# 3] . • 'rURNBR MORRISON & CO., L1'D v. COMMISSIONER OF INCOME-TAX, WEST BENGAL

- **Citation:** [1953] 1 S.C.R. 520
- **Court:** Supreme Court of India
- **Decided:** 1950-07-25
- **Case number:** Civil Appeal No. 41 of 1952
- **Bench:** Mehr Chand Mahajan, Das, VIVIAN BosE, Bhagwati
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/3-rurnbr-morrison-co-l1-d-v-commissioner-of-income-tax-west-bengal-43
- **Pages:** 14

## Headnote

Indian Inc"'1ie-tax Act (XI of 1922), ss. 4(1) (a), 4 (1) (c), 42,
48-Non-resident cornpany-Sale in India uf goods 1nan11,factured
outside India-Person e.-O'ecting sales in India-Whether agent of
non-resident-Proji,ts received in India.from sales-Whether assessable under s. 4 (1) (a) ors. 42-Liability of agent-Scope of s. 43.
'l'he Port Said Salt Association Ltd., a company incorporated
in the United Kingdom carried on business in Egypt and had its
headquarters in Egypt. It manufactured salt in Egypt and part
of the salt so manufactured was consigned to Turner Morrison and
Co. Ltd., (the assessee) for sale in India.
The assessee effected
sales in India through brokers at prices approved by the A_ssociation, collected the sale proceeds and received a commission of 2-!%
generally on all sales.
After deducting the expenses and commission the balance was remitted to the Association in Egypt.
On
these facts the assessee was treated as agents of the Association
under s. 43 of the Indian Income-tax Act and assessed to incometax under s. 4 (1) (a) or alternatively under s. 4 (1) (c) of the Act
on the income derived by the Association fron) the sale of salt in ·
India.
The High Court of Calcutta held that tbe income in question was chargeable t.o income-tax under s. 4 (1) (a) as income
received in India and not under s. 42 of the Act:
Held, (i) that, as the assessee was entrusted with the selling
of goods consigned to them for sale, handling the cargoes, issuing
delivery orders, collecting the proceeds etc., they were agents of
the Association, and did not act merely as a post office;
Pondicherry Railway Co. v. OonMnissioner of Income-tax, Madras (1931) I.L.R. 54 Mad. 691 referred to.
(ii) as the goods were neithei- imported nor sold by the assessees on their own account but on account of the Association the
income received by the assessees v'lere received by them on behalf
of the Association and not on their own account.
Ex parte White (L.R. 6 Oh. A. 397) distinguished.
(iii) As the assessees were authorised not only to sell but to
collect the price from the purchasers, the income was received by
the assessee as agents of the Association.
Bi;twick v. Grant (L.R. [1924] 2 K.B. 483) distinguished.
S.C.H.
SUPREME COURT REPORTS
521
19-58
(iv) The fact that the assessees as agents had a right to retain
the expenses incurred by them and their commission out of the
proceeds could not make the sale proceeds received by them as
Turner
agents any the less the proporty of their principals.
Morrison ct Co.,
•
Ltd.
Colquhoun v. Brooks (2 Tax Oas. 490) and Saiyid Ali Imam v.
v.
King Emperor ([19:J5] I.L.R. 4 Pat. 210) referred to.
Commissioner of
(v) When the gross sale proceeds were received by the agents
Income-tare,
in India they necessarily received whatever profits and gains were
West Bengal.
lying dormitnt in them. If on taking accounts there were income,
·
profits or gains, then the proportionate part thereof attributable
to the sale proceeds received by the agents in India was income,
profits and gains received by them at the moment the gross sale
proceeds were received by them in India, and s. 4 (1) (a) of the
Income-tax Act was _immediately attracted and the income, profits
and gains so received became chargeable to tax under s. 4 (1) (a)
read with s. 3.
Grainger ct Son v. William Lane Gough (L.R. [1896] A.O. 325)
i·elied on.
