HIRALAL KALYANMAL Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) THIS is a reference made by the Commissioner of Income-tax under Section 66(2) of the Indian Income-tax Act of 1922, raising two quite separate and distinct questions.

(2.) THE first question is : Whether the commission of one per cent. realised by the assessees 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 ?

(3.) THE argument on behalf of the Commissioner in this case is that the source of the commission is the receipt of the proceeds of sale on which the commission is calculated. But, in my opinion, that is not so. I think the source of the commission is the sale which took place in Indore. THE commission would be payable, although the proceeds of sale were not actually received, if the company voluntarily released purchasers from their obligation to pay. In my opinion, it is impossible to say that the commission accrued or arose at the place where, and at the time when, the purchase moneys were received. I think it is more accurate to say, as we said in Commissioner of Income-tax v. Sarupchand (supra), that it is the sale which is the real source of the commission, and as in this case the sale took place in Indore, whereas in Commissioner of Income-tax v. Sarupchand the sale took place in Bombay, the decisions in the two cases must necessarily be different.