9911796707
TMI Blog1952 (12) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... between the appellant and Messrs. Best & Co., Ltd., Madras, dated 11th July, 1939, Messrs. Best & Co., Ltd., were constituted the agents of the appellant for the purposes of its business in India. Messrs. Best & Co., Ltd., have under the terms of the agreement full powers in connection with the business of the appellant in the matter of purchasing stock, signing bills and other negotiable instruments and receipts and settling, compounding or compromising any claim by or against the appellant. The agents are empowered to borrow money on behalf of the appellant and to make advances. They are also expected to secure the best commissions, brokerages, rebates, discounts and other allowances in respect of and in connection with the business of the appellant. They are enjoined to keep proper accounts of the appellant and to pay over to the appellant the sum standing to its credit. They are remunerated by a salary of Rs. 6,500 per month and a percentage commission on the profits made. During the relevant year all the purchases of cotton required for the mill at Pondicherry were made by the agents in British India and no purchases were made through any other agency. The agents exercised th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for the appellant reiterated before us the arguments that he had addressed in the High Court and contended that on the facts of this case there was no scope for the finding that any profits or gains accrued to the assessee directly or indirectly through or from any business connection in India. It was argued that a mere purchase of raw materials or goods in British India does not result in the accrual or arising of profits and that the profits on the sale of goods arise and accrue only at the place where the sales are effected and that in the present case, there being no sales effected in British India in the year of account 1939, no profits accrued or arose to the company in British India nor could any profits be deemed to have accrued or arisen in British India. In support of his proposition, the learned counsel placed reliance on a number of cases, inter alia, on Board of Revenue v. Madras Export Co., Jiwan Das v. Commissioner of Income-tax, Lahore, Rahim v. Commissioner of Income-tax, Commissioner of Income-tax, Bombay v. Western India Life Insurance Co. and Commissioner of Income-tax v. Little's Oriental Balm Ltd. Most of these decisions were given under the Act of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of raw material ? " While answering these questions in the affirmative it was said :-- " It is clear that the purchase of raw material by a firm of manufacturers is one of the processes or operations which contributes to an appreciable degree to the ultimate profit which is realized on the sale of manufactured articles. " There is thus no uniformity of judicial opinion on the question that the mere act of purchase produces no profit. In our judgment, the contention of the learned counsel for the appellant,--and on which his whole argument is founded--that it is the act of sale alone from which the profits accrue or arise can no longer be sustained and has to be repelled in view of the decision of this Court in Commissioner of Income-tax, Bombay v. Ahmedbhai Umarbhai & Co. That was a case that arose under the Excess Profits Tax Act, XV of 1940. A firm which was resident in British India and carried on the business of manufacturing and selling groundnut oil, and owned some oil mills within British India also owned a mill in Raichur in the Hyderabad State where oil was manufactured. The oil manufactured in Raichur was sold partly within the State of Hyderabad and partly in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations. The same line of reasoning was adopted by the Madras High Court in Bangalore Woollen Cotton & Silk Mills Co. Ltd. v. Commissioner of Income-tax, Madras. There it was held that the purchase of raw materials by the managing agents in British India would be an operation within the meaning of Section 42(3) and it was reasonable to attribute a portion of the profits to such purchases in British India. After a careful consideration of the decided cases on the subject and in view of the insertion of Section 42(3) in the Act of 1922 by the amending Act of 1939, we have reached the conclusion that in the present state of the law there is hardly any scope for maintaining the view contended for by the learned counsel for the appellant and we therefore agree with the High Court in repelling it. While maintaining the view taken by the High Court in this case 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. These provisions have no application unless according to the known and accepted business notions and usages the particular activity is regarded as a well ..... X X X X Extracts X X X X X X X X Extracts X X X X
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