LAWS(MAD)-1961-10-27

PUDUKOTTAH COMPANY LIMITED Vs. COMMISSIONER OF INCOME TAX

Decided On October 13, 1961
PUDUKOTTAH CO LTD Appellant
V/S
COMMISSIONER OF INCOME-TAX, MADRAS Respondents

JUDGEMENT

(1.) THE following question has been referred to us for opinion :

(2.) THE assessee is a private limited company incorporated, having its registered office at Usilampatti, in the erstwhile Pudukottah State, which merged with the Indian Union on August 1, 1949. In 1944, the company entered into an agreement with Thaigesaralai Mills, a spinning mill at Usilampatti, by which it became the sole distributors of all yarn produced in the mills. Some time thereafter, the sale of yarn produced in cotton mills became subject to certain regulations, under which yarn could be sold only to the nominees of the Textile Controller at Bombay. THE control order did not, however, affect the agreement which the assessee had with the mills. THE Textile Controller made allotments to various applicants for the purchase of yarn produced in the Thaigesaralai mills. In the instant case, the goods were dispatched on the basis of such allotments from the premises of the mills itself, as the assessee had no godowns of its own. But the transaction took the form of sale by the mills to the assessee and of a subsequent sale by the assessee to the allottee. THE nearest rail-head for the dispatch of the goods to the buyers was Manaparai, which has all along been within the taxable territories. THE goods from the mills were initially dispatched to Manaparai on assessees account by means of carts and lorries engaged for the purpose. At Manaparai, they were handed over to the railway. THE incidental expenses were included by the assessee in the invoices, which, with the relative railway receipts, were delivered to the buyers agents in person or dispatched by post to the buyers direct or, sometimes, through banks in Pudukottah, alter duly discounting the same.

(3.) IT is next argued that, although the profits could be held to have accrued at Manaparai, they cannot be taken as wholly accrued at that place, as only a part of the business operation of the assessee was done there. IT is, therefore, contended that there should be an apportionment of profits between two places, namely, Usilampatti, where the goods were got by the assessee, and Manaparai, where the goods were sold by it. The Appellate Assistant Commissioner accepted this principle in part, when he allowed, in respect of the price received at Usilampatti, a deduction of 15% of the profits earned as referable to the business operation outside the taxable territory.