# [1958] 1 S.C.R. 938

- **Citation:** [1958] 1 S.C.R. 938
- **Court:** Supreme Court of India
- **Decided:** 1958
- **Bench:** B. P. SrNHA, J. L. Kapur
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1958-1-s-c-r-938-1444
- **Pages:** 13

## Headnote

Income-tax-Assessment of agent in respect of profits
held fO'r non-resident principal-Agent's right to claim
deduction for payment made-Ultimate liability of principal to income-tu on basis of his world income, if a relevant
consideraticn--Indian Income-tax Act, (XI of 1922), ss.
40 (2)' 42 (1).
.
The appellant company and the respondent firm were
carrying on business in the erstwhile Patiala State, and
were non-residents in British India. The appellant, ·acting
as commission agent for the respondent, entered into
several forward transactions with a Hapur firm of commis-
.sion agents. The profits accruing on these transactions
amounted to Rs. 29,275-2-6 on which the Hapur firm paid
.a swn of Rs. 9,314-13-4 as income-tax. In 1943 the appellant
was ordered to be wound up and the respondent was placed
·on the list of contributories. The Official Liquidator applied
to the Liquidation Judge for a payment order for a sum
which included the amount of income-tax paid by the
Hapur firm for and on behalf of the respondent. The main
-eontention raised on behalf of the respondent was that it
'had no taxable income in the year in dispute and was not
liable to pay any income-tax and that, consequently, it was
11ot liable for the income-tax paid by the Hapur firm.
S.C.R.
SUPREME COURT REPORTS
939
Held, that the Liquidator was entitled to claim from the
respondent the amount of income-tax paid by the Hapur
firm irrespective of the consideration whether its world
income was taxable or not. Under the law the Hapur firm
was an agent of the respondent for the business of the
agency which was entrusted to it, and was as such liable
under ss. 40(2) and 42 (1) Income-tax Actt as an assessee
for income-tax on the profits made on tne respondent's
transactions at Hapur and was entitled to retain the estimated amount of income-tax payable on the amount of the
respondent's profits. As the Hapur firm had rightly paid
the tax on the profits, the respondent could not be allowed
to challenge the liability on the ground that his total world
income was not taxable and he was entitled to his profits
without deductions. That was a question which must be
agitated by the non-resident assessee at the time of his
:assessment. As between the parties the tax; paid by the
agent had to be taken into account irrespective of the
result of the assessment on the non-resident.
C1v1L APPELLATE JURISDICTION: Civil Appeal No.
79 of 1954.
Appeal from the judgment and order dated .March
10, 1953, of the former Pepsu High Court in Letters
Patent Appeal No. 493 of Samvat 2005 arising out of
the judgment and order dated January 18, 1949, of
the said High Court in E. As. Nos. 78-96 of Samvat
:2001.
Naunit Lal, for the appellants.
Mohan Behari Lal, for the respondents.
1957. November 11. The following Judgment of
the Court was delivered by.
KAPUR J.-This is an appeal brought pursuant to
a certificate under Art. 133 ( 1) ( c) of the .Constitution
irom the judgement and order of the Division Bench
of the erstwhile Pepsu High Court pronounced on
March 10, 1953, modifying in appeal the order of the
Liquidation Judge.
The facts are fully recited in the judgments of the
courts below and comparatively a brief recital will be
sufficient for the purpose of this judgment. The
appellant company was incorporated in 1934 under
the Companies Act of the erstwhile Patiala State. ·It
carried on the business of commission agency for dealing in forward transactions in various kinds of grain
195'7
__.,
The Aggarwal
Chamber of
Commtrce, Ltd.
v.
Ganpat Rai
HiraLal
KapurJ.
1957
The Aggarwal
Chamber of
Commerce, Ltd.
v.
Ganpat Rai
HiraLal
KapurJ.
