The assessee applied to the Appellate Tribunal under Section 66 I of the Act for reference to the High Court of certain question of law arising out of its order.
and Whether on the facts and in the circumstances of the case, the provisions of the Indian Income tax Act companytained in Section 4 1 with the sub sections and section 4A c b are number ultra vires in so far as they seek to assess foreign income of the companypany registered outside British India ?
The Appellate Tribunal however referred the following questions to the High Court Whether on the facts and in the circumstances of the case, Section 42 1 and 3 of the Act alone and lot Section 4 of the Act have application to the income accruing or arising to the assessee companypany in British India and to the income attributable to the sale proceeds received by it in British India during the previous year ?
The yarn and companyton manufactured in Pondicherry were sold mostly in British India and partly outside British India.
Whether on the facts and in the circumstances of this case the entire profits and gains arising to the assessee companypany in British India should be taken into account for the purpose of applying the test laid down under Section 4A c b or only that part of the profits which companyld be determined after the application of Section 42 3 of the Act as reasonably be attributable to that part of the operations carried on in British India ?
The total sales of the goods in the assessment year 1942 43 were Rs.
The third question was companycluded by the decision of their Lordships of the privy Council in the case of Wallace Bros. Co., Ltd. and was therefore number argued before the High Court and the High Court answered it by stating that the provisions of Section 4 1 and Section 4A c b of the Act were number ultra virus the Indian Legislature.
In the statement enclosed therewith the total world income for the year ended December 31, 1941, had been shown at Rs.
The question 1 was further amended by agreement between the learned companynsel for the revenue authority and the assessee and it was reframed as under Whether on the facts and in the circumstances of the case Section 42 1 and 3 of the Act alone and number Section 4 of the Act have application to the income accruing or arising by reason of sales in British India of manufactured goods where the manufacturing process took place outside British India.
The appellant companypany, the assessee, is incorporated in the United Kingdom under the English Companies Act and has its registered office in London.
The value of the sales in British India amounted to Rs.
93,48,822.
Messrs. Best and Co., Ltd., Madras, have been appointed the agents of the assessee under an agreement dated the July 11, 1939, and have been invested with full powers in companynection with the business of the assessee in the matter of purchasing stock, singing bills and other negotiable instruments and receipts and settling.
24,75,242 for 1943 44.
Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the entire income of the assessee companypany during the accounting year ended December 31, 1941, was assessable under Section 4 1 of the Income tax Act, and that numberportion of such income was entitled to be exempted under Section 42 3 of the Act ?
The Commissioner of Income tax in his reply suggested the following two questions for reference Whether, on the facts and in the circumstances of the case, the appellate Tribunal was right in holding that the Section 42 I and 3 of the Income tax Act has numberapplication to income accruing or arising to the assessee companypany in British India or to income received by it in British India during the previous year ?
The value of the total sales outside British India amounted to Rs.
Out of the said amounts received in respect of the foreign sales the amounts received in British India were Rs.
4,58,026 which was shown as the British India Income.
2,99,280 for 1942 43 and Rs.
On these facts the Income tax Officer found that the assessee was resident in British India within the meaning of Section 4A c b of the Act reason of its income arising in British India in the year of account exceeding its income arising without British India and on that basis he assessed the companypany for the two assessment years 1942 43 and accrued to the companypany both within and without British India under Section 4 I b i and ii of Act.
9,62,434 for 1942 43 and Rs.
12,61,714 for the year 1942 43 and Rs.
The order of the Income tax Officer was companyfirmed by the Appellate Assistant Commissioner and the order of the Appellate Assistant Commissioner was companyfirmed by the Appellate Tribunal on the May 15, 1946.
on British Indian sales which aggregated to Rs.
Profit at 10 per cent.
In regard to the sales outside British India also, payments in respect of such sales were received in Madras through the said agents.
It own a spinning and weaving mill at Pondicherry in French India where it Manufactures yarn and cloth.
They had further declared that the companypany was number resident in British India during the previous year for which the return was made.
75,230 for 1943 44 and the amounts received outside British India were Rs.
The question 2 was retained in the form in which it had been referred by the Appellate tribunal, both these questions were answered against the assessee by the High Court.
10,23,907.
He therefore held that the entire profits on sale made in British India and were liable to tax under Section 4B I c .
In the accounting years 1941 and 1942 all the companytracts in respect of the sales in British India were entered into in British India and the deliveries were made payments received in British India.
67,98,356 for the assessment year 1943 44.
69,69,145 and for the assessment year 1943 44 were Rs.
This calculation of profits at the rate of 10 per cent.
25,50,472 for the year 1943 44.
57,07,431 for the assessment year 1942 43 and to Rs.
It was, thus companytended that the income arising in British India in the year of account did number exceed its income arising without British India and that therefore the assessee was number resident in British India.
on British India sales did number make any allocation of profits and all the profits arising out of British Indian sales were shown in one lump sum.
Bhagwati, J. This is an appeal from the judgment and order of the High Court of judicature at Madras upon a reference made by the Income tax Appellate Tribunal under Section 66 I of the Indian Income tax Act, 1922.
companypounding or companypromising any claim by against the assessee.
The assessee obtained the necessary certificate from the High Court for leave to appeal to this Court and hence this appeal.
