Law: Income Tax Act, 1922

Section: 66

JUDGMENT Y.S. Tambe, J. - This is a reference under sub-section (1) of section 66 of the Indian Income-tax Act and is in respect of the five reference applications made to the Tribunal relating to the assessment years 1949-50, 1950-51. 1951-52, 1952-53 and 1953-54, the accounting years being the respective previous calendar years. After consolidation of these five reference applications relating to the aforesaid assessment years, two questions of law have been referred to this court. The first question is common for all the five years and the second question is common only for three assessment years, viz. , 1950-51, 1951-52 and 1952-53. Facts giving rise to this reference in brief are: The assessee-company, Messrs. Ciba Pharma Private Limited, Bombay, hereinafter referred to as the "Ciba Pharma", is a cent. per cent. Indian subsidiary of Ciba Limited, Basle (Switzerland), hereinafter referred to as "the Ciba Basle." Ciba Basle deals in drugs, medicines, chemicals, pharmaceuticals and biological products. Ciba Pharma has been incorporated in India on 13th December, 1947. Prior to incorporation of Ciba Pharma and for some little time after its incorporation, Ciba Basle was carrying on its business in India through a company called Ciba (India) Limited, which was also a cent. per cent. subsidiary company of Ciba Basle. The activities of the Ciba Basle carried on in India through Ciba (India) Ltd. consisted of dealings both in pharmaceuticals as well as dealings in dyes and chemicals. In the year 1948, the activities of Ciba Basle in India till then carried on through Ciba (India) Ltd. were bifurcated. The pharmaceutical section was carved out and given over to Ciba Pharma and the rest of the activities in dyes and chemicals were being continued by Ciba (India) Ltd. under a changed name, Ciba Dyes Ltd. Now, with regard to the business in pharmaceuticals, which was handed over to Ciba Pharma, an agreement has been entered into between the Ciba Basle and Ciba Pharma. The agreement is of date December 17, 1947, and is annexure "A" to the statement of the case. The answer to the first question turns on the construction of this agreement. The preamble of this agreement…

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