Satyanarayana Rao, J. :- The following questions were referred to us by the Appellate Tribunal under S. 66 (1), Income-tax Act :

"1. Whether in the circumstances of this case, it is correct to hold that profits were received in British India within the meaning of S. 4 (1) (a) of the Act on the ground that some sale proceeds of goods were received in British India.

2. Whether in the circumstances of this case the applicant company had any business connection in British India within the meaning of S. 42 (1) of the Act.

3. If the answer to question (2) is in the affirmative, whether any profits could reasonably be attributed to purchases of raw materials made by the managing agents in British India which would mean an operation within the meaning of S. 42 (3)."

2. The year of assessment is 1939-40 and the accounting year is the period ending with 31-12-1938. The accounts of the assessee were kept on mercantile basis. The assessee is the Bangalore Wollen and Cotton and Silk Mills Co. Ltd., Bangalore, hereinafter called the "company" and the managing agents of the company are Messrs. Binny and Co. (Madras) Ltd., hereinafter called the "agents."

3. The company was registered under th