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TMI Blog1948 (8) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... rride the provisions of Section 4(1)(c) and render only such portion of such profits assessable as are attributable to operations carried out in British India. We may say at the outset that the frame of the question struck us at first sight as being not quite happy in view of the reference therein to Section 42(3) overriding the provisions of Section 4(1)(c). But after having heard the arguments we feel convinced that the question, for the reasons we shall state later, has been rightly framed. The applicant is a non-resident and he has been carrying on business in gold and silver in Secunderabad outside British India. He used to purchase gold at Secunderabad and to sell the major portion of it at Bombay through brokers in that line. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fixed at that place under the contract. Upon those premises it was argued that the profits from these sales did not accrue or arise in British India. An alternative suggestion was also made before the Appellate Assistant Commissioner that the appellant being a nonresident was only trading with British India and not in British India and that consequently profits attributable to transactions in British India fell to be taxed under Section 42 (3) on the basis of allocation of operations. These contentions were rejected by the Appellate Assistant Commissioner and an appeal was brought against this order before the Income-tax Appellate Tribunal. There also the same two contentions were raised, but the assessee gave up before the Tribunal the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 7,346 accrued or arose in British India. In paragraph 2 of the reply the Commissioner further pointed out that the argument relating to the second contention before the Bench, namely, as to the applicability of Section 42(3) proceeded on the accepted basis that the sales of gold actually took place in British India and that consequently the income from those sales accured or arose in British India. In the statement of the case after setting out all that had happened before the Appellate Assistant Commissioner and before the Tribunal at the earlier stages, it is specifically mentioned that the contention relating to the income arising in British India was definitely given up before the Tribunal. It is only in consequence thereof that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h India during such year. Section 42(1) runs thus:- All income, profits or gains accruing or arising, whether directly or indirectly, through or from any business connection in British India, or through or from any property in British India, or through or from any asset or source of income in British India, or through or from any money lentat interest and brought into British India in cash or in kind, or through or from the sale, exchange or transfer of a capital asset in British India, shall be deemed to be income accruing or arising within British India, and where the person entitled to the income, profits or gains is not resident in British India, shall be chargeable to income-tax either in his name or in the name of his agent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hongkong Trust Corporation Ltd. [1930] 4 ITC 312 Likewise when certain profits are deemed to be profits, for the purpose of a fiscal provision, they are not in reality profits, but they have to be deemed so for the specific purposes of the statute. Section 42(1) comprises a number of sources or connections through or from which the profits may accrue or arise; they are deemed to be income accruing or arising within British India and will be chargeable to income-tax, if the person entitled to the income is a non-resident, either in his name or in the name of his agent. With regard to cases to which Section 42(1) applies, sub-section (3) of that section provides that if the business consists of a number of operations carried out in British In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inction is made in the Act between residents and non-residents. It is provided in the case of residents that all income which accrues or arises whether within or without British India is taxable. In the case of non-residents, income which accrues or arises or is deemed to accrue or arise in British India alone is taxable [apart from cases covered by Section 4(1)( a) which apply to residents and non-residents alike] and it is only to define in what cases income, profits and gains are deemed to accrue or arise that provision is made in Section 42 and in other sections. We may here refer to the observations of Sir Iqbal Ahmad, C.J., in Hira Mills Ltd. v Income-tax Officer, Cawnpore [1946] 14 ITR 417 :- We think on construction alone that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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