(vi) Where income, profits and gains are actually received in
India s. 4 (1) (a) applies and it is no longer necessary for the
revenue to resort to the fiction introduced by s. 42, and the assessees were properly assessed under s. 4 (1) (a) and not under s. 4
(1) (c), Section 4(1) (a) applies to all categories of assessees including non-residents.
Hirn Mills v. Income-tax Officer, Cawnpore ([1946] 14 I.T.R.
417), Burugu Nagayya v. Commissioner of Income-tax, Madras
([1949] 17 LT .R. 194J and Pondicherry Railway Co. v. Commissioner
of Income-tax, Madras ([1931] I.L.R. 54 Mad. 691) relied on.
(vii) The mere fact that

## Text

19-53
Jan. 16.
5'20
SUPREME COURT REPORTS
[191)3] .
•
'rURNBR MORRISON & CO., L1'D
v.
COMMISSIONER OF INCOME-TAX,
WEST BENGAL.
[MEHR CHAND MAHAJAN, DAS, VIVIAN BosE
and BHAGWATI JJ.]
Indian Inc"'1ie-tax Act (XI of 1922), ss. 4(1) (a), 4 (1) (c), 42,
48-Non-resident cornpany-Sale in India uf goods 1nan11,factured
outside India-Person e.-O'ecting sales in India-Whether agent of
non-resident-Proji,ts received in India.from sales-Whether assessable under s. 4 (1) (a) ors. 42-Liability of agent-Scope of s. 43.
'l'he Port Said Salt Association Ltd., a company incorporated
in the United Kingdom carried on business in Egypt and had its
headquarters in Egypt. It manufactured salt in Egypt and part
of the salt so manufactured was consigned to Turner Morrison and
Co. Ltd., (the assessee) for sale in India.
The assessee effected
sales in India through brokers at prices approved by the A_ssociation, collected the sale proceeds and received a commission of 2-!%
generally on all sales.
After deducting the expenses and commission the balance was remitted to the Association in Egypt.
On
these facts the assessee was treated as agents of the Association
under s. 43 of the Indian Income-tax Act and assessed to incometax under s. 4 (1) (a) or alternatively under s. 4 (1) (c) of the Act
on the income derived by the Association fron) the sale of salt in ·
India.
The High Court of Calcutta held that tbe income in question was chargeable t.o income-tax under s. 4 (1) (a) as income
received in India and not under s. 42 of the Act:
Held, (i) that, as the assessee was entrusted with the selling
of goods consigned to them for sale, handling the cargoes, issuing
delivery orders, collecting the proceeds etc., they were agents of
the Association, and did not act merely as a post office;
Pondicherry Railway Co. v. OonMnissioner of Income-tax, Madras (1931) I.L.R. 54 Mad. 691 referred to.
(ii) as the goods were neithei- imported nor sold by the assessees on their own account but on account of the Association the
income received by the assessees v'lere received by them on behalf
of the Association and not on their own account.
Ex parte White (L.R. 6 Oh. A. 397) distinguished.
(iii) As the assessees were authorised not only to sell but to
collect the price from the purchasers, the income was received by
the assessee as agents of the Association.
Bi;twick v. Grant (L.R. [1924] 2 K.B. 483) distinguished.
S.C.H.
SUPREME COURT REPORTS
521
19-58
(iv) The fact that the assessees as agents had a right to retain
the expenses incurred by them and their commission out of the
proceeds could not make the sale proceeds received by them as
Turner
agents any the less the proporty of their principals.
Morrison ct Co.,
•
Ltd.
Colquhoun v. Brooks (2 Tax Oas. 490) and Saiyid Ali Imam v.
v.
King Emperor ([19:J5] I.L.R. 4 Pat. 210) referred to.
