HIRALAL KALYANMAL Vs. IN RE

JUDGEMENT

(1.) THE first question is Whether the commission of one per cent. revised by the assesses on the value of the hundis collected by them in Bombay in respect of the cloth sold by their Indore shop to merchants in Bombay is liable to be assessed to payment of income-tax and super-tax in British India.

(2.) THE facts in relation to that question are that by an agreement made in 1919 between the Kalyanmal Mills, Ltd., which was a joint stock company registered in Indore of the one part, and the assesses of the other part, the assesses were to be entitled, amongst other things, to be paid the Company a commission at the rate of one per cent on the gross sale proceeds of all cloth and yarn of the Company, and it was provided in clause (5) of the agreement that the commission should be due to theses firm yearly on the December 31, in each and every year during the continuance of the agreement and be paid immediately thereafter. THE facts as found are that sales were effected in Indore, being on terms F.O.R. Indore; the purchasers being Bombay merchants, the purchase money were received in the form of hundis drawn by the assesses through their Indore shop, and accepted by the Bombay purchasers; such hundis were collected by the assesses in Bombay, and after realisation paid to the Company in Indore. So that, the position being that sales were effected outside British India, the proceeds of such sales were collected by the assesses in British India, and the Commission of one per cent. Was ultimately paid outside British India, the question is whether it can be said that the commission of one per cent. accrued or arose in British India within the meaning of Section 4(1) of the Income-tax Act. THE commission payable at the end of the year was paid in Indore and not received in British India.

(3.) WE were referred to Arunachalam Chetty v. Commissioner of Income-tax, which was a decision of a Full Bench of the Madras High Court, and another decision of a full Bench of the same Court in S.I. Industrial v. Commissioner of Income-tax Madras, and in those two cases the Courts to a great extent adopted different views. WE were also referred to a decision of Mr. Justice Rowlatt in Scales v. George Thompson & Co., Ltd. I think it would be very difficult, if not impossible, to formulate any rules for determining questions of this nature. It is obvious that mere common ownership of the businesses does not means that were merely branches of the same business. It is also I think obvious that the mere fact that the two businesses are of a distinct nature does not necessarily mean that they are distinct businesses. You can have two branches of a multiple store, one selling drugs, and the other selling cloth. Nobody would suggest that these two departments constitute two different businesses. On the other hand, if you have a shop in Bombay selling cloth, and a shop in Ahmedabad selling drugs under different names and different management and under separate accounts, common ownership would hardly make them one business. Mr. Justice Rowlatt in Scales v. George Thompson & Co., Ltd., suggests that there must be some sort of interrelation between the two businesses, to constitute the branches of the same business. At any rate all these cases recognise the fact that this matter is a question of fact to be determined by the Commissioner, and if there is any evidence enabling him to determine the question, then his determination is final. I am unable to say that there was no evidence in this case on which the Commissioner could come to the conclusion which he reached, that these were two distance businesses. These two businesses may have overlapped to some extent, but there was evidence that they were separate in their character. I am not prepared to say that there was no evidence on which the Commissioner could reach the conclusion he reached.