AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1960 (8) TMI 3
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Swedish company as its sole selling agent in India. On account of the commencement of hostilities in the second world war, a corporation known as the Panrope Corporation was incorporated in the Republic of Panama in 1940, to take over as a war-time arrangement the assets and business of that Swedish company. With effect from July 1, 1947, the Panrope Corporation conveyed the property and business to the Swedish company. In the years 1947, 1948, 1949 and 1950 the S.K.F. sold in India as the agent of the Swedish and Panamanian companies---which will hereinafter be collectively referred to as the " foreign corporations "--- the goods manufactured by them. A small quantity of goods was bought by the S.K.F. and sold by it in India, but no que....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r of the said products shall be deemed to have been given by the agent for his own account and on his own responsibility. If the buyer has not paid the agent the amount that is owing by the date on which the agent is to render a statement and make payment to S.K.F. for such sales that have been made on credit, the agent shall nevertheless be liable to effect payment to S.K.F. in accordance with the terms and conditions that are defined in this agreement. Clause 23 : The agent shall pay to S.K.F. the net sales value of the said products that are sold each month, after deduction of the commission that has been-agreed upon (Cf. 20) and the import expenses that have been paid (Cf. 21). Payment shall be made in Sweden thirty (30) days, at the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncome-tax Appellate Tribunal. At the instance of the S.K.F., the following questions were referred to the High Court of Judicature at Bombay under section 66(1) of the Indian Income-tax Act, 1922 : (1) Whether there was evidence on which the Tribunal could have held that the Panrope Corporation and the non-resident company had a business connection in the taxable territories in the years of account ? (2) Whether the profits of the Panrope Corporation and the non-resident company in respect of the consignment goods were received in the taxable territories on their behalf ? At the hearing of the reference before the High Court, counsel for the assessee having conceded that the S.K.F. was not a purchaser of the goods " received on consig....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The High Court accordingly answered the second question in the affirmative " to the extent that the remittances were made after the sale proceeds were received by the assessee company ". We are unable to agree with the reasoning and the conclusion of the High Court. The terms of the agreement make it abundantly clear that the goods " received on consignment " from the foreign corporations were received by the S. K. F. as their selling agent and not as purchaser. The goods, it is true, were sold by the S. K. F. in its own name and not in the name of the foreign corporations, but the goods were still sold for and on behalf of the foreign corporations and the sale proceeds received by the S.K.F. were received not on its own behalf but for an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e before the price was realized, the S. K. F. became entitled to adjust the account and to take credit for the amount paid out of the realization. What the foreign corporations received under remittances made before or after realization of the price was not the sale proceeds in respect of sales, but amounts due by the S. K. F. under an obligation expressly undertaken by it under clause 23 of the agreement. The price of goods sold by the S. K. F. were in all cases received by it within the taxable territories ; and the S. K. F. being the agent for sale, and for receiving the price, the income embedded in the sale proceeds must be deemed to be received by the foreign corporations also within the taxable territories. It is the receipt of incom....