Commissioner of
(v) When the gross sale proceeds were received by the agents
Income-tare,
in India they necessarily received whatever profits and gains were
West Bengal.
lying dormitnt in them. If on taking accounts there were income,
·
profits or gains, then the proportionate part thereof attributable
to the sale proceeds received by the agents in India was income,
profits and gains received by them at the moment the gross sale
proceeds were received by them in India, and s. 4 (1) (a) of the
Income-tax Act was _immediately attracted and the income, profits
and gains so received became chargeable to tax under s. 4 (1) (a)
read with s. 3.
Grainger ct Son v. William Lane Gough (L.R. [1896] A.O. 325)
i·elied on.
(vi) Where income, profits and gains are actually received in
India s. 4 (1) (a) applies and it is no longer necessary for the
revenue to resort to the fiction introduced by s. 42, and the assessees were properly assessed under s. 4 (1) (a) and not under s. 4
(1) (c), Section 4(1) (a) applies to all categories of assessees including non-residents.
Hirn Mills v. Income-tax Officer, Cawnpore ([1946] 14 I.T.R.
417), Burugu Nagayya v. Commissioner of Income-tax, Madras
([1949] 17 LT .R. 194J and Pondicherry Railway Co. v. Commissioner
of Income-tax, Madras ([1931] I.L.R. 54 Mad. 691) relied on.
(vii) The mere fact that the assessees were treated as agents
under s. 43 of the Act did not 1nake it compulsory on the part of
the revenue authorities to assess under s. 42, for an appointment
as agent under s. 43 is for all the purposes of the Act and not only
for the purposes of s. 42.
Iniperial Tobacco Co. of India Ltd. v. Secretary of State for
India ([1922] I.L.R. 49 Cal. 721!, Commissioner of Income-tax,
Bombay v. Metro Goldwyn Ma,yer (India) Ltd. ([1939] 7 I.T.R.176),
Caltex Ltd. v. Commissioner of Income-tax, Bombay City ([1952] 21
I.T .R. 278) explained.
Judgment of the Calcutta High Court affirmed.
CIVIL APPELLATE JURISDICTION:
Civil Appeal
No. 41 of 1952. Appeal from a Judgment and Decree
dated 25th July, 1950, of the High Court of Judicature at Oalcul:.1:.a. (Sen 11nd Chunder JJ.) exercising
Special Jurisdiction
(Income-tax) in Income-tax
Reference No. 31 of 1949,
522
SUPREME COUR'r R~JPORTS [1953]
1958
S. Mitra (S. N. Mukherjee, with him) for the appellant.
Turner
AforriBon & Co.,
C. K. Daphtary, Solicitor-General for India (P. A.
Ltd.
Mehta, with him) for the respondent.
v.
Co11anissioner of
Inconie-tax,
TVcst Bengal.
1953.
January 16.
The Judgment of the Court
was delivered by
Daa J.
DAs J.-'l'his appeal arises out of six references
made by the Calcutta Bench of the Income-tax
Appellate Tribunal under section 66(1) of the Indian
Income-tax Act, two of them relating to the incometax assessment years 1943-44 and 1944-45 and the
remrtining four re_lating to excess profits tax for the
chargeable accounting periods ending on the 31st
December of each of the years 1940, 1941 1943 and
1943 respectively.
The relevant facts ap-pearing in the statements of
the case are as follows: Messrs. Port Said Salt Association Ltd, (hereinafter referred to as "the Association") is a company incorporated in the United
Kingdom and has its registered office there.
'rhe
Association, however, carries on business in Egypt
and its head office is situate in Alexandria where tbe
annual general meetings of its shareholders 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 As'sociation has been considered
to be a non-resident.
The association manufactures
salt in ]~gypt where it has certain concessions and
the salt as manufactured is sent for sale in any
country where there is.a ~.uitable 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 wlio sends the
documents to Messrs. Turner Morrison & Company
Ltd. Messrs. Turner Morrison aud Company Ltd.
(lffect sales i11 India through brokers at the best price
S.C.R.
SUPREME OOURT REPORTS
523
obtainable at or above the prices approved by the
1959
Association.
