COMMR OF INCOME TAX EXCESS PROFITS TAX BOMBAY CITY Vs. BHOGILAL LAHER CHAND INCLUDING BATLIBOI AND CO BOMBAY

JUDGEMENT

(1.) This is an appeal from the Judgment of the High Court of Judicature at Bombay delivered on a reference under S. 66(1) of the India Income Tax Act, 1922, whereby the High Court answered the first referred question in the negative.

(2.) The assessment in question concerns the year 1943-44. A Hindu undivided family was carrying on business in Bombay, Madras and the Mysore State. Its business was taken over by a registered firm on 17th March 1942. For the purpose of this appeal however this circumstance is not material. The case has been dealt with on the assumption that a single assessee carried on business from 10th October 1941 to 8th November 1942, the relevant accounting year. According to the assessee, during this period the Mysore branch purchased goods form the Bombay head office and the Madras branch of the value of Rs. 2,45,455. The Income-tax Officer estimated these purchases of the Mysore branch in British India at Rs. 3,00,000 and its profits at Rs. 75,000 on the sale of these goods in Mysore. In view of the provisions of S. 42 of the Act half of this profit i. e., to the extent of Rs. 37,000, was deemed to accrue or arise in British India, because of the business connection of the non-resident branch in British India.

(3.) It was contended that the assessee being a person resident in India, S. 42 could not be invoked in the case, because that Section had application only to cases of non-residents. The Income-tax Tribunal following the decision of the Bombay High Court in-Commr. Of Income-tax vs. Western India Life Assurance Co. Ltd., AIR 1946 Bom 185 (A), upheld this contention, and ruled that no part of the Mysore profit could be taxed in British India. At the instance of the Commissioner of Income-tax / Excess Profits Tax, Bombay City, three questions were referred to the High Court under S. 66(1), the first of these being: