COMMISSIONER OF INCOME-TAX/EXCESS PROFITS TAX, BOMBAY CITY versus MESSRS. BHOGILAL LAHERCHAND INCLUDING BATLIBOI & CO., BOMBAY

Citation: [1954] 1 S.C.R. 444 · Decided: 18-12-1953 · Supreme Court of India · Bench: MEHR CHAND MAHAJAN · Disposal: Appeal(s) allowed
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Judgment (excerpt)

1953 
Akhlakali 
Ha.Jatalli 
v. 
Th•Stateof 
Bombtg. 
1953 
Dec. 18. 
SUPREME COURT REPORTS 
[1954] 
charged accepted and 
the 
appellant 
acquitted 
and 
discharged and forthwith set at liberty. 
Appeal dllowed. 
Agent for the respondent : G. H. Rajadhyaksha. 
COMMISSIONER OF INCOME-TAX/EXCESS 
PROFITS TAX, BOMBAY CITY 
v. 
MESSRS. BHOGILAL LAHERCHAND including 
BATLIBOI & CO., BOMBAY. 
[MEHR CHAND MAHAJAN, S. R. DAs, GHULAM 
HASAN and JAGANNADHADAS JJ.] 
Indian Income-tax Act (XI of 1922), s. 42(1)-Scope of. 
A Hindu undivided family was carrying on business in Bom-
bay, Madras and the Mysore State, being treated as a single asses-
see and its relevant accounting period was 10th October, 1941, to 
8th November, 1942. 
During this period, the 
Mysore branch 
purchased goods from the Bombay head office and the Madras 
branch 
of 
the 
value 
of 
Rs. 
2 lakhs odd. 
The Income-
tax Officer estimated 
these 
purchases 
of 
the 
Mysore 
branch 
in 
British 
India at 
Rs. 3 
lakhs and 
its 
profits 
at 
Rs. 75,000 on the sale of these goods )n Mysore. 
In view of the 
provisions of s. 42 of the Indian Income-tax Act, half of this profit, 
i.e., 
to the extent of Rs. 37,500, was deemed to accrue or arise in 
British India because of the business connection of the non-resid~ 
ent branch in British India : 
Held, that, on the facts and circumstances of the case, the In-
come-tax Officer was right in applying the provisions of s. 42 (1) 
of the Income-tax Act and holding that 
Rs. 37,500 
were profits 
deemed to accrue in British India and in including in the 
assess~ 
ment a portion thereof. 
Held also, that s. 42 sub-ss. (!) and (3), cover cases of both 
residents as well as non-residents. 
Commissioner of Income-tax v. 
Western India 
Life Insurance 
Co. [1945] (13 LT.R. 405) dissented from. Sutlej Cotton Mills Ltd. 
v. Commissioner of Income-tax, West Bengal (A.LR. 1950 Cal. 551), 
Commissioner of Income-tax/Excess Profits Tax, Madras v. Parasu-
ram /ethanand (A.LR. 1950 Mad. 631), Commissioner of Income-tax. 
Bombay v. Ahmedb}iai 
Umarbhai 
& Co. ( [ 1950] S.C.R. 335), 
referred to. 
S.C.R. 
SUPREME COURT REPORTS 
445 
C1v1L 
APPELLATE 
JuR1so1cTroN : 
Civil 
Appeal 
No. 160 of 1950. 
Appeal against the Judgment and Decree dated the 
30th March, 1951, of the High Court of Judicature 
at 
Bombay (Chagla C. J. and 
Tendolkar J.) in 
Income 
Tax Reference No. 34 of 1950. 
C. K. Daphtary, Solicitor-General for India, (Porus 
. A. Mehta, with him) for the appellant. 
R. /. Kolah for the respondent. 
1953. 
December 18. The Judgment of the 
Court 
was delivered by 
MAHAJAN J.-This is an appeal from the Judgment 
of the High 
Court of Judicature at Bombay delivered 
on a reference 
under 
section 66 ( 1) of the 
Indian 
Income-tax 
Act, 
1922, 
whereby the 
High 
Court 
answered the first referred question in the negative. 
The assessment in question concerns 
the year 1943-
44. 
A Hindu undivided 
family 
was 
carrying 
on 
business in Bombay, Madras and the Mysore State. 
Its 
business was taken over by a registered . firm 
on 
17th March, 
1942. 
For the purpose 
of this 
appeal 
however this· circumstance is not material. The case 
has been dealt with on the 
assumptipn that a single 
assessee carried on business from 10th October, 1941, 
to 8th November, 1942, the relevant accounting year. 
According to the accounts of the assessee, during this 
period the Mysore branch purchased goods from the 
Bombay head office 
and the 
Madras branch 
of the 
value 
of 
Rs. 2,45,455. 
The Income-tax officer 
esti-
mated these purchases of the Mysore branch in British 
India at Rs. 3,00,000 and its profits at 
Rs. 75,000 
on 
the sale of these goods in 
Mysore. 
In view of the 
provisions of section 42 of the 
Act half of this profit, 
i.e., to the extent of Rs. 37,000, was deemed to accrue 
or arise 
in 
British 
India, 
because 
of the 
business 
connection of the 
non-resident 
branch 
111 
British 
India. 
It was contended that 
the assessee being a person 
resident in India, section 42 
could not be invoked in 
the case, because that section had application only ·to 
1953 
Commissioner 
of Income-tax 
Exc1ss Profit s 
Tax, Bombay 
City 
v• 
Messrs. Bhogilal 
I.aherchand 
Mahajan] . 
19;3 
Commissioru:r 
of income-tax 
E'xcels Profits 
T ttX; Bombay . 
City 
v. 
Messrs. Blwgilal 
Laherc!1and 
446 
SUPREME COURT REPORTS 
[19541 • 
cases 
of 
non-residents. 
The 
Income-tax 
Tribunal 
following the decision of the 
Bombay High Court,
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