Turner Morrison & Company Ltd. are
T
paid commission at the rate of 2-1£ per cent. generally lviorri;;:~; co.,
on all the sales except in some cases where It pe1
Ltd.
cent. is paid. All handling of the cargoes when they
v.
arrive at Calcutta and the necessary disbursementsOommissionei· of
in connection therewith are carried out and made by
Income-tax,
Turner Morrison & Company Ltd. The sale proceeds
West Bengal.
are collected by rrurner Morrison & Company Ltd.
Das J.
and credited to the account kept in their own name
with the Hongkong and Shanghai Banking Corporation.
After deducting the expenses including their
commission the balance is
remitted by Turner
Morrison & Company Ltd. to the Association in
Egypt. On these facts the Income-tax Officer treated
Turner Morrison & Company Ltd. as the agents of
the Association under section 43 of the Indian
Income-tax Act and assessed them to income-tax for
the two assessment years mentioned above under
section 4 (1) (a) or, alternatively, under the first part
of section 4 (1) (c). They were also assessed to excess
profits tax for the four chargeable
accounting
periods hereinbefore mentioned.
Turner Morrison & Company Ltd. (hereinafter
referred to as the Agents) preferred appeals against
the aforesaid assessment orders to the Appellate
Assistant Commissioner who, however, dismissed the
appeals.
The Agents took a further appeal to the
Income-tax Appellate Tribunal.
The submission of
the Agents before the Tribunal was that the asse;:.sment under section 4(1) (a) was bad and that the
assessment should have been made under section 42
of the Act.
The 'l'ribunal, on a co1isideration of the
facts, came to the conclusion that the assessment
was properly made under section 4( 1) (a) and incidentally the Tribunal also came to the conclusion that
the alternative contention of the Income-tax authorities that the assessment should be made under the
first part of section 4(1) (c) was also well-founded
and that section 42 had no application to the Cfli'i<'.
f?8
524
SUPREME COURT REPORTS
(1953]
1968
The result was that the Tribunal confirmed the findings of the Income-tax Officer and the Appellate
Afon~:;:~ Go., Assistant Commissioner and dismissed the appeals.
Ltd.
• On the application of the Agents made under
v.
section 66 (1) of the Act the Appellate Tribunal
Commissioner of referred the following questions to the High Court:-
Jnc~nne-tax,
H
,
.
west Bengal.
(1)
'Whether, m the facts and circumstances
of this case, the Tribunal was right in holding that
Das J.
the income, profits and gains derived from the sale of
salt in British India are assessable to tax as income,
profits and gains received or deemed to be received
under section 4(1) (a) ?
And if the answer to .the first question is in the
negative, ,-
(2)
Whether, in the facts and circumstances of
this case, the Tribunal was right in accepting the
contention of
the Department that the income
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 cir·-
cumstances of this c~se in rejecting the contention of
the assessee (applicant) that the income, profits and
gains am chargeable to tax from the sale of salt in
British India under section 42 only?"
'rhe reference came up for disppsal 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 assessed. Excess profits tax,
however, cannot be levied on this basis.
Question (2).
'l'he
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
iu accordance with fact.
We find that the iucome,
S.C.R. SUPREME COURT REPORTS
525
· profits and gains must be deemed to have arisen or
1953
accrued in India so far as excess profits tax is concerned and that section 42(3) of the Income-tax M
T"r"": 0
A t
1.
h 1
f
fi
b
. •
arr.so" "' o.,
c a pp ies to t e evy o excess pro ts tax y virtue
Ltd.
of section 21 of the Excess Profits Tax Act.
v.
Question (3).
The Tribunal was right in reject- Oommissionei· 01
ing the contention that the income, profits and gains
Inconie-tax,
West Bengal.
are chargeable to tax under section 42 only.
They
are also chargeable to income-tax as falling within
Das J.
the purview of section 4 (1) (a) of the Income-tax
Act as income received in India on behalf of the
assessee company.
In such a case section 42 of the
Income-tax Act would have no application."
