Law:

Section:

Section 5, read with sections 9 and 2(42) of the Income-tax Act, 1961 [Corresponding to section 4 read with sections 42 and 4A of the Indian Income-tax Act, 1922] - Income - Accrual of - Assessment years 1942-43 and 1943-44 - Whether question whether particular part of income, profits or gains arose or accrued within taxable territories or without taxable territories would have to be decided having regard to general principles as to where income, profits or gains be said to accrue or arise and section 42 of 1922 Act has no relevance for determination of this question because it is merely concerned with income which is deemed to have arisen or accrued and not with income which actually arises or accrue within taxable territories - Held, yes - Whether apportionment of income, profits or gains between those arising from business operations carried on in taxable territories is based not on applicability of section 42(3) of 1922 Act but on general principles of apportionment of income, profits or gains - Held, yes FACTS The assessee company was incorporated in the United Kingdom under the English Companies Act and had its registered office in London. It owned a spinning and weaving mill at Pondicherry in French India where it manufactured yarn and cloth. 'B' company had been appointed the agents of the assessee under an agreement dated the 11-7-1939, and had been invested with full powers in connection with the business of the assessee in the matter of purchasing stock, signing bills and other negotiable instruments and receipts and settling, compounding or compromising any claim by or against the assessee. The yarn and cotton manufactured in Pondicherry were sold mostly in British India and partly outside British India. In the accounting years 1941 and 1942 all the contracts in respect of the sales in British India were entered into in British India and the deliveries were made and payments received in British India. In regard to the sales outside British India also, payments in respect of such sales were received in British India through the said agents. The Income-tax Officer took it as settled law that the profits arose in the country in which the sales took…

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