N.H. Bhagwati, J. - (1.) This is an appeal from the judgment and order of the High Court of Judicature at Madras upon a reference made by the Income-tax, Appellate Tribunal under Section 66(1) of the Income Tax Act, 1922. The Appellant company, the assessee is incorporated in the United Kingdom under the English Companies Act and has its registered office in London. It owns a Spinning and Weaving Mills at Pondicherry in French India where it manufactures yarn and cloth. Messrs, Best and Co. Ltd, Madras have been appointed the agents of the assessee under an agreement dated the 11th July 1939 and have been invested with full powers in connection with the business of the assessee, in the matter of purchasing stock, signing bills and other negotiable instruments and receipts and settling, compounding or compromising any claim by or against the assessee. The yarn and cotton manufactured in Pondicherry were sold mostly in British India and partly outside British India. In the accounting years 1941 and 1942 all the contracts in respects of the sales in British India were entered into in British India and the deliveries were made and payments received in British India. In regard to the sales outside British India also, payments in respect of such sales were received in Madras through the said agents.
(2.) The total sales of the goods in the assessment year 1942-43 were Rs. 69,69,145 and for the assessment year 1943-44 were Rs. 93,48,822. The value of the sales in British India amounted to Rs. 57,07,431 for the assessment year 1942-43 and to Rs. 67,98,356 for the assessment year 1943-44. The value of the total sales outside British India amounted to Rs. 12,61,714 for the year 1942-43 and Rs. 25,50,472 for the year 1943-44. Out of the said amounts received in respect of the foreign sales the amounts received in British India were Rs. 9,62,434 for 1942-43 and Rs. 75,230 for 1943-44 and the amounts received outside British India were Rs. 2,99,280 for 1942-43 and Rs. 24,75,242 for 1943-44.
(3.) On these facts the Income-tax Officer found that the assessee was resident in British India within the meaning of Section 4-A (c)(b) of the Act by reason of its income arising in British India in the year of account exceeding its income arising without British India and on that basis he assessed the company for the two assessment years 1942-43 and 1943-44 as resident in British India on the profits and gains which had accrued to the company both within and without British India under Section 4(1)(b)(i) and (ii) of the Act. The order of the Income-tax Officer was confirmed by the Appellate Assistant Commissioner was confirmed by the Appellate Tribunal on the 15th May 1946.;