T.L.VENKATARAMA AYYAR, J.

(1) THIS is an appeal against the judgment of the High court of Bombay in a reference under s. 66(1) of the Indian Income-tax Act, 1922, hereinafter referred to as the Act.

(2) THE appellant is a private limited company incorporated under the Indian Companies Act, and is carrying on business as marine engineers and ship repairers. Its registered office is in Bombay and it is resident and ordinarily resident in India. Its entire share capital is beneficially owned by two British companies, the P. & 0. Steam Navigation Co. Ltd., and the British Indian Steam Navigation Co. Ltd., whose business consists in plying ships for hire. Under an agreement entered into with the two companies aforesaid, which will be referred to hereinafter as the non-resident companies; the appellant repairs their ships at cost, and charges no profits. Now, the point for determination is whether, on these facts, the appellant is chargeable to tax under s. 42(2) of the Act. That Ss. runs as follows: ` Where a person not resident or not ordinarily resident in the taxable territories carries on business with a person resident in the taxable territories, and it appears to the