It will be noticed that the Agents succeeded in
their contentions so far as they related to the
assessment of
e~cess profits tax.
The answers
given by the High Court, however, went against
them in so far as they related to the assessment of
income-tax for both the assessment years.
The Agents thereafter made two applications to
the High Court under section 66A for leave to appeal
to this Court in respect of the· income-tax assessments for each of the two assessment years.
The
High Court certified that the cases were fit for app_eal
to this Court and granted leave to appeal and directed
that the two appeals be consolidated.
The Commissioner of Income-tax, \Vest Bengal, however, has not
preferred any appsial from that part of the judgment
of the High Court which sets forth its opinion on the
questions in so far as they relate to the assessment of
excess profits tax.
This appeal is, therefore, concerned only with the answers given by the High
Court to the questions in so far as they relate to the
assessments of income-tax only.
The first main contention urged by Mr. S. Mitra
appearing in support of this appeal is that no income,
profits and gains were received in India by or on be~
half of the Association.
He seeks to make good this
contention on a variety of reasons all of which are
not quite consistent with each other and some of
526
SUPREME COUR1' REPORTS
[1953)
1953
which may even he mutually destructive.
Relying ori
T .
the decisions in Narasammal v. The Secretary of State
Morri:;,;•; 0 0.,•for India( 1 ) and Pondicherry Railway· Company Ltd.
Ltd.
v. Commissioner of Income-tax, Madras('), Mr. Mitra
v,
urges that no income, profits and gains were
Oommissionm- of "received" in India at all, for the Agents were nothing
;";•;•-taxi but "an animated Post Office". \Ye are bound to
"
'"9" • reject this reasoning as unsound on the same grounds
Das J.
on which the Privy Council rejected a similar contention in the case of Pondicherry Railway Company
Ltd.('). In the language of Lord Macmillan the
functions of the Agents far transcended the mere ·
mechanical act of transmitting the sums collected by
them to the Association in .B;gypt. 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 ex~enses 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.
1'he contention is that though the
Agents are described as agents, they were not so in
fact or in law and reliance is P.laced 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
their dealings as constituting an agency the consignee did not in fact sell. the goods as agent of the
consignor but did so on his own account and ·any
price realised in excess of the listed price was his own
II) [19t6] l.L.R. 39 Mad, 885,
(2/ I 1931jLL.R. ;4 Mad, 691; LR. 58 I.A. 239.
(3) L.R. 6 Ch. A. 397·
-
8.0.R.
SUPREME COURT REPORTS
527
profit.
On the facts found by the Tribunal, which
1958
the _learned counsel is not entitl~d to . ch.allen.ge
Tnrner
for the pu.rposes of these proceedmgs, it is q.rnte Morrison & co.,
clear that the goods were not imported by the
Ltd.
Agents on their own account and they never became
v.
a purchaser at any stage.
'l'hey could not sell the Commissioner of
goods at any price they liked, for they had to sell
Income-tax,
h
t
b
h
.
d b
h
A
.
!Vest Bengal.
t em a or a ove t e price approve
y t e
ssomation. If the sale was at a rate above the approved
Das J.
price the excess was never retained and appropriated
by the Agents as their own profits.
Mr. Mitra thereupon contends that assuming that the Agents had
sold the goods as agents of the Association they did
not necessarily have the authority to receive payment
of the price.
Reliance is placed on Butwick v.
Grant(1) in support of the proposition that an authority to sell does not of necessity imply an authority
to receive payment of the price.
The argument is
then formulated that as the Agents had no authority
· to receive the price, it cannot be said that the receipt
was by or on behalf of the Association.
This argument again overlooks the course of business as found
by the 'l'ribunal which clearly implies that the Agents
were not only agents for selling the s.alt but also for
collecting the sale proceeds.
