Accrual of income depends on where payment becomes enforceable; film-hire receipts earned in Native States were exempt from excess profits tax.

Film-hire receipts under both fixed-hire and percentage-of-collections contracts were held to accrue wholly in the Native States because the assessee acquired an enforceable right to payment only when the films were delivered and exhibited there, or when collections were made there; the place where the contracts were made in British India was not decisive. The receipts were therefore exempt from excess profits tax under the third proviso to Section 5. The further contention that profits should be apportioned between British India and the Native States was not entertainable on reference because it had not been raised before the tax authorities or the Tribunal and did not arise from the Tribunal's order.

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Issues: (i) Whether film-hire receipts under both fixed-hire and percentage-of-collections contracts, arising from exhibition of films in Indian States, accrued wholly in the Native States so as to be exempt from excess profits tax under the third proviso to Section 5 of the Excess Profits Tax Act. (ii) Whether the argument that the profits should be apportioned between British India and the Native States could be entertained on the reference.

Issue (i): Whether film-hire receipts under both fixed-hire and percentage-of-collections contracts, arising from exhibition of films in Indian States, accrued wholly in the Native States so as to be exempt from excess profits tax under the third proviso to Section 5 of the Excess Profits Tax Act.

Analysis: For percentage contracts, the assessee became entitled to payment only when the film was exhibited and collections were made in the Native State, and the amount was then paid there. For fixed-hire contracts, payment was not due until delivery of the film to the exhibitor in the Native State. On either footing, nothing accrued to the assessee in British India merely because the contracts were made there; the decisive place was where the film was delivered and exploited, and that was wholly in the Native State.

Conclusion: The receipts accrued wholly in the Native State and were exempt from excess profits tax. This issue is answered in favour of the assessee.

Issue (ii): Whether the argument that the profits should be apportioned between British India and the Native States could be entertained on the reference.

Analysis: The apportionment question had not been raised before the income-tax authorities or the Tribunal, and it did not arise from the Tribunal's order. A new question requiring factual investigation and apportionment could not be raised for the first time on reference.

Conclusion: The apportionment argument was not entertainable on the reference.

Final Conclusion: The reference was answered in favour of the assessee, and the profits from both classes of contracts were held to be exempt as accruing wholly in the Native States.

Ratio Decidendi: Income accrues where the assessee first acquires an enforceable right to receive payment and the business receipts are earned, not merely where the contract is made; a new question not arising from the Tribunal's order cannot be raised for the first time on reference.

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