Foreign business income controlled from India was not apportionable despite temporary absence of the proprietor.

Income accruing outside the taxable territories to a person resident but not ordinarily resident was includible only if it was derived from a business controlled in India under the proviso to section 4 of the Indian Income-tax Act, 1922. The Tribunal found, and the High Court accepted, that the Hong Kong business was controlled from India throughout the accounting year. Temporary absence of the proprietor did not displace that control, and there was no basis for apportioning the profits on a time basis. The claim for apportionment therefore failed, and the foreign business income was included in total income.

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Issues: Whether the income from the Hong Kong business was liable to be apportioned on a time basis for inclusion in the assessee's total income, in view of the requirement that the foreign business be controlled in India during the relevant year.

Analysis: Under the proviso to section 4 of the Indian Income-tax Act, 1922, income accruing outside the taxable territories to a person resident but not ordinarily resident was includible only if derived from a business controlled in India. The finding of the Tribunal, accepted by the High Court, was that the Hong Kong business was controlled from India throughout the accounting year. Temporary absence of the proprietor did not by itself displace that control, and there was no material to support apportionment of profits on a time basis.

Conclusion: The claim for apportionment failed, and the income from the Hong Kong business was rightly included in the assessee's total income.

Ratio Decidendi: Where a foreign business is found as a fact to have been controlled from India throughout the relevant accounting year, its profits are not liable to apportionment merely because the proprietor was temporarily absent from India.

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