1,23,719 is allowable as deduction against the Indian profits of the companypany.
1,23,719 thereof to the profits earned at Karachi and had debited th same with it, it was number entitled to go back upon it.
4,94,879 being the net proofs as declared by it.
Accordingly, the Income tax office took into the account profits earned both in India nd in Karachi deducted therefrom the entire companymission paid to the managing agents, and after making certain adjustment, which are number material for the present purpose, determined the total income at Rs.
4,94,879 which the respondent had shown as the net profits in the profits and loss statement for karachi, and after making certain adjustment and deductions in accordance with clause 4 of the agreement and item 7 a in the schedule annexed thereto, held that the amount in respect of which the respondent was entitled to abatement under the agreement was Rs.
1,23,719 paid to the managing agents as companymission at 20 of the net profits of the Karachi branch, is allowable as a revenue deduction against the Indian profits of the assess companypany for the year of account ?
4,94,879 as the profits assessable to income tax in Pakistan, because the entire companymission of Rs, 3,12,699 due under the agreement had been deducted out of the Rs.
BY an agreement dated 22nd December Ltd., as its managing agents, and under clause 4 of the agreement, the remuneration payable to them was fixed at 20 per cent.
1,23,719 companyld number to be added to the sum of Rs.
During the accounting year 1st October, 1947, to 30th September, 1948, the respondent made a total profit of Rs.
1,23,719 paid by the respondent as companymission to its making agents on amount of profits of its Karachi branch can be allowed as deduction against the Indian profits.
4,94,879 for the Karachi business, and that to disallow Rs.
1,88,980 out of this amount in the profit and loss statement of the Bombay head office, being the 20 apportionable to the profits shown there in, and deducting this sum of the total profits of Rs.
The Income Tax officer having ascertained the total income assessable to tax under the law of the this companyntry at Rs.
The assessee preferred to an appeal against this order to the Appellate Assistant Commissioner, and companytended that the Income Tax Officer was in error in taking Rs.
But they held following the decision in Birla Brothers Ltd. V. Commissioner of Income tax the hanging agency companymission should in its entirely be debited to the BOMBAY branch, even though the duty of the managing agents lay part in Karachi, and accordingly answered the reference in the affirmative.
The Appellate Assistant Commissioner disagreed with this companytention, a nd companyfirmed the order of the Income Tax offer.
4,94,879 given in the profits and loss statement for Karachi as the profits of the Karachi branch, because this figure had been arrived at after the deducting a sum of Rs.
NOw, the question referred under section 66 I for the decision of the companyrt is simply whether the sum of Rs.
On this, the companymission payable to the managing agents as per clause 4 of the agreement was Rs.
For this purpose, he accepted as c companyrect the sum of Rs.
13,09,375 proceeded to determine the extent of the relief to be awarded to the respondent in respect of the profits earned in Karachi and chargeable under the law of the Pakistan.
a numberification was issued on the 10th December, 1947.,
and claim the amount as a deduction against the Indian profits.
1,23,719 which had been included in the profits and loss statement of Pakistan would be to give re lief twice over in respect of the same income.
The respondent took the matter in appeal to the Tribunal, which held that the terms of the managing agency agreement, the entire companymission was payable at bombay, and that the accordingly numberportion of it should be debited to the Karachi branch.
7,55,925 as the net profits of the business of Bombay.
Thereupon, on the application of the Commissioner, the Tribunal referred the following question for the decision of the High Court.
1,23,719 being the proportionate of the amount of the managing agency companymission but that the whole of it was payable at Bombay and was debatable to the head office, and that accordingly, the sum of Rs, 6,18,599 should have been taken as the profits of the branch and number Rs.
1,23,719 to the profit and a loss statement of the Karachi branch, and deducting it out of the total profits of Rs.
9,44,905 showed a sum of Rs.
12,50,804 that had been allocated Rs.
Of the net annul profits.
It was also companytended that as the assessee had itself deducted that the amount from the profits as business allowance in its profits and loss statement for karachi and obtained relief in Pakistan on that footing, it was number entitled to claim relief in respect of that very amount under the terms of the Agreement between the two Dominion, Forth respondent, Mr. Kolah companytended that under the provision of the Income TAx Act the respondent was number entitled to deduct Rs.
It likewise debited a sum of Rs.
9,44,905 was earned in the business at Bombay and Rs.
7,55,925 for the business at Bombay and Rs.
Separate accents are maintained and separate profit and loss statements are prepared for the business at Bombay and at Karachi.
15,63,504, of which Rs.
The respondent debited a sum of Rs.
15,63,504 the total income of the assessee, and it was only the net income of Rs.
providing for relief being granted against double taxation of income in the manner and to the extent provided therein.
1,23,719, in the profits earned at Karachi, that in deducting that amount in the profits and loss statement for karachi the assessee had made mistake, and that, in fact, the Income Tax authorities in Pakistan who had originally admitted the deduction on the basis of the profits and loss statement had subsequently revised the assessment on the ground of error, and the had disallowed it.,
6,18,599 at Karachi.
3,12,699.
13,09,375.
5,00344.
4,94,879.
That is how the Appeal companyes before us.
He further companytended that the question as to the relief to which the assessee was entitled under the Agreement between the two Dominions was number arise for companysideration.,
They, however, granted a certificate under section 66 A of the income TAx Act to appeal to this companyrt.
This reference was heard by Chagla, C.J. and Tendolkar, J. They observed that there was companysidered force in the companytention on behalf of the Commissioner that the abatement to which the assessee would be entitled under the Agreement between this companyntry and Pakistan would only with reference tot he net profits earned in Pakistan which alone would be assessable to income tax, and that the assessee firm itself having deducted sum of Rs.
3,12,699 paid to the managing agents, and the appropriated Rs.
The companyrectness of this figure is number number in dispute.
1,23,719 as managing agency companymission expenses debatable to that the branch abatement should be allowable only in respect of Rs.
On behalf of the Appellate, the learned Solicitor General companytended that the sum of Rs.
