Law:

Section:

Section 160 of the Income-tax Act, 1961 [Corresponding to section 42 of the Indian Income-tax Act, 1922] - Representative assessee - General - Assessment years 1940-41 to 1943-44 - Assessees, two brothers, were proprietors of certain oil mills - Those mills were located in Hyderabad State (i.e., Outside British India) - Assessees sold oil manufactured in mills to one 'C and Co.' proprietor of which was their uncle 'C' - 'C' was doing his own business in Bombay (i.e., within British India) - 'C' kept no stock of oil and what he did was that he entered into contract for sale of oil in Bombay and thereafter purchased oil himself mainly from assessees - Oil was sent directly by assessees to customers - It was weighed at factory of customers and any rebate that was payable in respect of weight or quality was ultimately borne by assessees - It was further noticed that transactions between assessees and 'C' were as between principal and principal - Whether, in aforesaid circumstances, mere fact that some of hundis which were drawn on 'C' in Bombay were cashed in Bombay did not by itself establish any business connection whatsoever - Held, yes - Whether, consequently, it could be concluded that assessee had no business connection in British India - Held, yes FACTS The assessee's were, two brothers, who were the proprietors of certain Oil Mills. They had three oil mills in the Hyderabad State. The assessees sold oil manufactured in the mills to C & Co., the proprietor of which was their uncle 'C' who was doing his own business in Bombay (i.e., within British India), he kept no stock of oil and what he did was that he entered into contracts for sale of oil in Bombay and thereafter purchased the oil himself mainly from the assessee, but also from others in some cases. The oil was sent directly by the assessees to the customers. It was weighed at the factory of the customers and any rebate that was payable in respect of weight or quality was ultimately born by the assessees. The Tribunal also found that the transactions between the assessees and 'C' were as between principal and principal. The goods were dispatched f.o.r. from Hyderabad stations and the freight was…

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