Law:

Section:

Section 5 read with section 145 of the Income-tax Act, 1961 [Corresponding to section 4(1)(a) read with section 13 of the Indian Income-tax Act, 1961] - Income - Accrual of CASE REVIEW Subramanyam Chettiar v. CIT [1927] AIR Mad 841; Lakshmanan Chettiar v. CIT [1929] AIR Mad 675. JUDGMENT Chagla, CJ.-The assessee company is a company registered in the Baroda State and the assessment year of this reference is 1942-43 (calendar year 1941). This company is a non-resident company. It manufactures textile goods and after the goods are manufactured they are sold by the company ex-mills. The company has their guaranteed brokers Messrs. Jagmohandas Ramanlal & Co., and they guarantee the payment by the merchants to the company and they receive a commission for the work which they do. The contention of the company was that the company being a non-resident company it was not liable to pay any tax on its profits or income as none of the profits made by the company had been received in British India. In order to decide this question we have to consider separately three items which are the subject matter of this reference, viz., (1) an item of Rs. 12,68,480, (2) an item of Rs. 4,40,878, and (3) an item of Rs. 6,71,735. Now, with regard to the first item of Rs. 12,68,480 the company debited in their books of account a sum of Rs. 13,41,744 to Messrs. Jagmohandas Ramanlal & Co. and credited it to the sales account, thereby representing that the goods covered by this amount had been sold by the company for this sum. I may mention that the company maintains its accounts on a mercantile basis and not on cash basis. Messrs. Jagmohandas Ramanlal & Co. realised from various merchants from Ahmedabad to whom goods had been sold the sum of Rs. 12,68,480, and they utilised that sum in paying off various creditors of the company at Ahmedabad. On these facts there can be no doubt that the sum of Rs. 12,68,480 was received by the assessee company in Ahmedabad. A contention was put forward by the assessee company that the company was not concerned with the payments made by the merchants in Ahmedabad and that they were only concerned with Messrs. Jagmohandas Ramanlal & Co.…

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