The third ground urged in support of the first main
contention is that the entire amounts collected by the
Agents were not receivable by the Association, for the
agents were entitled to a portion of it, namely, the
amount spent by them in meeting the handling
charges and their own commission. On the authority of
Oolqtthoun v. Brooks(2) and Saiyid Ali Imam v. KingEmperor(3) Mr. Mitra contends that the sale proceeds
collected by the Agents were not so completely under
the control of the Association that it could by an act
of its own have the entire sale proceeds actually
transferred to it in Egypt. This argument is obviously
fallacious.
The concession that the Agents were
(r) [1924] 2 K.B. 483.
(2) 2 Tax Cas. 490.
(3J (1925) I.L.R. 4 Pat, 210; A.LR. 1925 Pat, 381,
•
528
SUPREME COURT - REPORTS
[1953]
l95B
entitled to deduct their disbursements and their comT
mission out of the sale proceeds clearly implies that
Morri:::~ co., th~ sale proceeds belonged to the Association, for the
Ltd.
Agents could not deduct the dues ·by the Assov.
ciation from something which did not belong to the
Oommissfoner of Association.
Section 217 of the Indian Contract Act
Income-ta•1•
gives to an agent the right to retain, out of any sum
West Benga •
·
d
f h
·
·
1 ·
h
b
·
receive on account o t e prmmpa m t e
usmess
Das J.
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 i~ subject to the rights of the Agents.
Finally, Mr. Mitra urges that the gross sale proceeds
were not really income, for they were only credit
items in the account and that several amounts were to
be debited in the same account and if there remained
any credit balance, such balance alone could be
regarded as stamped with the formal impress of the
character of income, profits and gains and capable of
being dealt with as such and income, profits and gains
could be said to have been received only at that stage.
We have been referred, in support of this contention,
to certain observations in the cases, of Commissioner of
Taxes v. The•Melbourne Trust Ltd.('), Russell v. Aberdeen Town and County Bank('), Re Rogers Pyatt Shellac
ltJ (1914] A.C. 1001 at p. 10II.
(2) 2 Tax Cas. 321 at p. 3z7.
8.0.R.
SUPREME COURT REPORTS
529
& Co. v. Secretary of State for India(1), Commissioner
1953
of Income-tax, Bombay City v. Agarwal & Company,
Turner
Bombay(2), In re Govind Ram Tansukh Rai(3), and Morrison ct co.,
other cases.
The observations in those several c~ses
Ltd. ·
have to be read in the light of the facts of those cases
. v'.
and the subi'ect which was then under discussion. So Comm.sB<oner of
Income-tax,
read those observations can have no application ·to
West Bengal.'
the facts of this case.
The case Morley v. Tattersall(4) also relied on by Mr. Mitra is clearly distinguishable because the liability for t.he sale proceeds
received by the auctioneers continued to exist even
Da• J.
after the unclaimed balances were transferred to the
accoun~ of the partners and, therefore, they could
not be
regarded as trade
receipts.
On the
other hand, the case of Grainger & Son v. William
Lane Gough(5 ) will clearly show that the moneys
received by an agent on behalf his foreign principal
could be regarded as including trade profits within
the meaning of section 41 of the-English Income Tax
Act of 1842 (See per Lord Herschel'l at p. 337 and
Lord Morris at p. 345). The several passages quoted
in the judgment under appeal from the cases of Neilson Anderson & Company v. Collins and Taru v. Scanlan(6) clearly indicate that the net sale proceeds are
included in the gross sale proceeds.
The same principle, as pointed out inBangalore Woollen, Cotton &
Silk Mills Co. Ltd. v. Commissioner of Income-tax,
Madras(7) is implicit in the decisions of the Privy
Council in Commissioner of Income-tax, Bombay Presidency and Aden v. Chunilal B. 111ehta(8 ) and Commissioner of Income-tax, Madras v. S. L. Mathias(°). There
ean, therefore, be no
question that when the
gross sale proceeds were received by the Agents in
India they necessarily received whatever income,
profits and gains were lying dormant or hidden or
otherwise embedded in them.
Of course, if on the
taking of accounts it be found that there was no
(r) [1925) LL R. 52 Cal. r at p. 3r.
