THE COMMISSIONER OF INCOME-TAX, BOMBAY versus S. K. F. BALL BEARING CO., LTD.

Citation: [1961] 1 S.C.R. 141 · Decided: 10-08-1960 · Supreme Court of India · Bench: S.K. DAS · Disposal: Case Partly allowed

Judgment (excerpt)

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1 S.C.R. SUPREME COURT REPORTS 
141 
THE COMMISSIONER OF INCOME-TAX, 
BOMBAY 
v. 
S. K. F. BALL BEARING CO., LTD. 
(S. K. ,DAS, M. HIDAYATULLAH anq 'J. C. SHAH, JJ.) 
Income-tax-Agent selling goods manufactured by principal-
Remittances of sale proceeds made to the principal before and after 
the recovery of price of goods-Profits-Whether include' remittances 
made before recovery of price by the Agent-The Indian Income-tax 
Act, r922'(II of r922), 
s. 4(r){a). 
. 
A Swedish company manufacturing ball bearing equipment 
entered into an agreement with the respondent, S. K. F. Ball 
Bearing Co. Ltd. registered under the Indian Companies Act, 
1913, appointing the latter as its sole selling agent in India. 
The material portion of the Agreement ran thus:- -
· 
"Clause 23 :- _ The Agent shall pay to S. K. F. net sales 
value of the said products that are sold each month, after deduc-
tion of the Commission that has been agreed upon and the 
import expenses that' have been paid: Payment shall be made 
in Sweden thirty days at the latest following the last day of the 
month in which the sales have been effected." 
During the second world war a corporation known as the Pan-
rope Corporation was incorporated in the Republic of Panama 
to take over the assets and business of the Swedish company 
and the said Panrope Corporation in its turn conveyed the· pro-
perty and business to the Swedish company. Thereafter the 
respondent company sold in India as the agent of _the foreign 
Corporations goods manufactured by' them, and in a majority of 
the sales the respondent company remitted the "sale value" to 
the foreign corporations after the goods were sold lmt before the 
sale proceeds were recovered from the buyers. In some cases 
remittances were made even before th_e goods were sold and in 
. others remittances were made after the sale proceeds were realis-
-ed from the buyers. The Income-tax Officer assessed the fore-
ign corporations under s. 4(1)(a) of the Indian Income-tax Act 
for payment of tax on the profit included in the price realised 
by the respondent company without making any distinction bet-
ween remittances made before recovery of the sale proceeds and 
remittances made after recovery of the sale proceeds. This order 
was confirmed ·by the higher income-tax authorities. On a refer-
ence made at the instance of the respondent company the High 
Court came to the conclusion that the foreign corporations had a 
business connection in the taxable territories in the years of 
account and the respondent company was liable to pay tax on 
their behalf only with regard to remittances _made after the 
sale proceeds were recovered. On appeal by the Commissioner 
of Income-tax by special leave, 
August IO. 
142 
SlJPREME COURT REPORTS 
[1961] 
1960 
Held, that the liability to pay income-tax under s. 4(1)(a) 
, 
arose on the receipt of the income and the question whether the 
TM Commi_(sioncr income \Vas received in the taxable territory v.•as determined by 
of 1,icr,ir.e-ta.t, 
the µla~c ~-here the price \\'as received. 
Hoinbay 
Profits \Vere received by the respondent company on behalf 
v. 
of the foreign corporations in the taxable territory in respect of 
S. K. F Hall 
all sales of consigned goorls irrrspcctivc of \vhether the rcmit-
Rcaring Co., Ltd. lances \Vere made either before or after the price was received. 
Shah J. 
CIVIL 
APP.EI.LATE JURISDICTION: 
Civil 
Appeal 
:\! o. 9 of 1958. 
Appeal by special leave from the judgment and 
order dated February 24, 1955, of tho former Bombay 
High Court in fncomc-tax Reference No. 50/X of 1954. 
K. N. Rajagopal Sastri and D. Gupta, for the appel-
lant. 
R. J. Kolah, S. N. Andley, J.B. Dadachanji, Ramesh. 
war Nath and P. L. Vohra, for the respondent. 
1960. 
August 10. The Judgment of the Court 
was deli vercd by 
SHAH, J.-Aktiebolagct Svenska Kullakerfabriken 
of Gothenburg is a company inco1;porated uncler the 
laws of Sweden, and is engaged in the manufacture of 
ball bearing equipment. S. K. F. Ba.II Hearing Co., 
Ltrl., which will hereinafter be refcrrod to as "the 
S. K. F." is a company registered under the Indian 
CompanicA Act, 1913. By an agreement rlated ,January 
I, l!l39, t.he S. JC F. was appointerl by tho Swedish 
company as its sole selling agent in India. On account 
of the commencement of hostilities in the second 
world war, a corporation known as the Panrope. 
Corporati:m was incorporated in the Hepublic of 
Panama in 1940, to take over as a war-t.

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