Taxable Income from Sale of Salt in British India by Agent Affirmed under Indian Income-tax Act

Turner Morrison And Company Private Limited Versus Commissioner Of Income-Tax, West Bengal

Turner Morrison And Company Private Limited Versus Commissioner Of Income-Tax, West Bengal - [1953] 23 ITR 152 Issues Involved:
1. Whether the income from the sale of salt in British India is assessable to tax under Section 4(1)(a) of the Indian Income-tax Act.
2. Whether the income accrued or arose or is deemed to accrue or arise in India under Section 4(1)(c).
3. Whether the income is chargeable to tax under Section 42 of the Indian Income-tax Act.

Detailed Analysis:

Issue 1: Assessability of Income under Section 4(1)(a)
The primary contention was whether the income derived from the sale of salt in British India by Turner Morrison & Company Ltd. (the Agents) on behalf of the Port Said Salt Association Ltd. (the Association) is assessable under Section 4(1)(a). The High Court affirmed that the income, profits, and gains from the sale of salt in British India are assessable to tax as income received or deemed to be received in India under Section 4(1)(a). The Supreme Court upheld this view, rejecting the argument that the Agents were merely "an animated Post Office." The Court emphasized that the Agents performed significant duties beyond mere transmission of funds, including selling goods, handling cargo, issuing delivery orders, and collecting sale proceeds. Thus, the income was received in India on behalf of the Association, making it taxable under Section 4(1)(a).

Issue 2: Accrual or Deemed Accrual of Income under Section 4(1)(c)
The second issue addressed whether the income accrued or arose or is deemed to accrue or arise in India under Section 4(1)(c). The High Court found that the Tribunal was wrong in accepting the Department's contention that the income accrued or arose in India. However, the Court concluded that the income must be deemed to have arisen or accrued in India for excess profits tax purposes, applying Section 42(3) of the Income-tax Act via Section 21 of the Excess Profits Tax Act. The Supreme Court agreed that Section 4(1)(a) applies generally and is not limited to any specific category of assessees, including non-residents. The Court clarified that Section 42, which deals with deemed income, is not necessary when income is actually received in India.

Issue 3: Chargeability under Section 42
The third issue was whether the income is chargeable to tax under Section 42 only. The High Court ruled that the income, profits, and gains are chargeable to tax under Section 4(1)(a) as income received in India on behalf of the Association, and Section 42 has no application in this case. The Supreme Court supported this view, stating that Section 42 pertains to deemed income and is not applicable when income is actually received in India. The Court emphasized that Section 4(1)(a) is applicable to both residents and non-residents and that the receipt of income in India attracts taxation under this section without the need to resort to the deeming provisions of Section 42.

Conclusion:
The Supreme Court upheld the High Court's answers regarding the assessment of income-tax. The income from the sale of salt in British India was rightly assessed under Section 4(1)(a) as income received in India. The provisions of Section 42 were not applicable as the income was actually received in India, making the deeming provisions unnecessary. The appeal was dismissed with costs.