(2) [I952] 2I I.T,R. 293.
(6) Il Tax Cas gr.
(3) (1944] 12 I.T.R. 450,
(7) [1950] r8 I.T.R. 423 at p. 438.
(4) [1938] 3 All E.R. 296,
(8) (1938) 65 I.A. 332.
(~) [1896) A.C. 32~,
(9) I.L.R. [19391Mad.178; 7I.T.R.1s.
530
SUPREME COURT REPORTS
[1953]
1958
profit during the year then the question of receipt of
Tnrner
inco11!e, profits and gains w?uld not arise but if. there
,irorrison & Go., were mcome., profits and gams, then the proport10nate
Ltd.
par~ thereof attributable to the sale proceeds received
v.
by the Agents in India were income, prnfits and gains
Commissioner 0/received by them at the moment the gross sale
Income-tax,
proceeds were received by them in' India and that
1Ve,<f Bengal. b ·
th
"t•
th
· .
f
t"
4 (1) ( )
emg
e pos1 10n
e prov1s10ns o sec 1011
a
Da.• J.
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( l) 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 in the total income should
be under section 4 ( 1) (c) for the Association is nonresident.
Mr. Mitra urges that the charging under
section 3 is
to
be " in accordance
with
and
subject to the provisions of this Act".
Likewise, section 4 (1) is also " subject to the provisions of this Act." This, according to Mr. Mitra,
at
once
attracts section 42 and such income,
profits and gains being within section 42 must be
included in section 4 ( l) (c) and the other alternative,
i.e.; section 4 (1) (a), is no longer applicable. In other
words, according to Mr. Mitra's contention, section 4
(1) (a) becomes a dead letter so far as income, profits
and gains arising or accruing to a non-resident are
concerned,
We are unable to accede to this contention.
Section 42 only speaks of deemed income. 'rhe
whole object of that section is to make certain income,
profits and gains to be deemed to arise in India so as
to bring them to charge.
The receipt of the income,
profits and gains being one of the yests of liabilit;v1
s.c.R.
SUPREME COURT REPORTS
531
where the income, profits and gains are actually
1953
received in India it is no longer necessary for the
revenue authorities to have recourse to the fiction u
Turn; 0
and this has been held quite clearly in Hira Mills?,td.
om~t~.
o.,
v. Income-tax Officer, Cawnpore (1)
and in Burugu
v.
Nagayya and Rajanna v. Commissioner of Income-tax, Commissioner of
Madras (2).
'!'his is also implicit in the decision of
Incorne-tax,
h
P .
C
'] .
n
d' h
R 'l
C
West Bengal.
t e
n vy
ounc1 m ron io erry
ai way ompany
Ltd. v. Commissioner of Income-tax, Madras( 3), to which
Das J.
reference has already been made.
Section 4( J) (a) in
terms is,
unlike section 4 (1) (b) or 4 (1) (c), not
confined in its application to any particular category
of assessees.
Section 4 (1) (a) is general and applies
to a resident or a non-resident person. The second
proviso to section 4 (1), although it relates to the case
of a person not ordinarily resident, also indicates
that income, profits and gains wh :ch accrue or arise
to such . a person without the taxable territories can
be included in his total income if they are brought
into or received in the taxable territories and become
chargeable to tax under section 3 read with section 4
(1) (a).
For reasons hereinbefore stated this contention of Mr. Mitra must be rejected. It may be that
the construction we are adopting in agreement with
the High Court may operate harshly against nonresidents in that income, profits and gains attributable to business operations outside India may also be
brought to charge as having been received in India
and such
consequence
may deter
non-resideRt
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
(1) [1946] 14 I.T.R. 417 at p. 423.
(2) [1949] 17 I.T.R. 194,
(3) (1931) I.L.R. 54 Mad, 691; L.R, 58 I.A. 239.
t;i9
53'2
SUPREME COURT REPORTS
[1953]
rnsa
Tobacco Company of India Ltd. v. The Secretary of
T·urner
State for
India (1), Commissioner
of Income-tax,
Mor.·ison .t Go., Bombay v. Metro Goldwyn Mayer (India) Ltd.(2) and
Ltd.
