Principal place of business dispute requires statutory determination before assessment; unresolved jurisdiction cannot be assumed by the tax officer.

The principal place of business was determined by where the persons directing the venture carried on and controlled the business, not merely where operations were performed. On the facts, Calcutta, not Cawnpore, was the principal place of business because formation, finance, contracting, banking and correspondence were centred there. Once that jurisdictional dispute arose, the Income-tax authorities were required to invoke the special procedure under section 64(3) of the Income-tax Act, 1922, and could not assess on an unresolved assumption that Cawnpore had jurisdiction. The summary assessment made without that determination was therefore not in accordance with the Act. The cessation of the venture would not, by itself, have removed jurisdiction if Cawnpore were otherwise the proper place.

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Issues: (i) Whether the special venture's principal place of business was in Cawnpore or Calcutta; (ii) whether assessment by the Cawnpore Income-tax Officer could stand without determination under section 64(3) of the Income-tax Act, 1922; (iii) whether the Income-tax authorities were bound to obtain a decision under section 64(3) before assessing; and (iv) whether the cessation of the venture had removed jurisdiction to assess.

Issue (i): Whether the special venture's principal place of business was in Cawnpore or Calcutta.

Analysis: The decisive test was the place where the persons directing the firm carried on and led the business, not merely the place where substantial practical work was done. The venture was formed and financed from Calcutta, the contract with the railway was made there, payments were received there, banking was maintained there, and correspondence with the railway was conducted from there. Although much of the operational work was done at Cawnpore, that fact was not enough to make Cawnpore the principal place of business.

Conclusion: The principal place of business was not Cawnpore; on the facts stated, it was in Calcutta, and there was no evidence to support the contrary finding.

Issue (ii): Whether assessment by the Cawnpore Income-tax Officer could stand without determination under section 64(3) of the Income-tax Act, 1922.

Analysis: Once a dispute had arisen as to the principal place of business, the Act required that question to be determined through the special machinery under section 64(3). The Income-tax Officer could not himself assume that the place was Cawnpore and assess the whole firm on that basis while the dispute remained unresolved.

Conclusion: The summary assessment made in Cawnpore without compliance with section 64(3) was not in accordance with the Act.

Issue (iii): Whether the Income-tax authorities were bound to obtain a decision under section 64(3) before assessing.

Analysis: The statutory scheme showed that the moment a dispute arose, the matter had to be referred to the appropriate Commissioner or Commissioners for determination, with the assessee given an opportunity to present his views. The officer who first became aware of the dispute was expected to set the machinery in motion, and not to decide the jurisdictional question himself.

Conclusion: Yes, the authorities were bound to have the question determined under section 64(3).

Issue (iv): Whether the cessation of the venture had removed jurisdiction to assess.

Analysis: If the business had in fact been carried on wholly in Cawnpore, its later cessation would not by itself have removed the power to assess. The answer to this point was therefore only hypothetical and did not affect the main decision.

Conclusion: The ending of the venture would not have deprived the Income-tax Officer of jurisdiction, if Cawnpore had otherwise been the proper place of assessment.

Final Conclusion: The assessment was vitiated by failure to follow the statutory dispute-resolution machinery for determining the principal place of business, and the finding that the business was principally in Cawnpore could not be sustained on the evidence.

Ratio Decidendi: Where a statute provides a special procedure for determining a jurisdictional dispute, the assessing authority cannot bypass that procedure and assume jurisdiction on an unresolved question of place of business; the principal place must be determined by the statutory forum, and a finding unsupported by evidence cannot stand.

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