Commission accrual in British India made managing agency income taxable despite part of profits arising in Indian States.

Commission under an indivisible managing agency agreement accrued in British India where the business was carried on, the managing agents performed their functions, and the amount was credited in the accounts. The fact that part of the consolidated profits related to branch business in the Indian States did not change the source or place of accrual of the commission. On those facts, the commission was held taxable as income accruing in British India, and the claim to exemption failed.

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Issues: Whether the commission sum of Rs. 81,023, said to relate to profits earned in the Indian States, accrued in British India so as to be assessable to income-tax.

Analysis: The commission arose under one indivisible managing agency agreement and was worked out on the basis of the company's consolidated profits. The company's business was carried on in British India, the managing agents performed their functions in British India, and the amount had been credited in their favour in the accounts. On these facts, the source and accrual of the commission were not in the States merely because part of the profits related to branch business there.

Conclusion: The sum of Rs. 81,023 was taxable as income accruing in British India, and the claim to exemption failed.

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