940
SUPREME COURT REPORTS
[1958]
and other commodities. The respondent-firm Ganpat Rai Hira Lal of Narnaul-besides being a shareholder of the appellant company had dealings with it
and entered into several forward transactions of sale
and purchase of grain and other commodities. The
appellant, acting as a commission agent of the respondent and its other constituent

## Text

I
938
SUPREME COURT REPORTS
(1958]
1957
the work given to him? We have referred to the
Nohirta Ram circumstances in which the appellant refused to do
v.
work in the Public Health Section to which he was
The Ulfion. of India allotted; he did not work from October 13, 1952 and
s. K.Das1. got no pay from November, 1952. The appellant has
to thank himself for the predicament in which he is
placed. All that we can say is that if he had shown
patience, good sense and moderation, he could have
avoided. a great part of the trouble he brought on himself.
1957
Novtmbtr, 11.
In the result, both appeals fail and are dismissed
with costs; as the appeals were heard together there
will be one hearing fee to be shared by the respondents in the two appeals.
Appeals dismissed.
THE AGGARWAL CHAMBER OF
COMMERCE, LTD.
'V.
M/s. GANPAT RAI HIRA LAL
(B. P. SrNHA and J. L. KAPUR JJ.)
Income-tax-Assessment of agent in respect of profits
held fO'r non-resident principal-Agent's right to claim
deduction for payment made-Ultimate liability of principal to income-tu on basis of his world income, if a relevant
consideraticn--Indian Income-tax Act, (XI of 1922), ss.
40 (2)' 42 (1).
.
The appellant company and the respondent firm were
carrying on business in the erstwhile Patiala State, and
were non-residents in British India. The appellant, ·acting
as commission agent for the respondent, entered into
several forward transactions with a Hapur firm of commis-
.sion agents. The profits accruing on these transactions
amounted to Rs. 29,275-2-6 on which the Hapur firm paid
.a swn of Rs. 9,314-13-4 as income-tax. In 1943 the appellant
was ordered to be wound up and the respondent was placed
·on the list of contributories. The Official Liquidator applied
to the Liquidation Judge for a payment order for a sum
which included the amount of income-tax paid by the
Hapur firm for and on behalf of the respondent. The main
-eontention raised on behalf of the respondent was that it
'had no taxable income in the year in dispute and was not
liable to pay any income-tax and that, consequently, it was
11ot liable for the income-tax paid by the Hapur firm.
S.C.R.
SUPREME COURT REPORTS
939
Held, that the Liquidator was entitled to claim from the
respondent the amount of income-tax paid by the Hapur
firm irrespective of the consideration whether its world
income was taxable or not. Under the law the Hapur firm
was an agent of the respondent for the business of the
agency which was entrusted to it, and was as such liable
under ss. 40(2) and 42 (1) Income-tax Actt as an assessee
for income-tax on the profits made on tne respondent's
transactions at Hapur and was entitled to retain the estimated amount of income-tax payable on the amount of the
respondent's profits. As the Hapur firm had rightly paid
the tax on the profits, the respondent could not be allowed
to challenge the liability on the ground that his total world
income was not taxable and he was entitled to his profits
without deductions. That was a question which must be
agitated by the non-resident assessee at the time of his
:assessment. As between the parties the tax; paid by the
agent had to be taken into account irrespective of the
result of the assessment on the non-resident.
C1v1L APPELLATE JURISDICTION: Civil Appeal No.
79 of 1954.
Appeal from the judgment and order dated .March
10, 1953, of the former Pepsu High Court in Letters
Patent Appeal No. 493 of Samvat 2005 arising out of
the judgment and order dated January 18, 1949, of
the said High Court in E. As. Nos. 78-96 of Samvat
:2001.
Naunit Lal, for the appellants.
Mohan Behari Lal, for the respondents.
1957. November 11. The following Judgment of
the Court was delivered by.
KAPUR J.-This is an appeal brought pursuant to
a certificate under Art. 133 ( 1) ( c) of the .Constitution
irom the judgement and order of the Division Bench
of the erstwhile Pepsu High Court pronounced on
March 10, 1953, modifying in appeal the order of the
Liquidation Judge.
The facts are fully recited in the judgments of the
courts below and comparatively a brief recital will be
sufficient for the purpose of this judgment. The
appellant company was incorporated in 1934 under
the Companies Act of the erstwhile Patiala State. ·It
carried on the business of commission agency for dealing in forward transactions in various kinds of grain
195'7
__.,
The Aggarwal
Chamber of
Commtrce, Ltd.
v.
