commissioner of Income Tax v. Phra Phraison Salarak (I.L.R. 6 Rangoon 598), where it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Mr. Every received for his services as an employee in the tea company did accrue or arise in British India, and that in the circumstances of the case it is impossible to ignore the place from which the income came in any consideration of the question whether or not there was an accruing or arising of the income in British India. I would, therefore, answer the question put before this Court in the affirmative. In the circumstances of this case I think there should be no order as to costs. PANCKRIDGE, J.--There is very little that I desire to add to the judgment already delivered. In my opinion the words accruing and arising are very wide, and I am in full agreement with those decisions of the Bombay High Court which have laid it down that they mean something different from being received . This view receives support from the language of Sec. 4(2) which specifically recognises that income, profits and gains may arise or accrue at one place and be received at another. I think that the question whether any particular income, profits or gains accrue or arise in British India is a question of fact, and it is not practicable to formulate any precise test. I am incli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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