TMI Blog1938 (6) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... ous foreign markets-Liverpool, London, New York and elsewhere outside British India. The assessee disputes his liability in respect of such profits on the ground that they were not profits accruing or arising in British India . It is conceded that they are not otherwise chargeable: they have not been received in British India nor do they come under any of the provisions whereby they can be deemed to accrue or arise or be received in British India. No question arises as to the details of the transactions or as to the calculation of the tax. Though the transactions appear to have been of a speculative character and of the kind compendiously described as dealing in futures , it is not now sought to charge the assessee upon the basis of any allegation that his contracts were made by way of gaming and wagering. In case, however, the place at which the profits accrued or arose should be held to depend upon the facts as to delivery of goods thereunder or intention to deliver the question propounded to the Court was stated in a double form as follows:- (1) Whether in the circumstances of the case all the profits and gains which accrued and arose to the assessee from the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so income from properties and dividends on shares in joint stock companies. As regards the speculation business, the assessee does this on his own account as well as on account of his constituents and he carries on his business not only with parties in British India but also with parties outside British India, e.g., at Liverpool, London and New York. Profit or loss from such business as is done on his own account is his. As regards business done on account of his constituents, he charges brokerage and the profit or loss arising therefrom is theirs. 7. As in this connection, it is necessary to have some idea of the exact manner in which the assessee does this speculation business, I beg to refer here to an actual transaction to show how it was put through. Taking up the New York Cotton Exchange, on October 29, 1930, the assessee sent a telegram to A. Norden Co. of New York asking them to Buy 500 March at the closing . A copy of the telegram is annexed hereto and marked Ex. E. This was done at 11.74 cents per pound (a bale containing 500 lbs.), as appears from the reply telegram of the same date which runs Bought March 500. 11.74 (copy annexed and marked Ex. P). On Dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that what he earned by his efforts in British India was earned where the brokers were located. The brokers merely helped him in getting into contact with parties willing to enter into a contract with him. Surely the profit which the assessee earned must have accrued somewhere and when everything which he need do to earn it was done by him in Bombay (including employment of brokers which, too, was done from Bombay), it is difficult to see how the profit could he said to have arisen in London or New York where the assessee never set foot. All the activities on his part which resulted in this profit took place in Bombay and the profit which was the result thereof must be taken to have accrued here and nowhere else . This view, it will be observed, proceeds upon a consideration of the particular transactions and the method by which each transaction was entered into and carried out. But the argument has been heightened or re-inforced by maintaining that the profits now in question being profits of a business carried on in Bombay, all the profits of such business become chargeable to tax as accruing or arising in Bombay, and that it is not necessary or permissible to discriminate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case two things only to put forward-apart, that is, from the argument as to business which will be dealt with separately in this Judgment. These two things are (a) the exercise of skill and judgment in Bombay, (b) the giving of the directions from Bombay. It is difficult indeed to see that the place at which a man takes a decision to do something in New York or to ask someone else to do something for him in New York is the place at which arises the profit which results from the action taken in consequence of the decision. And if the place from which he issues his instructions be regarded as a separate element the identity of place is no less difficult to detect. That the profit may be casually attributed to the assessee's decision is reasonable enough; though it be not the proximate cause nor the whole of the cause, it is, in the chain of causation, the link which most deserves the attention of anyone who desires to explain the success of the transaction. For this, and it may be for other purposes, the selective process which ignores the intermediate links is justified. But is the same selective process justified for the purpose of assigning the place at which the result ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10, the principle has to be applied in the case of business profits, that loss or profit is the result of the trade as a whole, that the source of the profit is the business as a business, and that the ultimate and total profit of the business must be regarded as accruing or arising at the place of direction or control. On this view it seems that a business carried on outside British India could have no profits accruing or arising within British India though it might be liable to tax on different principles. So, too, a business carried on in British India could have no profits which did not arise or accrue within British India. The result is that by sections of the Act which make no mention of the place where the business is carried on, the tax is really levied upon the whole or upon none of the profits of a business according as it is or is not carried on in British India. If and only if the owner of a foreign business be not resident in British India, its profits from any business connection or property in British India are taxable by the special provisions of Section 42. Their Lordships do not consider that the Indian Income Tax Act is patent of this construction. They will f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sixth head in Section 6 the words from whatever source derived are surplusage: even so, they are not there as a guide to the place where profits accrue or arise but to make clear that for another purpose source is irrelevant. There is every presumption that in such a section in an Indian Act the Legislature intends the exact language of the section to be the test of liability. To answer the question, Do these profits accrue or arise in British India? by asking another, What in the sense of Section 6 is the source of these profits and is it situate in British India? is to divert attention from that to which the statute points and to devote attention to what it discards. Nothing could be easier than to say from whatever source derived if situate in British India had this been intended. But it would have been by no means easy to apply. The source of salaries, of interest on securities, of professional earnings, is not readily described as situate anywhere though the place where an employment if carried on, or an investment made, or a salary or fees are earned is a familiar notion. There would have been no difficulty in the case of property and with the aid of certain ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where he may be said to trade-viz., where his profits come home to him. That is where he exercises his trade. But the question here is whether under the Indian Act the place where certain profits did not come home to him is the place at which they accrued or arose. There seems to be no necessity arising out of the general conception of a business as an organisation that profits should arise only at one place. This indeed seems to have been the view of Cockburn, C.J., in the case cited (cf. p. 716). Their Lordships have also been referred to an observation by Lord Macmillan in Robinson Brothers (Brewers) Ltd. v. Assessment Committee:- In the case where the brewer sells his own beer in the public house which he rents, he no doubt benefits his brewery by having an assured channel for the disposal of his beer, but the profit is actually made where the sales are effected-that is, in the public house. No doubt, if it can be held that under the Indian Act profit in the case of a business must be taken so strictly that it is not to be understood distributively at all, the profit of the assessee's business would become an ultimate and single figure, irreducible, and refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that a business carried on outside can have no profits which accrue or arise within British India much of the profits of business done in British India by firms abroad would be taxable under Section 42(1) as accruing or arising whether directly or indirectly through or from any business connection or property in British India . But apart from the difficulty of supposing that all such profits are within the sub-section, there is the important fact that the sub-section does not apply at all where the assessee is resident in British India: such a person owning a foreign business would escape altogether. Of course it may be that a resident would be more likely to bring the profits into British India, but even so if the appellant's view is sustained, a leakage which can hardly have been intended must result. Their Lordships have no hesitation in saying that the sub-section is more readily intelligible as an addition to a provision which catches profits arising in British India to businesses carried on outside. These considerations lead their Lordships to the conclusion that under the Indian Act a person resident in British India carrying on business there and controlling trans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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