Case: The Hukam Chand Mills Ltd., Indore Vs. Commissioner of Income Tax, Bombay

said to accrue or arise in British India ? (3) Whether on the facts and in the circumstances of the applicants case, the Tribunal was right in holding that a proportionate part of the profits determined on sales grouped under items 3, 4, 5 and 9 in the assessment order by the application of rule 33 was assessable to income-tax? 3. The High Court answered question No. (3) in favour of the assessee. In view of its finding on question No. (3), the High Court did not answer question No. (2). The Commissioner of Income-tax then came up in appeal to this Court, and the decision of this Court is reported in 67 I.T.R. 79 = [1968] (1) S.C.R. 47. This Court held that the answer to question No. (3) should be in the negative as the property in goods passed to the purchaser in British India and proportionate part of the profits of these sales accrued in British India and as such was assessable to Indian income-tax. The case was remitted to the High Court to answer question No. (2) in accordance with law. On remand the High Court held that the profits were correctly determined by the application of rule 33 and one-third of the profits so determined could be said to arise or accrue in British India. When the matter came up in appeal before this Court, it was found that the High Court had not taken into account the relevant circumstances for answering question No. (2). It was also stated by counsel for both the parties that rule 33 was not applicable to the facts of the case. This Court accordingly directed the Appellate Tribunal to submit a supplementary statement of the case to this Court. Supplementary statement of the case has now been received.The Tribunal found that in respect of the sales in categories (a) and (b) amounting to Rs. 9, 37, 919, it was just and equitable to apportion 15 per cent of the profits said to have arisen and accrued in British India. Regarding sales in categories (c) and (d) for a total amount of Rs. 5, 42, 140, the Tribunal held that 7 1/2 per cent of the profits could be said to have accrued and arisen in British India. As the profits were found to represent 31.12 per cent of the turnover, the profits in respect of the turnover of Rs. 9, 37, 919 comprised in categories (a) and (b) were calculated at the rate of 4 1/2 per cent (i.e. 15 per cent of 31.12 per cent). The profits in British India were thus found to be Rs. 42, 200. Profits accuring and arising in British India in respect of sales turnover of Rs. 5, 42, 140 comprised in categories (c) and (d) at the rate of 2 1/4 per cent (7 1/2 per cent of 31.12 per cent) were found to be Rs. 12, 200. The total profits accruing or arising in British India to the assessee company in the assessment year 1942-43 were thus worked out to be Rs. 54, 400. The above finding of the Tribunal has been arrived at on consideration of the facts of the case. The modus operandi in respect of the sales of various categories was found by the Tribunal to be as under: (a) Sales of Rs. 6, 46, 028 (i) The assessees paid representatives at Bombay canvassed the sales, on behalf of the assessee, to merchants in British India. (ii) The orders were sent by British Indian merchants to the assessee at Indore. (iii)The assessee accepted the orders at Indore, prepared the contracts and signed them at Indore and forwarded the same to customers in British India. (iv) The customers signed the contract s in British India. (v) The contracts were signed on companys forms.(vi) The contracts bore British Indian stamps. (b) Sales of Rs. 2, 91, 891 (i) The brokers in British India, described as freelance brokers, transmitted the offers to the company at Indore. (ii) The offers were made to the company on the brokers own forms. (iii)The brokers were not engaged by the assessee company and such orders were placed by the brokers in the normal course of their business. (iv) The customers signed the contracts in British India. (c) Sales of Rs. 2, 86, 224 (i) These sales were made to British Indian merchants who went to Indore to negotiate and place orders. (ii) The orders were accepted at Indore. (iii)The contracts bore British Indian stamps. (iv) The customers signed the contracts in British India. (d) Sales of Rs. 2, 55, 916 (i) These sales were made to British Indian merchants on their or their brokers personal visit s to Indore. (ii) The offers were taken direct at Indore. (iii)Contracts for such sales were made in the same manner as stated hereinbefore. The Tribunal also gave a finding that the assessee maintained an organisation in British India, that that organisation was interested in bringing to the notice of the British Indian merchants, brokers and consuming public the goods manufactured by the assessee-company and that the ground-work for sales effected in these groups was done in British India. 4. Nothing has been urged before us either on behalf of the assessee appellant or on behalf of the revenue- respondent to assail the finding of the Tribunal in the supplementary statement of case. The question as to what proportion of the profits of the sales in categories (a), (b), (c) and (d) arose or accrued in British India is essentially one of fact depending upon the circumstances of the case. In the absence of some statutory or other fixed formula, any finding on the question of proportion involves some element of guess work. The endeavour can only be to be approximate and there cannot in the very nature of things be great precision and exactness in the matte r. As long as the proportion fixed by the Tribunal is based upon the relevant material, it should not be disturbed.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]The Tribunal also gave a finding that the assessee maintained an organisation in British India, that that organisation was interested in bringing to the notice of the British Indian merchants, brokers and consuming public the goods manufactured by the assessee-company and that the ground-work for sales effected in these groups was done in British IndiaNothing has been urged before us either on behalf of the assessee appellant or on behalf of the revenue- respondent to assail the finding of the Tribunal in the supplementary statement of case. The question as to what proportion of the profits of the sales in categories (a), (b), (c) and (d) arose or accrued in British India is essentially one of fact depending upon the circumstances of the case. In the absence of some statutory or other fixed formula, any finding on the question of proportion involves some element of guess work. The endeavour can only be to be approximate and there cannot in the very nature of things be great precision and exactness in the matte r. As long as the proportion fixed by the Tribunal is based upon the relevant material, it should not be disturbed.