TaxTMI 
TaxTMI 
1978 (4) TMI 58
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.... 1963, the ITO found that the assessee had charged from its constituents in respect of tea purchased actual cost, commission or brokerage and also a sum of 10 paise per pound of tea on account of shipping, sampling and other miscellaneous charges, the commission charged varying between 1% and 2% on the value of the tea. In respect of despatch to head office the assessee did not charge any commission but charged all other items of expenses. The assessee contended that the sales to its head office were effected on a principal to principal basis and, therefore, there was no profit assessable under s. 9(1) of the I.T. Act, 1961. The ITO, however, held that the amount of commission which was not charged on sales to the head office accrued to the....
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....ondon office did earn more because of its business connection through the assessee in India and by not paying commission this earning accrued or arose to the assessee because of its business connections in India. The Tribunal accordingly included the said amount of pound 7,827 in the computation of the assessee's income as profit in respect of purchase operations carried on on behalf of the London office. At the instance of the assessee, the Tribunal under s. 256(1) of the I.T. Act, 1961, has drawn up a statement of case and referred the following question as a question of law arising from its aforesaid order : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of pound 5,897-1....
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.... held that the company must be deemed to have made a profit, being the difference between the market price of the said shares and their book value. On appeal, the AAC held that without a finding that the assessee had in fact made profits in the transaction the ITO could not add any amount on the basis of a notional income. He remanded the matter to the ITO. From this order, the revenue preferred an appeal to the Tribunal challenging only the finding of the AAC that the shares could not be valued at the market price. The Tribunal rejected the appeal summarily. On a reference, the High Court held that the order of the Tribunal rejecting the application was not competent. There was a further appeal to the Supreme Court. In its judgment, the Su....
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....arranged its affairs in such a manner as to reduce its tax liability by starting a subsidiary company and transferring its shares to that subsidiary company and thus forgoing part of its own profits and at the same time enabling its subsidiary to earn some profits, such a course is not impermissible under law." (b) CIT v. National and Grindlays Bank Ltd. [1969] 72 ITR 121 (Cal). In this case, this court construed s. 42(1) of the Indian I.T. Act, 1922, and held that where both money was advanced and the interest was payable thereon abroad there was nothing by which the interest earned could be connected with the taxable territory in India. (c) CIT v. R. D. Aggarwal and Co. [1965] 56 ITR 20 (SC), In this case the Supreme Court construed....
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....s arise or accrue to a non-resident must be determined upon the facts and circumstances of the case." Mr. B. L. Pal, learned counsel for the revenue, drew our attention to s. 9 of the I.T. Act, 1961, as it stood at the relevant time: "The following incomes shall be deemed to accrue or arise in India- (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through or from any money lent at interest and brought into India in cash or in kind or through the transfer of a capital asset situate in India; Explanation.-For the purposes of this clause- (a) in the case of ....
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....or the transactions. It appears to us that both the assessee and the revenue had been proceeding on the basis that the transaction between the London head office of the assessee and its unit in India was a transaction as between principal and principal. If this position is accepted then it cannot be held that any income arose in favour of the assessee either directly or indirectly, the gain in the London head office being offset by the loss incurred in the Indian branch. The decision in Calcutta Discount Co. Ltd. [1973] 91 ITR 8 (SC) could not be distinguished by Mr. Pal and if we apply the principles in the facts of the present case it has to be held that by the forgoing of the commission by the assessee on the supply to the head office....