Accrual of speculative trading profits depends on the full factual matrix, and no tax withholding arose here.

Trading profits from speculative forward contracts accrue or arise for income-tax purposes on the cumulative effect of the relevant facts, not by reference to the place of contract alone. The place of conclusion, performance of acts under the contract, and the place where the right to receive payment arises are all relevant, but no single test is decisive in foreign-transaction cases. On the facts stated, the contracts were concluded at Sangli, no delivery was contemplated, and the profits arose from market differences there, so the profits did not accrue or arise in British India. Because the sums were not chargeable as income in the non-residents' hands, the resident buyers had no duty to deduct tax at source.

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Issues: (i) Whether the profit earned by the non-residents from the forward contracts accrued or arose in British India within the meaning of the charging provision. (ii) Whether the resident buyers were bound to deduct tax at source on the amounts paid to the non-residents under the deduction provision.

Issue (i): Whether the profit earned by the non-residents from the forward contracts accrued or arose in British India within the meaning of the charging provision.

Analysis: The expressions "accrue" and "arise" denote something less than actual receipt and refer to the point at which income comes into existence as a present or enforceable right to receive it. No single test is ative in every foreign-transaction case. The place where the contract is concluded, where acts under it are performed, and where the right to receive payment arises are all relevant, but the question must be decided on the cumulative effect of the facts. On the facts found, the contracts were concluded at Sangli, the transactions were speculative, no delivery was contemplated, and the profits resulted from the market differences at Sangli.

Conclusion: The profits did not accrue or arise in British India.

Issue (ii): Whether the resident buyers were bound to deduct tax at source on the amounts paid to the non-residents under the deduction provision.

Analysis: The duty to deduct tax depended upon the sums being income chargeable in the hands of the non-residents. Since the profits from the transactions were not chargeable as income accruing or arising in British India, the statutory obligation to deduct tax did not arise. The resident's liability under the deduction machinery was only consequential upon the non-resident's substantive chargeability.

Conclusion: The resident buyers were not bound to deduct tax.

Final Conclusion: The reference was answered in favour of the residents, and the non-residents' trading profits were held not taxable as income accruing or arising in British India.

Ratio Decidendi: For income-tax purposes, the place of accrual or arising of trading profits from speculative contracts is determined on the cumulative effect of the relevant facts, and not by the place of contract alone; where the profits arise outside the taxable territory, no obligation to deduct tax at source arises.

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