Judgement

Appeal (No. 65 of 1945), by leave of the Federal Court of India, from a judgment of that court (January 15, 1945) which affirmed the judgment of the High Court at Bombay in its original civil jurisdiction (July 22, 1943) on a case stated by the Income Tax Appellate Tribunal on questions of law arising out of the order of the Appellate Tribunal (March 21, 1942).

The following facts and statutory provisions are taken from the judgment of the Judicial Committee. Two questions were in issue in this appeal; first, the validity of certain provisions of the Indian Income-tax Act, 1922- 1939, by virtue of which there was made on the appellant company an assessment to income tax on income which included income arising without British India, and second, the jurisdiction of a particular income tax officer to make that assessment.

The directly relevant provisions of the Income-tax Act, 1922- 1939, were contained in ss. 3, 4, 4a and

64. Those, so far as it is necessary to state them, were as follow.

"3. Where any Act of the Central Legislature enacts that " income-tax shall be charged for any year at any rate or " rates tax at that rate or those rates shall be charged for "that year in accordance with, and subject to the provisions "of, this Act, in respect of the total income of the previous "year of every individual, Hindu undivided family, company " and local authority, and of every firm and other association "of persons or the partners of the firm or members of the "association individually."

"4.—(1) Subject to the provisions of this Act, the total " income of any previous year of any person includes all " income, profits and gains from whatever source derived "which—

" (a) are received or are deemed to be received in British " India in such year by or on behalf of such person, or

" (b) if such person is resident in British India during " such year— " (i.) accrue or arise or are deemed to accrue or arise " to him in British India during such year, or

" (ii.) accrue or arise to him without British India "during such year, or . ..." " 4a. For the purposes of this Act—

" (c) a company is resident in British India in any year " (a)if the control or management of its affairs is situated "wholly in British India in that year, or (b) if its income " arising in British India in that year exceeds its income " arising without British India in that year."

"64.—(1.) Where an assessee carries on a business, profession or vocation at any place, he shall be assessed by the " Income-tax Officer of the area in which that place is situate " or, where the business, profession or vocation is carried " on in more places than one, by the Income-tax Officer of " the area in which the principal place of his business, " profession or vocation is situate.”

The material facts were that the appellant company was incorporated in the United Kingdom and that the control and management of its affairs were situate exclusively in that country. It was a member of the firm of Wallace and Co., which carried on business in Bombay. The Income Tax Appellate Tribunal found as a fact that the appellant company was a " sleeping partner" in that firm, which was understood to mean that the appellant company took no part in the management of the firms affairs. In the year 1938- 1939— " the previous year " for the purposes of this case—the income of the appellant company arising in British India was Rs. 17,85,831, and its income arising without British India was Rs. 7,48,427. On February 12, 1941, the appellant company was assessed to tax for the assessment year 1939- 1940 on the whole of its income. That assessment was made by the additional income tax officer within whose district the firms place of business was situate. On those facts, which were to be found in the case stated by them, the tribunal referred the following questions of law to the High Court

" (i.) Whether in the circumstances found by the tribunal " in its order under s. 33, the assessee company was taxa