Dipak Kumar Sen, J. - (1.) The facts found and/or admitted in this reference are of a short compass. Betts Hartley Huett & Co. Ltd., the asses-see, is a non-resident company with its head office in London. The assessee's business in Calcutta is mainly that of purchasing tea for its constituents abroad. In the assessment year 1963-64, the relevant previous year ending on the 31st December, 1963, the ITO found that the assessee had charged from its constituents in respect of tea purchased actual cost, commission or brokerage and also a sum of 10 paise per pound of tea on account of shipping, sampling and other miscellaneous charges, the commission charged varying between 1% and 2% on the value of the tea. In respect of despatch to head office the assessee did not charge any commission but charged all other items of expenses. The assessee contended that the sales to its head office were effected on a principal to principal basis and, therefore, there was no profit assessable under Section 9(1) of the I.T. Act, 1961. The ITO, however, held that the amount of commission which was not charged on sales to the head office accrued to the assessee's head office in London and, therefore, estimated the profit attributable to purchase operations of the assessee's London office in India through the assessee at 11/2% of the value of the tea sold and computed such profit as 7,827.
(2.) Being aggrieved, the assessee preferred an appeal from the assessment. The AAC accepted the contentions of the assessee and held that the ITO was not justified in adding the same amount of 7,827 as extra profit and directed deletion of the same. Similar deletions were directed to be made in respect of the subsequent assessment years 1964-65, 1965-66 and 1966-67.
(3.) Being aggrieved by this order of the AAC, the revenue preferred appeals to the Tribunal in respect of each of the said assessment years which were consolidated and disposed of by a common order. In the appeals, it was contended on behalf of the revenue that as commission was charged on sales to other constituents but not on the sales to the head office, the AAC was not justified in deleting the additions. It was contended on behalf of the assessee, on the other hand, that it had, in fact, earned profits on its sales to the head office though the same was somewhat less than the profit earned on the sales to outsiders. The Tribunal found that there was no plausible reason why a commission was not charged on the assessee's sales to its London office and to the extent the commission was not charged the London office did obtain a benefit. The Tribunal held that the London office did earn more because of its business connection through the assessee in India and by not paying commission this earning accrued or arose to the assessee because of its business connections in India. The Tribunal accordingly included the said amount of 7,827 in the computation of the asses-see's income as profit in respect of purchase operations carried on on behalf of the London office.;