JUDGMENT :-

(1.) This is an appeal from a decision of the High Court of Judicature at Bombay upon a reference made by the Income-tax Appellate Tribunal, Bombay, under S. 66(1), Income-tax Act. The respondent firm, the assessees, carried on business of manufacturing and dealing in oil during the relevant accounting periods. They are a registered firm under the Income-tax Act and are residents in Bombay. They own three

mills at Bombay and one at Raichur for manufacturing oil from groundnuts. The oil produced at Raichur is sold partly at Raichur and partly in Bombay. Their liability to pay income-tax in respect of their whole profits is not disputed under the Income-tax Act. The question is in respect of their liability under the Excess Profits Tax Act for the oil manufactured at Raichur, but sold in Bombay.

(2.) The assessees contend that in respect of such oil a portion of the profits earned by them is attributable to their business of manufacturing oil at Raichur and that portion of the profits should not be assessed to tax under the Excess Profits Tax Act. The taxing authorities rejected the contention of the assessees. The Income-tax Tribunal agreed with them. On a reference the H