Receipt of sale proceeds in taxable territory by authorised intermediaries remained taxable, despite mercantile accounting treatment.

Amounts paid in British India to a non-resident's authorised brokers, banks, or shroffs as the first receipt of sale proceeds were treated as actual receipts in the taxable territory and were chargeable under section 4(1)(a) of the Indian Income-tax Act, 1922. The mercantile system of accounting did not convert those receipts into mere accruals, and section 13 did not exclude taxability where money was in substance received on the assessee's behalf in British India. Later transfer of the funds did not alter the character of the initial receipt, so the tax liability on the disputed sums was upheld.

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Issues: Whether, on the facts of the case, the sums received through the Bombay brokers and through banks and shroffs in British India were sale proceeds received in British India so as to be taxable under section 4(1)(a) of the Indian Income-tax Act, 1922; and whether the assessee's mercantile system of accounting and section 13 displaced liability on the basis of actual receipt.

Analysis: The assessee was a non-resident and its accounts were kept on the mercantile basis, but the Court held that the sums in question were not merely book entries or notional receipts. In substance, the sale proceeds were paid by the merchants in British India to the assessee's brokers, banks, or shroffs on the assessee's behalf, and the money was first received in British India when those persons obtained payment under the arrangement governing delivery of the goods. The mercantile system affects computation of business profits, but it does not convert actual receipts into mere accruals for the purpose of section 4(1)(a), nor does section 13 create an exemption from tax on receipts actually received in British India. The later movement of money after such receipt did not alter its character as the first receipt within the taxable territory.

Conclusion: The sums were received in British India on behalf of the assessee and were chargeable to tax under section 4(1)(a); the assessee's mercantile method of accounting did not prevent taxability.

Final Conclusion: The appeal failed, and the tax liability on the disputed amounts was upheld.

Ratio Decidendi: For a non-resident, amounts paid in British India to its authorised intermediaries as the first receipt of sale proceeds are taxable as receipts in British India under section 4(1)(a), and the mercantile system of accounting does not exclude such actual receipt from chargeability.

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