The main legal point established in the judgment is that the legal fiction created by the Income Tax Act, 1961 should be confined to income arising from business connections in India and should not be extended to cover income from the sale of capital assets located outside India.

( 1 ) ALL these references made at the instance of the revenue in terms of Sub-section (1) of Section 256 of the Income tax Act, 1961 ( hereinafter referred to as, the Act ) by the Income tax Appellate Tribunal, Delhi Bench b , New Delhi ( hereinafter referred to as the Tribunal ) involving common questions of law and fact were taken up for hearing together and are being disposed of by this common judgment.

( 2 ). The questions, which have been referred for opinion of this Court, are as follows :-

"1. Whether on the facts and in the circumstances of the case, the Tribunal is correct in law in upholding the order of the C. I. T. (Appeals) in excluding the profits arising from the sale of capital assets located outside India from the world income? 2. Whether on the facts and in the circumstances of the case, the Tribunal is correct in law in upholding the order of C. I. T. (Appeals) that the profit due to change in exchange rate of the Australian Dollars is a capital gain?"

( 3 ). However, in ITR No. 228 of 1983, only the second question and in ITR No. 229 of 1983, only the first question has been referred to this Court for its opinion.

( 4 ). The factual matrix of the matter is not in dispute. The assessee is a non-resident company incorporated in Australia. Its shares are owned by the Government of Australia and the assessee carries on worldwide air-transport business and maintains the centralized accounts in Australia. It had sold the aircrafts, which were its capital assets. Such sales are effected outside India.

( 5 ). The question, which arises for consideration, is as to whether the sale of such capital assets would be income proportionately assessable in terms of the provisions of the Act?

( 6 ). Although the Inspecting Assistant Commissioner ( in short, iac ) held that the profits arising out of sale of capital assets would come within the purview of income at the hands of the assessee, the Commissioner of Income Tax (Appeals) ( in short, cit (A) ) and the Tribunal held otherwise.

( 7 ). Mr. Sanjiv Khanna, the learned counsel appearing on behalf of the Revenue, would submit that having regard to the provisions contained in sub-section (2) of Section 5 of the Act, such income would be deemed to be an income arising in India.

( 8 ). The learned counsel would urge that as in terms of the aforementioned provisions, the income derived by sale of capital assets would come within the net of assessment as the same accrued or arose or deemed to accrue or deemed to arise outside the territorial jurisdiction of India, in view of the legal fiction created and the same must be given its full effect.

( 9 ). The learned counsel would contend that the expression attributable to is of wide amplitude and in support of the said contention reliance has been placed on Cambay Electric Supply industrial Co. Ltd. v. Commissioner of Income Tax and Commissioner of Income Tax v. Sterling Foods.

( 10 ). The learned counsel would contend that there does not exist any dispute that having regard to its worldwide network, the assessee had been having computation of worldwide profit and, thus, is liable to pay tax in terms of the Act.

( 11 ). The learned counsel would submit that having regard to the provisions contained in Section 9 and Rule 10 (1) of the Income tax Rules, 1962 (in short, the Rules ), the sale of the capital assets would also come within the concept income inasmuch as capital gains also come within the purview thereof. Reliance in this connection has been placed on Union of India and Anr. v. A. Sanyasi rao and Ors. ; Commissioner of Income Tax v. G. R. Karthikeyan; father Epharam v. Commissioner of Income Tax; and Emil Webber v. Commissioner of Income Tax.

( 12 ). The learned counsel would contend that there cannot be any doubt whatsoever that the capital gains would be income within the meaning of Section 9 of the Act, even if the sale of the capital assets of the assessee takes place outside India.

( 13 ). The