S. R. Das, J. - (1.) This is an appeal from the judgment pronounced by the High Court of Judicature at Madras on the 29th March 1951 on a consolidated reference by the Income-tax Appellate Tribunal under Section 66(1) of the Income-tax Act whereby the High Court answered in the affirmative both the referred questions which were expressed in the following terms: "(1) Whether on the facts and in the circumstances of the case the profits derived by the assessee company from sales made to European and American buyers arose outside British India (2) Whether on the facts and in the circumstances of the case the profits derived by the assessee company from sales made to European and American buyers were received outside British India -
(2.) The above questions of law arose out of proceedings for the assessment to Income-tax of the respondent, Mysore Chromite Ltd., (hereinafter referred to as the assessee company), for the years 1939-1940, 1940-1941. 1941-1942 and 1942-1943. The facts leading up to the reference as found by the Income-tax Appellate Tribunal are shortly as follows:
(3.) The assessee company is a private limited company registered in the Mysore State under the Mysore Company Regulations and has its registered office at Sinduvalli in Mysore State. The management and control of the assessee company was vested in M/s. Oakley Bowden and Co. (Madras) Ltd., another private limited company incorporated under the Indian Companies Act, having its registered office at No. 15, Armenian Street Madras. The assessee company owns chromtie mines in Mysore State. Chrome ores are extracted from the mines and converted into a merchantable product and then sold to buyers mostly outside India. A very small proportion of the total sales is effected in India and for the purposes of this case may be left out of consideration. The sales are mostly to buyers in America and Europe. The sales to the purchasers in Europe are put through in London by Bowden Oakley and Co. Ltd., London, which is the agent of the assessee company in Europe holding a power of attorney from the assessee company. The contracts for sale to European purchasers are signed by Bowden Oakley and Co. Ltd., in London. The sales to purchasers in America are effected through M/s. W. R. Grace and Co., who buy for undisclosed principals. The contracts for sale to American purchasers are signed by W. R. Grace and Co. presumably in America and by Oakley Bowden and Co., (Madras) Ltd., in Madras. Specimen forms of contracts with European purchasers and those with American purchasers are set out in the order of the Tribunal dated the 22nd January 1948 out of which the present reference arises. Under both forms of contracts the price was F. O. B. Madras of Marmagoa. A very small quantity of goods was sold F. O. B. Marmagoa and the same need not be considered here. Provision was made for weighment, sampling and assay of goods at destination. The terms of payment under the European contract were as follows: "Payment:Buyers to open a confirmed irrevocable Bankers credit in favour of M/s. Mysore Chromite Ltd., Madras (to be advised to sellers) through the Eastern Bank Ltd., for 90 per cent. (ninety per cent.) of the Provincial (sic) Invoice against documents. Documents to consist of: 1.Bills of Lading, 2. Provisional Invoice. Provisional Invoice to be based on Bill of Lading weight and contract price for 48 per cent. Cr. 203. Balance on ascertainment of weight and analysis to be paid in London to Bowden Oakley and Co. Ltd., within 10 days of the final invoice, based on outturn weights and assays". The corresponding terms of payment under the American contracts were as follows: "Payment:Letter of credit for eighty per cent, (80 per cent.) of invoice value to be available against drafts at ninety (90) days' sight with documents attached to be opened immediately in London in favour of the seller. Balance estimated twenty (20 per cent.) of the margin due to be paid by telegraphic transfer through London on receipt of information as to assay and outturn which should be submitted within a month after the arrival of the steamer at destination. Charges for such telegraphic transfer for account of beneficiary". The European contracts also provided for insurance by buyers but no such provision was made in the American contracts.;