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TMI Blog1960 (2) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... we have to answer this question, lie within a comparatively brief compass: (1) it was within British India that the assessee entered into the contract with the Government of India; (2) all the other trading operations of the assessee in all the relevant years were undertaken only within Cochin State; and (3) all the profits were realised and received by the assessee in Cochin State, that is, outside British India. The Tribunal held that, though the profits of the contract business actually accrued to the assessee wholly outside British India, the provisions of section 42 of the Act applied, and that the assessee was liable to be taxed on 50 per cent. of his share of the profits of that contract. Annexure "A" to the statement of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the place of contract itself is a matter for investigation at this stage. Even in paragraph 14 of annexure "A" what the assessee was asked to do was to confirm the contents of that letter, which purported to set out what the parties had agreed upon at Delhi. We shall, therefore, proceed on the basis, that the Tribunal was not in error when it held that the assessee has negotiated and concluded the contract in British India. It should be taken as well settled now that where the contract was entered into is really immaterial in cases of this kind of decide where the profits of the contract accrued or arose: see Commissioner of Income- tax v. Anamallais Timber Trust Ltd.([1950] 18 I.T.R. 333), the principles laid down in which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there has to be an apportionment under section 42(3). The learned counsel for the assessee referred to the observation of the Supreme Court in Anglo-French Textile Co. Ltd. v. Commissioner of Income-tax [1954] 25 I.T.R. 27, 39: "........we wish to point out that it is not every business activity of a manufacturer that comes within the expression 'operation' to which the provisions of section 42(3) are attracted. Those provisions have no application unless according to the known and accepted business notions and usages the particular activity is regarded as a well defined business operation. Activities which are not well defined, or are of a casual or isolated character would not ordinarily fall within the ambit of this rule. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... z and Co. [1951] 20 I.T.R. 247, 260 and contended that the contract itself should be viewed as a source of profit that the assessee made, and as that source lay within British India, it came within the scope of section 42(1) of the Act. We would, however, prefer to rest our decision in this case on the basis that the contract the assessee obtained evidenced by annexure "A" was one of his essential trading operations. That is sufficient to bring it within the scope of section 42(1) of the Act, and that, in its turn, in the circumstances of this case, attracts the application of section 42(3). The question that remains for consideration is whether the Tribunal was right in apportioning 50 per cent. of the assessee's share of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e works. Taking the special features of the contract into consideration, we are of opinion that a share of the assessee's profits should be attributed to that trading operation, and that the share to be so attributed should be something more than nominal. The learned counsel for the assessee pointed out that in Anglo French Textile Co Ltd. v. Commissioner of Income-tax [1954] 25 I.T.R. 27 ten per cent. was considered reasonable, where the trading operations consisted of purchase of raw material within the taxable territories, while the rest of the trading operations were in Pondicherry outside the taxable territories. We can see considerable force in his contention, that there will be no justification for allowing a higher percentage th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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