SALT AND INDUSTRIES AGENCIES LTD Vs. COMMISSIONER OF INCOME-TAX-EXCESS PROFITS TAX

JUDGEMENT

(1.) THE assessee before us is a joint stock company incorporated in Bombay and they are the managing agents of the United Salt Works & Industries, Ltd. , which company also is incorporated in Bombay. THE assessee company was appointed the managing agents under the managing agency agreement, dated 1st June 1944, and in this reference we are concerned with the assessment year 1945-46, the relevant previous year being the year ended 30th September 1944. During the year of account the United Salt Works & Industries, Ltd. , made a profit of Rs. 10,12,402 from its business at Aden and a profit of Rs. 7,61,165 from its business at Kandla.

(2.) THE Tribunal took the view that the total comission payable to the assessee company amounted to Rs. 2,10,816 and out of that Rs. 1,22,750 was attributable to the Salt Works at Aden and Rs. 88,065 was attributable to the Salt Works at Kandla.

(3.) WHAT we, therefore, have to consider is not where the control of the business is, but where the profits of the business had arisen or accrued, and I agree with Mr. Kolah that as a general proposition the profits of a business arise or accrue at the place where the business is carried on. It is the place where the business yields profits which are sought to be taxed which must be considered to be the place of the accrual or arising of those profits, and therefore what we have to determine in this case is where did the commission of the managing agents arise or accrue which is sought to be taxed. On this point, with regard to accrual or arising of profits, there is a decision of this Court which might be of some help, and that is, In re Aurangabad Mills, Ltd. , 23 Bom. L. R. 670 : (A. I. R. (8) 1921 Bom. 159 ). There a joint stock company was registered in Bombay and the board of directors were also in Bombay. The company owned a textile mill which was worked at Aurangabad in the Nizam's territory and the whole work of the mill was done at Aurangabad by a paid manager who held a power-of-attorney from the directors, though the accounts were made up in Bombay, and the question was whether the profits of the company arose or accrued in the territory of the Nizam or in British India, and Sir Norman Macleod in taking the view that the profits arose in the Nizam's territory stated (p. 119) : " No authorities have been cited for the proposition that because the affairs of a company are directed from a particular place while the actual business of the company is carried on in another therefore the profits accrue or arise in the former place. " Therefore, the test to be applied in order to determine where the profits accrue or arise is to find out where the actual business of the company is done which yields the profits which are sought to be taxed. The question as regards control or supervision is material and irrelevant as far as this particular question is concerned. Therefore, applying that test to the facts of this case, what we have to ask ourselves is, where did the commission of the assessee company accrue or arise, and for that purpose we have also got to consider where was the business of the managing agency done which made it possible for the managing agents to earn this commission.