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

This judgment would dispose of five civil appeals No. 1062 to 1066 which arise out of references under section 66(1) of the Indian Income-tax Act, 1922 made at the instance of the assessee-appellant.The assessee-appellant, Hukam Chand Mills Ltd. Indore, is a public limited company. It owns a textile mill at Indore and carries on the business of manufacture and sale of textiles. These appeals have a long history and are concerned with the income of the appellant during the calendar years 1941, 1942, 1944, 1945 and 1946, the relevant assessment years for which were 1942-43, 1943- 44, 1945-46, 1946-47 and 1947-48. In those years the assessee effected sales of textiles to merchants in the then British India. Question which arose for consideration was as to what part of the income arising out of those sale transactions accrued or arose in British India. As the questions of law involved in each of the appeals were identical, the facts relating to the assessment year 1942-43 only were taken into consideration. According to the finding of the Income-tax Officer in that year the price of the textiles sold by the assessee in British India aggregated to Rs. 14, 80, 059. This amount consisted of the following four categories:(a) Sales in pursuance of business canvassed by companys representatives in British India, also described as item      (3) Rs. 6, 46, 028      (b) Sales to British Indian merchants through brokers and agents in British India, also described as item      (4) Rs. 2, 91, 891      (c) Sales to British Indian merchants and brokers during their visit to Indore, also described as item      (5) Rs. 2, 86, 224      (d) Sales to British Indian merchants at the time of their own or their brokers visit at Indore, also described as item(9) Rs. 2, 55, 916      TOTAL Rs. 14, 80, 059Profits from those sales were held at 31.12 per cent to amount to Rs. 4, 60, 560. Profits attributable to operations carried out in British India were held by the Appellate Assistant Com missioner to be one-third of Rs. 4, 60, 560, i.e. Rs. 1, 53, 520. In doing so the Appellate Assistant Commissioner acted upon the analogy of rule 33 of the Indian Income-tax Rules, 1922. We need not set out the finding of the Income -tax Officer. The Tribunal substantially agreed with the Appellate Assistant Commissioner. At the instance of the assessee the following two questions were inter alia referred to the High Court:(2) Whether on the facts and in the circumstances of the applicants case, the Tribunal was right in holding that in respect of sales of Rs. 14, 80, 059/- the profit was correctly determined by application of rule 33 and one-third of the profits so determined could be 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?The High Court answered question No. (3) in favour of the assessee.

Reasoning: 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.