Profits arise only at the place of sale, and profits derived from the sale in a foreign country of goods purchased in British India are not assessable to Income Tax when the profits have not been received or brought into British India.

Alfred Henry Lionel Leach, C.J.

1. The assessee in this case is the manager of a joint Hindu family which exports goats and sheep from this country to Colombo and sells them there at a profit. For the year 1936-37 the assessee was assessed to Income Tax by the Income Tax Officer, Tuticorin Circle, on a total income of Rs. 16,412 which included a sum of Rs. 15,139 found to be the profits made in Colombo and remitted to British India. The Income Tax Officers order of assessment was revised by the Commissioner of Income Tax, who assessed the income at Rs. 31,384. Included in this amount was the figure of Rs. 9,000 which the Commissioner said was the amount of profit which had accrued to the assessee in British India from this business. The Commissioner considered that the assessee had bought the animals at lower prices than those disclosed in his invoices when shipping them to Colombo. The assessee objected to an assessment on this basis and asked the Commissioner to state a case to this Court. The Commissioner refused, but was compelled to do so by an order of this Court, dated the 17th October, 1939. In pursuance of this Courts direction the Commissioner has referred the following question:

Are the Income Tax authorities entitled in law to increase the petitioners assessment by Rs. 9,000 as being profits made in British India for the year 1936-37?

2. In his order revising the assessment the Commissioner gave the following reasons for holding that the assessee had made profits in British India : (i) the assessee had agents for the purchase of goats and sheep within the Presidency but he himself had exercised "a certain amount of supervision" and this had its value; and (ii) there was usually an element of profit involved in F.O.B. prices and in this case the profit had not been included in the profit shown by the Colombo books. These are the only two reasons which the Commissioner gave for holding that the assessee had made a profit of Rs. 9,000 in British India in the year of assessment. The reasons for the inclusion of this sum of Rs. 9,000 given by the Commissioner in making the reference are of a nebulous character and what it comes to is that the Commissioner considered that the assessee had made more profit than he had shown and he formed in his own mind an estimate of what that profit was. The Commissioner was not called upon in this case to exercise his best judgment within the meaning of Section 23(4). To say that the goats and sheep shipped from this country to Colombo left it with an increased value because the assessee had supervised his agents is going too far. The second reason given by the Commissioner is also fallacious. Because exporters, when they sell at F.O.B. prices, include in those prices their profit does not mean that in a case like the present one profit is included. When this case is examined it is manifest that the prices at which the animals were invoiced to Colombo would make no difference in the calculation of the profits made by the assessee. There is no evidence for the year of assessment that the assessee charged his Colombo office greater amounts than the cost to put the animals on board the steamers, but assuming that the invoices had been inflated that would Hot make any difference. The profit made by the assessee could only be calculated on what the goats and sheep actually cost him and the amounts at which they were actually sold in Colombo. The figures in the invoices, whether inflated or deflated, would not matter. We can see no justification whatsoever for the Commissioner for increasing the assessment by this figure of Rs. 9,000, or by any figure as estimated profits made in British India.

3. When a business is of this simple nature--the business we have here is the buying in one place of animals for human consumption and the selling of them in another place--the profit arises only at the place of sale. This was the effect of the decision in The Secretary, Board of Revenue (Income T