1965 (9) TMI 38 - HC - Income Tax

Summary

Issues Involved:
1. Whether the whole or any part of the assessee's income accrued or arose in the State of Mysore and is exempt from tax under section 14(2)(c) of the Indian Income-tax Act.
2. If only a part of such income accrued or arose in the State of Mysore, what is the quantum thereof.

Detailed Analysis:

1. Accrual of Income in the State of Mysore:
The primary issue was whether the income of Rs. 1,24,004 accrued or arose to the assessee in the State of Mysore and was exempt from tax under section 14(2)(c) of the Indian Income-tax Act for the assessment year 1946-47. The assessee, a resident of Madras, entered into financing agreements with S. Krishna Ayyar, a building contractor, for projects in Kolar and Yelahanka in the Mysore State. The agreements stipulated that the advances would be repaid from the payments received from the Mysore authorities, and the commission was to be calculated at 10% of the total value of the works executed and accepted by the Mysore authorities.

The court observed that the actual advances were made in Mysore, and the final bills were submitted and accepted in Mysore. The commission income was contingent upon the acceptance of these bills by the Mysore authorities. Therefore, the court concluded that the situs of accrual of the commission was in Mysore, as the right to receive the commission arose only upon the acceptance of the final bills in Mysore.

2. Quantum of Income Accrued in Mysore:
Given the conclusion that the entire commission income accrued in Mysore, the second question regarding the quantum of income did not require an answer. The court held that since the entire income accrued in Mysore, it was exempt from tax under section 14(2)(c) of the Indian Income-tax Act.

Conclusion:
The court answered the first question in favor of the assessee, determining that the entire commission income of Rs. 1,24,004 accrued in the State of Mysore. Consequently, the second question about the quantum of income did not arise. The assessee was entitled to costs, with counsel's fee set at Rs. 250.