Accrual of income depends on where profits arise, not merely where business control is exercised.

Under the Income-tax Act, 1922, the decisive test for taxing profits was where the profits came into existence, not merely where decisions were taken or business control was exercised. The statutory scheme in sections 4, 6 and 10 required a direct enquiry into whether particular profits accrued or arose in British India, and did not make the place of direction the sole criterion. Because the future delivery contracts were neither framed nor carried out in British India, the profits from those foreign dealings did not accrue or arise there, and the issue was resolved in favour of the assessee.

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Issues: Whether profits from future delivery contracts entered into with parties outside British India, and controlled from Bombay, accrued or arose in British India.

Analysis: The decisive question was the place where the profits came into existence, not merely where the assessee formed the decision, gave instructions, or exercised skill and judgment. The statutory language in Sections 4, 6 and 10 of the Income-tax Act, 1922, required a direct enquiry into whether the particular profits accrued or arose in British India. The Act did not treat the place of direction or control of a business as the sole test of accrual. The Court also noted that the scheme of the Act, including the special provision for profits accruing without British India and later received in British India, was inconsistent with the contention that all profits of a business carried on in British India must necessarily accrue there. On the facts, the contracts were neither framed nor carried out in British India, and the profits from those foreign dealings did not accrue there.

Conclusion: The profits from the foreign future delivery contracts did not accrue or arise in British India, and the answer was in favour of the assessee.

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