9911796707
TMI Blog1953 (1) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ers are held. Not being resident in the United Kingdom the Association pays no British income-tax on its profits. For the purposes of assessment under the Indian Income-tax Act the Association has been considered to be a non-resident. The Association manufactures salt in Egypt where it has certain concessions and the salt as manufactured is sent for sale in any country where there is a suitable market. Part of the salt so manufactured by the Association is consigned to Messrs. Turner Morrison & Company Ltd. for sale in India. All shipping operations, i.e., chartering of steamer, loading, insurance, etc., are effected in Egypt by the Association who sends the documents to Messrs. Turner Morrison & Company Ltd. Messrs. Turner Morrison and Company Ltd. effect sales in India through brokers at the best price obtainable at or above the prices approved by the Association. Turner Morrison & Company Ltd. are paid commission at the rate of 2 1/2 per cent. generally on all the sales except in some cases where 1 1/4 per cent. is paid. All handling of the cargoes when they arrive at Calcutta and the necessary disbursements in connection therewith are carried out and made by Turner Morrison & C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come accrued or arose or is deemed to accrue or arise in India and is assessable to tax as contemplated by Section 4(1)(c) ? (3). Whether the Tribunal was right in the circumstances of this case in rejecting the contention of the assessee (applicant) that the income, profits and gains are chargeable to tax from the sale of salt in British India under Section 42 only ? " The reference came up for disposal before a Bench of the Calcutta High Court consisting of Sen and Chunder, JJ. The learned Judges gave the following answers to the questions :-- " Question (1). The answer is in the affirmative so far as income-tax is concerned. Excess profits tax, however, cannot be levied on this basis. Question (2). The Tribunal was wrong in accepting the contention of the Department that the income accrued or arose in India. The Tribunal did not hold that the income is income which should be deemed to accrue or arise in India. The part of the question which states that the Tribunal did so is not in accordance with fact. We find that the income, profits and gains must be deemed to have arisen or accrued in India so far as excess profits tax is concerned and that Section 42(3) of the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e functions of the Agents far transcended the mere mechanical act of transmitting the sums collected by them to the Association in Egypt. They were entrusted with important duties on behalf of the Association, namely, selling of the goods consigned to them for sale, handling the cargoes, issuing delivery orders, collecting the sale proceeds and then to remit the same after deducting the expenses incurred by them and their own commission. The description of "an animated Post Office" can hardly apply to an agent of this description. Mr. Mitra thereupon shifts his ground and urges that even if income, profits and gains were received in India, the receipt was not by or on behalf of the Association. The contention is that though the Agents are described as agents, they were not so in fact or in law and reliance is placed on the well known case of Ex parte White. A perusal of that case will clearly show that there the person to whom goods were consigned, together with a price list, was, by their course of dealings, entitled to sell the goods at any price he liked and that he remitted to the consignor of the goods only the listed price. In other words, although the parties looked upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. Section 217 of the Indian Contract Act gives to an agent the right to retain, out of any sum received on account of the principal in the business of the agency, all moneys due to himself in respect of advances made or expenses properly incurred by him in conducting such business and such remuneration as may be payable to him for acting as agent. Section 221 also confers a right on the agent to retain the goods, papers and other property of the principal received by him until the amount due to him for commission, disbursements and services in respect of the same has been paid or accounted for to him. The right of retainer and lien conferred on the agent does not make the amount received by the agent on behalf of the principal any the less the property of the principal. The principal is the full owner and has complete control over his properties in the hands of the agent subject only to the latter's statutory right of retainer and lien. It follows, therefore, that the entire sale proceeds received by the Agents in the case before us were received on behalf of the Association and belonged to it subject to the rights of the Agents. Finally, Mr. Mitra urges that the gross sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dden or otherwise embedded in them. Of course, if on the taking of accounts it be found that there was no profit during the year then the question of receipt of income, profits and gains would not arise but if there were income, profits and gains, then the proportionate part thereof attributable to the sale proceeds received by the Agents in India were income, profits and gains received by them at the moment the gross sale proceeds were received by them in India and that being the position the provisions of Section 4(1)(a) were immediately attracted and the income, profits and gains so received became chargeable to tax under Section 3 of the Act. In our opinion there is no substance in the first main contention adumbrated by Mr. S. Mitra. Mr. Mitra's second main point is that assuming that there was receipt of income, profits and gains within India, such income, profits and gains clearly arose through or from a business connection in India and, therefore, the provisions of Section 42(1) would apply and such income, profits and gains should be dealt with as income, profits and gains deemed to accrue or arise in India and consequently the inclusion of such income, profits and gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought to charge as having been received in India and such consequence may deter non-resident merchants from doing business in India. These indeed are serious considerations but the Courts have to construe the statute according to the plain language and tenor thereof and if any untoward consequences result therefrom it is for authority other than this Court to rectify or prevent the same. The last main point urged by Mr. Mitra is that as soon as Turner Morrison & Co. Ltd., were treated as agents under Section 43, the provisions of Section 42 were immediately attracted. In support of this contention Mr. Mitra relies on the decisions in Imperial Tobacco Company of India Ltd. v. The Secretary of State for India, Commissioner of Income-tax, Bombay v. Metro Goldwyn Mayer (India) Ltd. and Caltex (India) Ltd. v. Commissioner of Income-tax, Bombay City where it has been held that Section 43 is only a machinery for giving effect to Section 42. To say that Section 43 is really only machinery for giving effect to Section 42 is not to say that Section 43 has no other purpose. Section 42 refers to income, profits or gains accruing or arising directly or indirectly through or from (i) any bus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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