Ganpat Rai
HiraLal
KapurJ.
1957
The Aggarwal
Chamber of
Commerce, Ltd.
v.
Ganpat Rai
HiraLal
KapurJ.
940
SUPREME COURT REPORTS
[1958]
and other commodities. The respondent-firm Ganpat Rai Hira Lal of Narnaul-besides being a shareholder of the appellant company had dealings with it
and entered into several forward transactions of sale
and purchase of grain and other commodities. The
appellant, acting as a commission agent of the respondent and its other constituents entered into several
transactions of forward delivery at Hapur with Firm
Pyarelal Musaddi Lal, who were carrying on commission agency business at Hapur (and will hereinafter
be termed the Hapur firm). The total profits of the
transactions entered into by the appellant with the
Hapur firm was Rs. 48,250 on which the Hapur firm
paid Rs. 14,730-8 as income-tax. The profits accruing on the transactions entered into on behalf of the
respondent amounted to Rs. 29,275-2-6 on which the
proportionate income-tax claimed to. have been paid
was Rs. 9,314-13-4. On May 20, 1943, the appellant
was ordered to be wound up and Udmi Ram Aggarwal, a pleader of the old Patiala High Court was
appointed its liquidator. The list of contributories was
settled on October 21, 1943, and the respondent was
placed on that list. Though this matter was challenged in the appeal before the High Court it is no longer
in controversy between the parties.
The Official Liquidator on March 18, 1944, applied
under s. 186 of the Patiala Companies Act, for a payment order for Rs. 12,204-12-3 against the respondent
and in support of his daim he filed, with this application, copies of the respondent's account in the books
of the appellant showing how the amount claimed was
due from the respondent. This amount included the
sum of Rs. 9,476-13-0, on account of income-tax paid
by the Hapur firm for and on behalf of the respondent
on the profits of the forward transactions at Hapur
and the commission of the Hapur firm. . The respondent raised several objections and pleaded inter alia
that the Hapur firm with whom the appellant had
entered into forward transactfons had no right to
demand any income-ta:x: frnm the appellant as no profit
had accrued to the appellant which was acting· as a.
:S.C.R.
SUPREME COURT REPORTS
941
<:ommission agent and "was only entitled to the com-
.mission". It was also pleaded that as on the total
number of transactions entered into between the
.,respondent and the appellant there was a loss, the res_pondent was not liable to pay any income-tax and that
the respondent had no taxable income in the year
under dispute or in any other year. On May 23, 1944,
the respondent filed an application in which it was
.submitted that the Hapur firm, who were agents of
the appellant at Hapur, had retained Rs. 14,730-8-0,
"which was in trust with them under s. 42 of the
Income Tax Act" and prayed that the Official Liqui-
<iator be directed to apply to the Income Tax authorities for a refund of the amount retained and paid by
the Hapur firm, as no tax was really due on the transactions enter.ed into by the appellant with the Hapur
firm and none was payable by the respondent.
After evidence was led by both parties the payment
order was made by the learned Liquidation Judge on
January 18, 1949, for a sum of Rs. 8,191-0-9 which induded a ·sum of Rs.
6,867-9-6 the proportionate
amount of income-tax due on the profits accruing on
the respondent's transactions. Against this order the
respondent took and appeal to the Division Bench and
canvassed two points: (1) that the respondent could
not be settled·on the list of contributories and (2) that
, it was not liable for the amount retained for payment
of income-tax from out of profits on the transactions
-entered into on its behalf by the appellant with the
Hapur firm and subsequently paid by the latter. The
.court negatived the former contention and held that
the respondent had rightly been settled on the list of
.contributories and upheld the latter contention and
held, 1fl1lowing a judgment of the Judicial Committee
of the Tjlas-khas of Patiala in Panna Lal Mohar Singh
v. Aggarwal Chamber (1 ), that the Official Liquidator of the appellant was not entitled to claim the
:amount of income-~ax paid by the Hapur firm. The
J'udicial Committee Ijlas-khas had held:
"Before the liability of the contributory can be
(I) C. A. 60 of 2005 S.
1957
T/ie Aggarwal
C/iamberof
Commera, Ltd •
v.
Ganpat Rai
HiraLa/
Kapur J.
