JUDGMENT
Satyanarayana Rao, J.
1. Under the directions of this Court, under Section 66(2) of the Income-tax Act, the following four question? were referred to us by the Appellate Tribunal :
“(1) Whether, on the facts and in the circumstances of the case, the profits on the sale of coal to (1) State-managed and company-managed railways in British India, (2) the Madras Electric Supply Corporation Ltd., and other customers in British India (marked out by the Appellate Tribunal) constitute profits accruing or arising in British India within the meaning of Section 4 of the Indian Income-tax Act;
(2) Whether, on the facts and in the circumstances of the case, the profits on the sale of coal were received by the assesses company in British India within the meaning of Section 4(1)(a) of the said Act;
(3) Whether, on the facts and in the circumstances of the case, the profits on certain sales of coal to customers in British India, other than those mentioned in question (1), accrued or arose to the assessee company directly or indirectly through or from a business connection in British India within the meaning of Section 42(1) of the Indian Income-tax Act?
(4) Whether, on the facts and in the circumstances of the case, Section 42(3) of the Indian Income-tax Act is applicable to the profits assessable as received under Section 4(1) (a) and as accruing and arising under Section 4(1) (c) of the Income-tax Act?”
2. In the statement of the case and the Appellate Tribunal’s order the contention between the parties were narrowed down considerably in view of the elaborate orders of the Appellate Assistant Commissioner and the Income-tax Officer. The assessee is a limited company incorporated under the Hyderabad Companies Act. It has its registered office at Singareni Collieries, Deccan, outside British India. Messrs, Best and Co., Ltd., Madras, were appointed under two deeds of 25-11-1931, Secretaries and Managing Agents of the company on a renuneration stated in the agreement. Extensive business in coal was carried on by Messrs. Best and Co. on behalf of the company under which coal was sold under contracts to State-managed and company-managed railvyays in British India, to the Madras Electric Supply Corporation and also through brokers or agents in specified areas in British India. A large volume of business amounting to several lakhs was done by the company. As the company is resident outside British India, the question raised was whether its income was to any extent assessable under the Indian Income-tax Act. Its income could be assessed to tax, as if it accrued or arose or was received in British India, or if there was a business connection within the meaning of Section 42, in which case there would be an appointment under Section 42(3). It was found by the Appellate Tribunal that the contracts for sale of the goods were accepted in British India, and that the cheques for the payment of the price were received in British India. In fact, it was admitted by counsel who appeared before the Appellate Tribunal that the cheques or the treasury orders for payment of coal supplied by the assessee were drawn on banks in India and were received by Messrs. Best and Co., Ltd., who, however, passed them on the Colliery office situated in the State of H.E.H. the Nizam of Hyderabad for encashment. On these facts it was found that the profits not only accrued or arose in British India but that they were also received in British India. It was further found on the facts there that there were a business connection to justify an apportionment in cases where it was not clear whether the income accrued or arose or was received in British India.
3. It was contended on behalf of the assessee by Mr. Nambiar that on the facts as stated in the statement of the case it was not possible to sustain the conclusion, that the income was received in British India. We are not prepared to accept this contention. His contention was that the cheques were received no doubt in British India and were also drawn on Banks in British India; but they were sent for collection to the Imperial Bank at Secunderabad, and thereafter there was nothing to show that they were received by the agents at Madras. It is pointed out by Mr. Rama Rao Sahib, the learned advocate for the Income-tax Commissioner, that before the Appellate Assistant Commissioner the assessee was asked to produce a copy of his account with the National Bank at Madras in order to determine the method and the manner in which the cheques were realised. It must be remembered that under the Managing Agency agreement Messrs. Best and Co. were authorised to deposit the monies in the National Bank of India at Madras and in such other banks as the company may direct. There is no evidence of any direction by the company that Messrs. Best and Co. were authorised to deposit monies in any other bank or banks than the National Bank of India. In answer to a querry put by the Appellate Assistant Commissioner as noted by him in his order it was stated on behalf of the assessee that he was not in a position to produce a copy of his account with the National Bank of India, and that he had no objection for any adverse inference that might be drawn against him by reason of the, non-production of such accounts. In view of this very important circumstance it was rightly assumed by the Revenue authorities that the amount after collection must have found its way into the National Bank at Madras, and the finding, therefore, that the receipt of the profits was in British India was perfectly warranted on the facts as found by the Appellate Tribunal. From this point of view, it is unnecessary to go into the question, which has also been decided by the Appellate Tribunal, whether the profits did not accrue or arise in British India. However, on the facts as stated by them, we have no hesitation in agreeing with their conclusion. There is a business connection which has been found by the Appellate Tribunal, and in view of that, in cases in which it is not possible to determine whether the profits accrued or arose or were received in British India there was justification for applying Section 42(3).
4. It follows that the questions which have been referred to us must be answered against the assessee. As the assessee has failed, he must pay the costs of the Income-tax Commissioner, which we fix at Rs. 250.