TMI Blog1948 (11) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... y these arhatias from the sales of the aforesaid products were all remitted to the head office at Cuttack. The finding of the Tribunal is that the aforesaid products were not subjected to any manufacturing process but that they were transported in their raw state from various Orissa States where they were collected to various places in British India for sale. The assessee's accounts were maintained on the mercantile system of accounting. On these facts the main question for decision is whether any portion of the profits of the business can be said to accrue or arise in any Orissa State. Mr. Patnaik, on behalf of the assessee, argued that inasmuch as the mercantile system of accounting was followed by the assessee, a portion of the profits included the value of the stock-in-trade that might have remained unexported in the States at the end of the year in question and that consequently a portion of the profits should be held to have accrued or arisen in the States. He further contended that buying is an important part of operation in the business of trade and that the Income-tax authorities should have estimated that portion of the profits which accrued or arose in States ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income-tax, Madras v. Dewan Bahadur S.L. Mathias [1937] 5 ITR 435 (Mad.). The opposite view is that the place where the right to demand payment of the income or profit or the place where it is actually received is the place of accrual and that the place of accrual may not necessarily be the place where it originates or is earned. (1) Mohanpur a Tea Company Ltd. [1937] 5 ITR 118 (Cal.), (2) Sir T. Vijayaraghavacharya's case (supra) and (3) Phra Phraison Salarak AIR 1929 Rang. 1. So far as the present case is concerned, the decision of this vexed question is not very difficult chiefly because the finding on facts is that the raw materials do not undergo any manufacturing process in Orissa States but that they are exported in their raw state from the States to British India where they are sold at higher prices. Consequently the decision in Kirk's case (supra) or the recent decision of the Bombay High Court in Ahmedbhai Umarbhai Co. v. Excess Profits Tax Officer [1948] 16 ITR 193, which dealt with cases where raw materials underwent some sort of manufacturing process before export from the place of purchase, are distinguishable on facts. In Sulley v. Attor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt from the buying of raw materials and exporting them to British India. There could be no question of profit accruing in the States soon after the purchase of these raw materials. Mr. Patnaik argued that the assessee obtained a monopoly licence from the Rulers of the States to purchase these articles at very low prices in the States and that consequently had he sold them in the States at the market price prevailing there he would have obtained some profit and that profit should be deemed to have accrued in the States. This argument, however, does not appeal to us. The mere fact that the raw materials were purchased at concessional prices in the States because of the monopoly granted to the assessee does not necessarily lead to the inference that if the assessee had attempted to sell them in the States he would have obtained higher prices for those articles. At any rate there is absolutely no finding on this point by the Tribunal and it is therefore unnecessary to speculate as to whether there was any market for these articles in the States or else whether the assessee would have been able to sell these raw materials in those States. The applicability of the aforesaid decisions to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rother. I should not, however, accept it as an abstract proposition of law that in all cases without any exception of a trade of buying and selling, the principle as enunciated will necessarily apply. The bulwark of the theory that the place of sale of commodities where the prices are either realisable or realised is the place where the profits or gains accrue or arise, is to quote the words of Sir George Rankin in the case of Commissioner of Income-tax, Madras v. S.L. Mathias [1939] 7 ITR 47; 66 IA 23, the business operations cannot be arbitrarily cut into two portions but must be regarded as a whole. Notwithstanding these observations, however, which seem to be the ratio of the decision, his Lordship had to concede that the fact that the commodities were purchased at a particular place was not without its significance. In making this concession, his Lordship observed:- On the other hand, upon the question whether profits and gains accrued or arose in British India, it may be that the fact that the coffee was grown in Mysore is by no means to be disregarded notwithstanding that it was sold in British India, especially if it be true that it was sold without further process o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... privilege in relation to his right of purchase in the States which must have contributed largely to the income actually earned. It can be envisaged that the purchase of raw skins can in certain circumstances be paralleled to the extraction of ores and bringing them into merchantable condition in the New South Wales case (supra). According to the custom of the country, carcasses of animals are thrown into jungle and out of the way places without skinning. The work of collecting skins from such abandoned carcasses is limited to the class of untouchables to collect them not without some difficulties. The bones and horns are seldom found stored either in heaps or in appreciable quantity in any particular place. By employment of special agents of a particular class of people, they are collected from over a wide field scatterred as they lie. The monopolist has to pay some times in advance by way of encouraging the people to go about the country and collect the commodities sometimes after unearthing them. These operations with the addition of certain others, however minor, in order to bring them into merchantable condition cannot be disregarded as unconnected with the operation of buying ..... X X X X Extracts X X X X X X X X Extracts X X X X
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