Commission accrual and separate business findings in income tax law turned on where sales were completed and whether evidence supported distinct businesses.

Commission earned under an agreement tied to Indore sales did not accrue or arise in British India, because the sales were completed in Indore and the sale proceeds collected in Bombay were not the source of the commission; the answer on this issue was in favour of the assessee. The claim that the cotton Jatha activity had ceased as a separate business was a question of fact, and the High Court would not disturb the Income-tax Officer's finding where there was evidence of separate books, different names, and distinct business character; this issue was decided against the assessee. The reference was thus answered partly for and partly against the assessee.

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Issues: (i) Whether the commission of one per cent. on the Indore sales accrued or arose in British India within the meaning of Section 4(1) of the Income-tax Act, 1922; (ii) whether the cotton Jatha business was a separate business which had ceased before the assessment year, so that the finding of the Income-tax Officer could be interfered with.

Issue (i): Whether the commission of one per cent. on the Indore sales accrued or arose in British India within the meaning of Section 4(1) of the Income-tax Act, 1922.

Analysis: The commission was earned under an agreement which made the sale at Indore the real source of the remuneration. The sales were completed in Indore, the commission became payable only at the end of the year, and the mere receipt in Bombay of the sale proceeds did not convert the commission into income accruing or arising in British India. The place where the sale proceeds were collected was not the source of the commission.

Conclusion: The commission did not accrue or arise in British India and the answer was in favour of the assessee.

Issue (ii): Whether the cotton Jatha business was a separate business which had ceased before the assessment year, so that the finding of the Income-tax Officer could be interfered with.

Analysis: The question was one of fact. Separate books were maintained, the businesses were carried on under different names, and there was material suggesting that they were distinct in character and capable of independent existence. In such a matter, the Court could interfere only if there was no evidence to support the finding, and that threshold was not met.

Conclusion: There was evidence to support the finding that the cotton Jatha business was a separate business, and the answer was against the assessee.

Final Conclusion: The reference was answered with one question decided in favour of the assessee and the other against the assessee, leaving each party to bear its own costs.

Ratio Decidendi: For income-tax purposes, commission linked to sales accrues at the place where the sale giving rise to the commission is completed, and a factual finding that two businesses are separate will not be disturbed if there is evidence supporting it.

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