1957
The Aggarwal
Chamber of
Commerce, Ltd.
v.
GanpatRaj
HiraLal
KapurJ.
942
SUPREME COURT REPORTS
[1958J
fixed it must be shown that his income was ·such on
which income was assessable ........ It is not denied
that the contributory was carrying on other transactions in India as it stood before partition through
other person. It was therefore his entire income that
was to be taken into consideration to assess his liability to income-tax."
The appellant then applied for a certificate to appeal
under Art. 133(1) (c) which ·was granted in the following terms:
"The first question is whether a decision given by
one Judge of the Judicial Committee can be regarded
in law as a decision of the Committee. The second
is whether the principle laid down by the learned
Judge of the Judicial Committee that the Aggarwal
Chamber of Commerce was not entitled to recover
from its clients the proportionate share of the incometax paid by it unless it was shown that the total
amount of income of the clients was assessable to income-tax, was sound.
Accordingly we allow the petition and grant the
certificate."
The first point has not been canvassed before us and in
the view that we have taken it would be unnecessary
to go into that matter. The sole point for decision is
whether the respondent is liable for income-tax, which
has been paid by the Hapur firm on the transactions,
which were entered into by the appellant with the
Hapur firm for and on behalf of the respondent?
There is no finding by the High Court that the respondent had entered into any forward transactions in
British India or at Hapur with any firm other than
the Hapur firm and this matter was not· agitated before us, nor is there any finding as to the total world
income of the respondent and there is no material on
the record from which it could be determined.
The appellant is a non-resident company and the
respondent is a non-resident, residing at Narnaul in
what was the Indian State of Patiala. The appellant
entered into forward transactions on behalf of the respondent at Hapur in which there was a considerable
S.C.R.
SUPREME COURT REPORTS
943
amount of profit. The High Court has found that the
Hapur firm paid Rs. 6,867-9-0 on account of incometax which was payable on the profits made on the
transactions entered into with the Hapur firm for and
on behalf of the respondent. The respondent challenged its liability to pay income-tax on the ground
that it was liable :
"Only on his total earnings during the year under
assessment and since, as is clear even from the books
of the respondent; he had suffered heavy losses in his
business at Narnaul, his total income was not assessable to any income-tax."
The learned Liquidation Judge held the respondent
liable for the amount of the income-tax by. applying
s. 69 of the Contract Act. The Division Bench on
appeal disallowed this item on the ground that it had
not been shown that the "total earnings" ·of the respondent were taxable under the Act. Neither of the
courts below have discussed the relevant provisions of
the Act, not even s. 42 which was mentioned by the
respondent in his application of May 23, 1944, nor
have they given a finding as to the jural relationship
of the Hapur firm with the respondent. The agency
of the Hapur firm was not seriously disputed before
us nor repudiated. The case seems to have proceeded
on the basis of this .agency in the courts below. The
Hapur firm was employed by the appellant for forward
transaction business of the respondent who has
accepted the transactions entered into as also the
amount of the profit accruing on those transactions and
is only disputing the amount of income-tax deducted,
retained and paid on those profits. Under the law
the Hapur firm would be an agent of the respondent
for that part of the business of the agency as was
entrusted to it and "privity of contract arises between
the principal and the substitute". Section 194 of the
Contract Act; De Busse he v. Alt ( 1).
It is now necessary to refer to the relevant provisions of the Income-tax Act in force in the assessment
year 1942-43 (hereinafter termed the Act). It is not
(1)(1878) 8 Ch. D. 286, 311.
1957
The Aggarwal
Chamber of
Commerce, Ltd.
v.
Ganpat Rai
HlraLal
Kap11rJ.
1951
Th• Aggarwal
Chamber of
Commerce, Ltd.
v.
Ganpat Ral
HlraLal
KapurJ.
944
SUPREME. COURT REPORTS
[1958]
clear as to what was the signification of the words
"total earnings" used by the High Court because it
is not used in the Income Tax Act which uses two
expressions; "total income" and "total world income"
fu sub-s. 15 of s. 2 of the Act. The definition of "total
income" comprises two things (i) the total amount of
income, profits and gains referred to in s. 4 ( 1) and
(ii) computation in the manner laid down in the Income Tax Act.
