Judgment

HIDAYATULLAH, J.: The appellant is a firm at Gudur (Andhra Pradesh), which was doing business in Mica under the name and style of the Continental Export and Import Company. During the years of account, 1948-49 and 1949-50 (corresponding to the assessment years, 1949-50 and 1950-51), the assessee firm exported Mica to Japan. Mica was not directly exportable to Japanese buyers during these years, as Japan was under military occupation, but to a State Organisation called Boeki-Cho (Board of Trade). To negotiate for orders and to handle its other affairs in Japan in connection therewith the assessee firm engaged SanEi Trading Co. Ltd., Tokyo, as its agents. The Japanese Company was admittedly a non-resident Company. Two agreements were entered into by the assessee firm and the Japanese Company, the first for the quarter, July to September 1948, during which period a commission of 4 per cent. on the gross sale proceeds was payable to the Japanese Company,and the second, for an indefinite period, with the commission reduced to 2 per cent.

2. During the years of account, the amount of commission due to the Japanese Company was respectively Rs. 26,254-9-1 and Rs. 11,272-8-8. These