Caltex (India) Ltd. v. Commissioner of Income-tax,
_v._
Bombay City('), where it has been held that section 43
Oommiss.aner of is only a machinery for giving effect to section 42.
Income-tam.
To say that section 43 is really only machinery for
lVest Bengal.
giving effect to section 42 is not to say that section
Das J.
43 has no other purpose. Section 42 refers to income,
profits or
gains accruing or arising directly or
indirectly through or from (i) any business connection
in India, (ii) any property in India or (iii) any assets
or sources of income in India, or (iv) any money lent
at interest and brought into India in cash or in kind
or (v) the sale, exchange or transfer of a capital asset
in India. All these incomes by virtue of this section
have to be deemed to be income accruing or arising
within India and where the person entitled to such
income, profits or gains is a non-resident such
income, profits and gains are .made chargeable to
income-tax either in his name or in the name of his
agent who is to be deemed to be for all the purposes
of this Aet the assessee in respect of such income-tax.
Section 43, however, refers to a person (a) employed
by or on behalf of a non-resident, (b) having any
business connection with such non-resident or (c)
through whom such non-resident is in receipt of any
income, profits or gains. A person who comes within
one or other of these three categories, may, under
this section, be treated by the Incomectax Officer as
agent of the non-resident and such person is for all
the purposes of this Act to be deemed to be such
agent. 'rhe third category refers to a person through
whom the non-resident is in receipt of any income,
profits or gains.
The portion of section 43 which
refers to the person through whom the non-resident
is in receipt of any income, profits or gains does not
necessarily attract the provisions of section 42, for
the income, profits and gains received by the person
(t) (1922) l.L.R. 49 Cal. 721.
(2) ~1939) 7 I.T.~. 176.
•
' ,. --
S.C.R. SUPREME COURT REPORTS
533
who is treated as agent under section 43 may not fall
19S3
within any of the several categories of income, profits
T
·
f
d
·
'
4"
Th
1
urnar
or gams re erre
to m section
:6.
e anguage Mm·rison ct co.,
of section 43 will also attract the provisions of
Ltd.
section 40, for that section also
contemplates a
v.
person who is entitled to receive on behalf of the Commissioner 01
non-resident any income, profits and gains chargel~~cotnBie-tao:,t
b
d
.
d
h
.
'es
enga •
a le un er this Act an may even attract t e provi-
·
sions of section 4(l)(a). In our opinion there is no
Das J.
warrant for the contention that an appointment of a
person as a statutory agent under section 43 only
attracts section 42 for such appointment is for all
purposes of the Act and not only for the purposes of
section 42.
In our judgment, for reasons stated above, the
answers given to the questions by the High Court,
in so far as they relate to the assessment of incometax with which alone we are now concerned, are
correct and this appeal must be dismissed with costs.
Appeal dismissed.
Agent for the appellant: P. K. Mukherii.
Agent for the respondent: G. H. Raiadhyaksha.
N ALINAKHYA BY SA OK
v.
SHYAM SUNDER HALDAR AND OTHERS.
[MEHR CHAND MAHAJAN, DAS, and BHAGWATI JJ.]
West Bengal Premises Rent Control (Temporary Provisions)
Act (XVII of 1950), s. 18 (I)- T-Vhether applies to orders for recovery of possession made by Presidency Small Cause Court-" Decree
for recovery of possession "-Construction of stat1ites-Mistakes of
legislature.
The expression "decree for recovery of possession" in· s. 18
(1) of the West Bengal Premises Rent Control (Temporary Provisions) Act (Act XVII of 1950) does not include an order for recovery of possession made under s. 43 of the Presidency Small
Cause Courts Act, 1882, and a person against whom an order fo1·
1959
Jan. 29.