"Total world income" includes all
income, profits and gains wherever accruing or arising except income to which under the provisions of
s. 4(3) the Act does not apply.
Thus in the case of the respondent who is a "nonresident" "total income" would comprise income,
profits and gains received or accrued in British India
or deemed to be received or to accrue in British India.
Section 17 of the Act which was relied upon by the
respondent's counsel occurs in Chapter III dealing
with "Taxable income". It provides for the determination of tax payable in· certain special cases of
which the case of a non-resident is one. It provided :
"Where a person is not resident in British India
and is a British subject as defined in section 27 of the
British Nationality and Status of Aliens Act, 1914 (4
& 5 Geo. V. Ch. 17) or a subject of a State in India or
Burma, or a native of a Tribal Area, the tax, including super-tax, payable by him or on his behalf on his
total income shall be an amount bearing to the total
amount of the tax including super-tax which would
have been payable on his total world income had it
been his total income the same proportion as his total
income bears to his total world income ............ "
Section 17 does not deal with or affect the rights and
liabilities of persons required under the Act to make
deductions of income-tax from sums payable to nonresidents or the consequences of failure to make such
deductions.
The very next chapter (Chapter IV) deals with
deductions which the Act requires to be made in
regard to different heads of income. Section 18 pro-
S.C.R.
SUPREME COURT REPORTS
945
vides for deduction at the source. Sub-s. 3A of this
section was as under :-
S. 18(3A) "Any person responsible for paying to
a person not resident in British India any interest not
being "interest on securities", or any other sum chargeable under the provisions of this Act, shall, at the
time of payment, unless he is himself liable to pay
income-tax thereon as an agent, deduct income-tax
at the maximum rate."
The proviso to this sub-section made provision for payment of monies without deduction if there was a certificate of the Income Tax Officer to that effect. Under
s. 18(7) of the Act a person making the deduction
was required to pay the amounts so deducted to the
Income Tax authorities. In default of such deduction
such person became an assessee in respect of the tax.
Chapter V of .the Act deals with "Liability in
Special Cases" which includes agents. Section 40(2)
dealing with the case of trustees or agents of a person
non-resident in British India; provided
S. 40(2) "Where the trustee or agent of any person not resident in British India and not being a minor,
lunatic or idiot (such person being hereinafter in this
such section referred to as a beneficiary) is entitled
to receive on behalf of such beneficiary, or is in receipt
on behalf of such beneficiary of, any income, profits or
gains chargeable under this Act, the tax, if not levied
on the beneficiary direct, may be levied upon and recovered from such trustee or agent, as the case may
be, in like manner and to the same amount as it would
be leviable upon and recoverable from the beneficiary
if in direct receipt of such income, profits or gains, and
all the provisions of this Act shall apply accordingly."
Thus under this section which is essentially a
machinery and an enabling section the tax to be realised from a non-resident could be levied upon the
agent in the same manner as it could have been leviable upon and recoverable from a non-resident. Section 42 ( 1) of the Act provided :
"All income, profits or gains accruing or arising,
1957
The Aggarwal
Chamber of
Commerce, Ltd.
v.
GanpatRal
HiraLal
Kap11rJ.
1957
The Aggarwal
Chamber of
Commerce, Ltd.
v.
Ganpat Ra;
H/raLa/
Kapur/.
946
SUPREME COURT REPORTS
[1958J
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 lent at interest and
brought into British India in cash or in kind, shali 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, and in the latter case such
agent shall be deemed to be, for all the purposes of
this Act, the assessee in respect of such income."
. In proviso 2 to this sub-section any such agent who
apprehended that he might be taxed as such agent
could retain out of any money payable to such nonresident a sum equal to the estimated liability under
the sub-section and in the event of any disagreement
between the non-resident and such agent a certificate
could be obtained from the Income Tax Officer as to
the amount to be retained which shows that the Act
had a provision for the determination of the question.
As was observed by Viscount Cave in Williams v.
Singer (') :
"The fact is that, if the Income Tax Acts are
examined, it will be found that the person charged
with tax is neither the trustee nor the beneficiary as
such, but the person in actual receipt and control of
the income which it is sought to reach. The object of
the Acts is to secure for the State a proportion of the
profits chargeable, and this end is attained (speaking
generally) by the simple and effective expedient of
taxing the profits where they are found.
