COMMISSIONER OF INCOME-TAX, BANGALORE versus THE UNION OF TILE EXPORTS, BANGALORE

Citation: [1969] 2 S.C.R. 55 · Decided: 10-09-1968 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Judgment (excerpt)

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COMMISSIONER OF INCOME-TAX, BANGALORE 
v. 
THE UNION OF TILE EXPORTS, BANGALORE 
September 10, 1968 
[J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.J 
Indian 
Income-tax 
Act, 
1922 s. 
4(l)(a)-Place of accrual of 
income-Contracts entered into Bangalore in Part B State and profits re~ 
ceived there-Subsequent operations in British India and Ceylon-Conces~ 
sion under Part B States (Taxation, concessions) Order, 1950 whether 
could be claimed in resp.ect of business activity at Bangalore-Apportion~ 
C 
ment of profits under Indian Income-tax Act, 1922 s. 42(3). 
D 
E 
H 
The assessee firm carried on business at Bangalore in the State of 
Mysore, which at the relevant time was a Part B State. It was appointed 
as the sole selling agent for certain areas in Ceylon in respect of tiles 
and ridges manufactured by the principal at 
Feroke in British India. 
According to the agreement between the parties all prices quoted by the 
manufacturer were to be F.0.B. Beypore Port situated in taxable territory. 
Chartering and loading of vessels was done by one of the assessee's 
employees stationed at Calicut. The bills of lading were obtained by the 
assessee's representative at Beypore and sent to Bangalore when 
the 
hundis together with the invoices and shipping documents were handed 
over by the assessee to a bank at Bangalore. 
Pursuant to the letter of 
credit opened by the purchaser in Ceylon, payments were made by the 
aforesaid bank to the assessee. 
In income tax proceedings for the assess· 
ment years 1951-52, 1952-53, and 1953-54 the' assessee claimed that since 
its registered office was in Bangalore and as the agency agreement with 
the purchaser at Colombo was entered into in Bangalore the entire in .. 
come shou1d be treated as in.come accruing or 'arising in Part B State 
and concession regarding rates and allowances as provided in Part 
B 
States (Taxation Concessions) Order, 1950 should be allowed to it. The 
income tax authorities and the Tribunal decided against the assessee. The 
High Court however held that since the profits were received in Part B 
State at Bangalore, it could not be said that the entire profit accrued or 
arose within the meaning of cl. (a) of sub-s" (1) of s. 4 of the Jncome-
tax Act, 1922 in the taxable territories other than Part B State. Accord-
ing to the High Court 
the profits arose at Bangalore, Feroke, and 
Ceylon, of which only PeToke was in the taxable territories, and therefore, 
the assessee was entitled to the concession under the order in respect of 
the profits that could be apportioned under s. 42(3) of the Act to the 
business operations conducted in Bangalore and Ceylon. The Revenue 
appealed to this Court contending that hardly any activity took place 
of such a nature as could be said to give rise to accrual of profits at 
Bangalore. 
HELD : The conclusion which the High Court arrived at must be 
upheld. 
The making of contracts pursuant to which all the subsequent activity 
in respect of the execution of those contracts took place resulting in 
profits to the assessee was an integral part of the entire selling operations. 
The contracts in the present case having been entered into at Bangalore 
it could not be said that no part of the business activity which produced 
the profits took place there. [53 HI 
56 
SUPREME COURT REPORTS 
[1969] 2 s.c.R. 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1769 to 
A 
1771 of 1967. 
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Appeals from the judgment and order dated December 17, 
1963 of the Mysore High Court in I.T.R.C. Nos. 6 of 1959 and 
3 of 1960. 
C. K. Daphtary, Attorney-General, V. A. Seyid Muhammad, 
B 
R. N. Sachthey and B. D. Sharma, for the appellant (in all the 
,_ 
appeals). 
S. T. Desai, Bhuvanesh Kumari and Ravinder Narain, for the 
respondent (in all the appeals). 
The Judgment of the Court was delivered by 
Grover, J. These appeals are by certificate from the common 
judgment of the Mysore High Court on the following questions 
of law which were referred by the Income tax Appellate Tribunal 
under s. 66(1) of the Income tax Act, 1922, hereinafter called 
the Act. 
" ( 1) Whether, on the facts and circumstances of 
the case, the income of the assessee did not arise in 
Bangalore (Mysore State) in respect of sales effected 
by the assessee to the Burma Teak Trading Co., Ltd., 
Colombo? 
( 2) If the answer to the above question is in favour 
of the assessee, then whether, on the facts and circum-
stances of the case, the assessee is enti

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