COMMISSIONER OF INCOME TAX Vs. MODERN THEATRES LIMITED

JUDGEMENT

(1.) THE two questions that were referred to us by the Income-tax Appellate Tribunal under Section 66(1) of the Indian income tax Act are as follows:

(2.) THE assessee is a public limited company whose registered office is at Salem and is incorporated in British India. It carried on the business of producing and distributing aims. THE films are distributed to exhibitors within, and also without, British India under two classes of contracts, specimen copies of which are annexed to the case stated by the Appellate Tribunal as A and B. THE films are given on hire for exhibition either for a fixed sum agreed to be paid by the exhibitor, or for a percentage of the collections made by the-exhibitor at the time of the exhibition of the picture. THE assessee claimed that under the third proviso to Section 5 of the Excess Profits Tax Act, the income he received by exhibiting films in the Indian States under both the types of contracts was exempt from liability to pay excess profits tax. This, contention was upheld by the Tribunal, differing from the Appellate Assistant Commissioner. Hence this reference. THE crucial question that falls to be determined is whether the whole of the profits accrued, or arose, in an Indian State or not.