See also Archer Shee v. Baker('), Executors of Estate
of Dubash v. Commissioner of Income Tax (')
This has rightly been stated to be the underlying
principle of the deduction under ss. 40, 41 and 42.
Section 48 of the Act deals with refunds and if the
respondent thought that it was not liable \.o the pay-
<'l (1920) 7 T.C. 387, 411 (H.L.).
(2) (1927) 11 T.C. 749, 770
(3) [1951] 19 I.T.R. 182, 189 (S.C.).
S.C.R.
SUPREME COURT REPORTS
947
ment of any tax it could apply to ihe Income Tax
Officer for refund.
Thus the liapur firm being an agent could be .held
liable under ss. 40(2) and 42(1) of the Act as an
assessee for income-tax on the profits made on the
respondent's transactions at Hapur and was therefore
entitled under the proviso to s. 42(1) to retain the
estimated amount of income.:tax payable tin the
amount of the respondent's profits which in this case
was deducted, retained and actually paid. This fact
has not been challenged before us. The ground on
which this liability is attacked is that the total ·world
income of the respondent was not taxable and therefore, on the profits made on the Hapur transactions,
the British Indian Tax authorities could not levy any
tax. This contention disregards the provisions of and
liability arising under ss. 40(2) and 42(1) and the
proviso thereto. It also is contrary to the principle
of taxing statutes that the profits are "taxed where
they are found." In this case they were in the ·hands
of the Hapur firm which was in receipt and control
of the income. The agent at Hapur, having lawfully
and properly paid the tax under the Act that amount
has been rightly deducted from the profits accruing
on the Hapur transactions.
·
The Judgment of the Judicial Committee of the
Ijlas·i-khas on which the High Court has based its
decision suffers from the infirmity that it ignores both
the provisions of and principle underlying ss. 40(2)
and 42 ( 1) of the Act and the proviso thereto relating
to the liability of an agent under the Act and the law
of Agency relating to employing of sub-agents by
agents. If the Hapur firm rightly paid the tax on theprofits, the respondent cannot be allowed to challenge
the amount on the ground that his total world incomewas not taxable and he was entitled to his profits without deductions. That is a question which has to be
agitated by the non-resident assessee at the time of
his assessment. Those persons who are bound under
the Act to make deduction at the time of payment of
any income, profits or gains are not concerned with
19S7
Tlie Aaarwal
Chamber of
Commerce, Ltd.
v.
'Gllllpdt ·Roi
Htral,,al
Kap11rJ.
1957
Tire Aggarwal
Chamber of
Commerce, Ltd.
v.
Ganpat Ra/
HiraI.41
Kapur J.
948
SUPREME COURT REPORTS
(1958]
the ultimate result of the assessment.
The scheme
of the Act is that deductions are required to be made
out of "salaries", "interest on securities" and other
heads of "income profits and gains" and adjustments
are made finally at the time of assessment. Whether
in the ultimate result the amount of tax deducted or
any lesser or bigger amount would be payable as income-tax in accordance with the law in force would
not affect the rights, liabilities and powers of a person
under s. 18 or of the agent under ss. 40(2) and 42(1).
As to what would be the effect and result of the application of s. 17 if and when any appropriate proceedings are taken is not a matter which arises in this
appeal between the appellant and the respondent nor
can that matter be adjudicated upon in these proceedings. That is a matter which would be entirely between the respondent and the Income Tax authorities
seized of the assessment.
Our attention was drawn to two cases ( 1) Commis-
.sioner of Income-tax v. Currimbhoy Ebrahim & Sons
(').
In that case the assessee company had been treated as an agent of the Nizam of Hyderabad who had
lent to the assessee company a sum of Rs. 50 lakhs.
