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 High Court disagreed with the view of the Tribunal and held that the assessee's contention was correct. The Commissioner of Income-tax has come in appeal from that decision. In the Excess Profits Tax Act S. 2(5)) defines "business" as follows : " 'Business' includes any trade, commerce or manufacture or any adventure in the nature of trade, commerce or manufacture... . Provided further that all business to which this Act applies carried on by the same person shall be treated as one business for the purposes of this Act."

(3.) Section 5 of the Act runs as follows :

(4.) "This Act shall apply to every business of which any part of the profits made during the chargeable accounting period is chargeable to income-tax by virtue of the provisions of sub-cl.(i)or sub-cl.(ii)of cl.(b) of sub-s.(1)of S. 4, Income-tax Act, 1922, or of Cl. (c) of that sub-section : Provided that this Act shall not apply to any business the whole of the profits of which accrue or arise without British India where such business is carried on by or on behalf of a person who is resident but not ordinarily resident in British India unless the business is controlled in India : Provided further that where the profits of a part only of a business carried on by a person who is not resident in British India or not ordinarily so resident accrue or arise in British India or are deemed under the Income-tax Act, 1922, so to accrue or arise, then except where the business being the business of a person who is resident but not ordinarily resident in British India is controlled in India, this Act shall apply only to such part of the business, and such part shall for all the purposes of this Act be deemed to be a separate business : Provided further that this Act shall not apply to any business the whole of the profits of which accrue or arise in an Indian State; and where the profits of a part of a business accrue or arise in an Indian State, such part shall, for the purposes of this provisions be deemed to be a separate business the whole of the profits of which accrue or arise in an Indian State, and the other part of the business shall for the purposes of the Act be deemed to be a separate business. " [1] S. 21 of the Act, which was not referred to in the course of the arguments before us, runs as follows : "The provisions of Ss. 4A, 4B, 10, 13, 24B, 29, 36 to 44C (inclusive), 45 to 48 (inclusive), 49E, 49F, 50, 54, 61 to 63 (inclusive), 65 to 67A (inclusive), Income-tax Act, 1922, shall apply with such modifications, if any, as may be prescribed as if the said provisions were provisions of this Act and referred to excess profits tax instead of to income-tax, and every officer exercising powers under the said provisions in regard to income-tax may exercise the like powers under this Act in re