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Issues Involved:
1. Tax liability of a non-resident company on profits received in British India. 2. Determination of whether specific sums represent sale proceeds or debts. 3. Determination of the location where the sale proceeds were received. 4. Method of computation of income for assessment purposes. Issue-wise Detailed Analysis: 1. Tax Liability of a Non-Resident Company on Profits Received in British India: The primary issue was whether the non-resident company was liable to pay tax on its profits or income, given that none of the profits were allegedly received in British India. The court emphasized that for a non-resident company, the mere accrual of income or profits in Baroda does not entitle the taxing authorities to tax any profits unless it is shown that these profits were received or deemed to be received in British India during the assessment year. The court clarified the distinction between the accrual or arising of income and the actual receipt of income, stating that income may accrue in one place and be received in another. 2. Determination of Whether Specific Sums Represent Sale Proceeds or Debts: The court examined three specific items: Rs. 12,68,480, Rs. 4,40,878, and Rs. 6,71,735. For the first item, it was established that Messrs. Jagmohandas Ramanlal & Co. received the sum on behalf of the assessee company, indicating that the sum was received in British India. The court rejected the argument that the sum was merely a realization of debt, emphasizing that the primary liability to pay for the goods was on the merchants, and the brokers were merely guarantors. For the second item, the court found that the merchants received goods and drew hundis, which they honored to get possession of the goods, thus constituting sale proceeds received in British India. For the third item, the court required further facts to determine whether cheques and hundis represented unconditional discharge of liability or were merely instruments for collection. 3. Determination of the Location Where the Sale Proceeds Were Received: The court concluded that the sums of Rs. 12,68,480 and Rs. 4,40,878 were received in British India. The court directed the Tribunal to submit a supplementary statement of facts for the third item of Rs. 6,71,735 to determine whether the cheques and hundis were given for collection or were cashed, which would affect the location of receipt. The court also sought clarification on whether the cheques and hundis were endorsed in favor of someone in Baroda and if the endorsee was a holder for value or merely an agent for collection. 4. Method of Computation of Income for Assessment Purposes: The assessee's notice of motion requested the Tribunal to raise a question about the correctness of the method of computation of income adopted for the assessment. The court noted that this point was not argued before the Tribunal and was not dealt with in its order. Therefore, the court declined to direct the Tribunal to raise this question, stating that there was no suggestion of this point of law either in the Tribunal's order or in the statement of the case submitted by the Tribunal. Conclusion: The court framed the questions as follows: 1. Whether the sums of Rs. 12,68,480 and Rs. 4,40,878 were sale proceeds of goods sold by the assessee to merchants in British India or were debts due by the said merchants? The court answered that they were sale proceeds. 2. Whether, if they were sale proceeds, they were received in British India? The court answered that they were received in British India. 3. Whether the profits of the assessee's business are included in the sums of Rs. 12,68,480 and Rs. 4,40,878? The court answered that they are included in these two sums. The court ordered the assessee to pay two-thirds of the respondent's costs and reserved the costs for the third item pending the receipt of the supplemental statement of the case. The notice of motion by the assessee was declined, and no order was made as to the costs of the motion.
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