'The assessee company had paid in the assessment year
·a sum of Rs. 3 lakhs on account of interest and it was
held that the interest earned by the Nizam did not
.accrue or arise to the Nizam through or from any
business connection with the assessee company in
British India or from any property within British
India and therefore s. 42 was not applicable. No question of "business connection" was raised in the court
below and the argument there proceeded on the basis
that the respondent was not liable for this amount on
account of income-tax because the "entire income"
was not assessable to income tax. 'The argument of
isolated transactions based on the Anglo-French Textile Co. Ltd. v. Commissioner of Income-tax, Madras
( 2) is not available to the respondent nor was the
foundation for any such argument laid in the courts
below or raised in the statement of the case filed by
(I) (1935) 3 I.T.R. 325 (P.C.).
(2) (1953] S.C.R. 454.
S.C.R.
SUPREME COURT REPORTS
949
the respondent in this court. Another case on which
reliance was placed is Greenwood v. F. L. Smidth and
Company (1 ) .
That was a case of a Danish firm
resident in Copenhagan. It manufactured and dealt
with cement making machinery which it exported to
other countries. It had an office in London in charge
of a qualifiei:l. engineer who received enquiries for
machinery such as the firm could supply, s.ent to
Denmark particulars of the work which the machinery
was required to do and when the machinery was supplied he was available to give English purchaser the
benefit of his experience in erecting it. The contracts
between the firm and their customers were made in
Copenhagan and the goods were shipped F.O.B. Copenhagan. It was held in that case. that the firm did not
exercise & trade within the United Kingdom within
the meaning of Sch. D of s. 2 of the Income Tax Act
1853 and was therefore not assessable to income-tax.
This decision is not relevant to the case now before us
as the facts were different and the decision was under
a different statute.
In our opinion the Judicial Committee of Ijlas-ikhas was in error in holding that before fixing the
liability of a contributory to tax paid by an agent in
British India for and on behalf of the non-resident
contributory, his liability to pay tax on his "entire
income" really total world income had to be established. Therefore the finding of the High Court that
the Liquidator cannot claim from the respondent the
amount of tax paid by the Hapur firm on transactions
entered into by the appellant for and on behalf of the
respondent unless it was shown that his total world
income was taxable is unsustainable. As between the
parties the tax paid by the agent had to be taken into
account irrespective of the ultimate result of the
assessment on the non-resident.
In the result this appeal is allowed and the judgment and order of the Division Bench of the Pepsu
High Court set aside and the order of the learned
(1) (1922) 1A.C.417.
1957
The Aggarwal
Chamber of
Commerce, Ltd •.
v.
Ganpat Ral
HiraLal
Kap11rl.
19S1
The Aggarwal
Chambe•of
Commerce, Ltd.
v.
Ga,npat Ra/
Hiralal
KapurJ.
19S7
November~ 15~
950
SUPREME COURT REPORTS
(1958]
Liquidation Judge restored but in the circumstances
of this case the. parties will bear their own costs in
this court and in the courts below.
Appeal allowed.
MST. KIRPAL KAUR
v.
BACHAN SINGH AND OTHERS
(S. R. DAS C. J., JAFER IMAM and A. K. SARKAR JJ.)
Adverse possession-Hindu J at widow in possession as
full owner-Life estate by subsequent agreement with
.:ollaterals-Agreement not registered-If admissible in
evidence-Indiaii Registration Act, 1908 (XVI of 1908), s .
. 49,
On the death of R, a Hindu Jat, in April or May, 1920,
the widow of his pre-deceased son, H, took possession of the
properties and on August 24, 1920, obtained a mutation of
the settlement records showing her as the owner of the
lands in the place of R. A gift of half of the properties
by H to her daughter K gave rise to disputes between
them and the collaterals but the matter was settled on H
executing a document on February 6, 1932, whereby, inter
alia, she agreed that the lands would belong to her for her
life and after her death to her daughter for the latter's
life and that none of them would be entitled to sell or
mortgage the lands. The document, however, was not
registered. In 1939 H made a gift of the entire lands to K
who obtained a mutation of the settlement records showing her as the owner of the lands, and in 1945 a suit was
·filed . by the collaterals challenging the transaction as not
'binding on them as the reversionary heirs of R. Under the
general custom governing the parties as admitted by them
a widow of a pre-deceased son was entitled only to maintenance when there were collaterals, and as H was in possession of th.e properties since 1920 it was said by .her and
'K that she had, at the date of the gift, acquired an absolute
title by adverse possession. It was contended for the plaintiffs, inter alia, that the agreement of February, 1932,