TURNER MORRISON & CO. LTD vs. COMMISSIONER OF INCOME-TAX, WEST BENGAL

CIVIL APPEAL No. 41/1952Supreme Court[1953] 1 S.C.R. 52016 January 1953Bench: 4 JudgesAuthor: MEHR CHAND MAHAJAN, SUDHI RANJAN DAS, VIVIAN BOSE, NATWARLAL HARILAL BHAGWATI14 pages
AI SummaryDismissed

What were the facts?

Turner Morrison & Co. Ltd. (the assessee) was appointed as the agent of Port Said Salt Association Ltd. (the Association), a non-resident company incorporated in the UK with its head office in Egypt. The Association manufactured salt in Egypt and consigned it to the assessee for sale in India. The assessee effected sales through brokers, collected sale proceeds, and received a commission of 2.5%. After deducting expenses and commission, the balance was remitted to the Association. The Income-tax Officer treated the assessee as an agent under Section 43 of the Indian Income-tax Act and assessed them under Section 4(1)(a) or alternatively under Section 4(1)(c) for assessment years 1943-44 and 1944-45, and also for excess profits tax for periods ending in 1940, 1941, 1942, and 1943. The assessee appealed, arguing the assessment should have been under Section 42, not Section 4(1)(a) or 4(1)(c). The High Court of Calcutta affirmed the assessment under Section 4(1)(a).

What did the Supreme Court hold?

The Tribunal held that the assessee, Turner Morrison & Co. Ltd., was indeed an agent of the Port Said Salt Association Ltd. under Section 43 of the Indian Income-tax Act. The assessee was entrusted with selling the consigned goods, handling cargoes, issuing delivery orders, and collecting sale proceeds, which went beyond merely acting as a post office. The Tribunal found that the income was received in India by the assessee on behalf of the Association, not on their own account. The fact that the assessee had a right to retain expenses and commission did not alter the nature of the sale proceeds as belonging to the principal. The Tribunal ruled that when gross sale proceeds were received in India, any profits embedded within them were also received in India at that moment, attracting Section 4(1)(a). Therefore, the income was chargeable under Section 4(1)(a) read with Section 3, making resort to the fiction under Section 42 unnecessary. The Tribunal rejected the argument that appointment as an agent under Section 43 automatically necessitated assessment under Section 42, stating that Section 43 applies for all purposes of the Act. The assessment under Section 4(1)(a) was affirmed.

What were the issues?

1. Whether the assessee, Turner Morrison & Co. Ltd., acted merely as a post office or as an agent of the Port Said Salt Association Ltd. under Section 43 of the Indian Income-tax Act, considering their role in selling goods, handling cargoes, issuing delivery orders, and collecting proceeds. 2. Whether the income derived from the sale of salt in India was assessable under Section 4(1)(a) as income received in India, or alternatively under Section 4(1)(c), or if it should have been assessed under Section 42. Assessee's Arguments: - The assessment under Section 4(1)(a) was incorrect; it should have been made under Section 42. - As soon as the assessee was treated as an agent under Section 43, the provisions of Section 42 were immediately attracted. Reliance was placed on Imperial Tobacco Co. of India Ltd. v. The Secretary of State for India, Commissioner of Income-tax, Bombay v. Metro Goldwyn Mayer (India) Ltd., and Caltex Ltd. v. Commissioner of Income-tax, Bombay City, which held Section 43 as machinery for Section 42. Revenue's Arguments: - The assessee was an agent under Section 43 and their activities constituted income received in India, making it chargeable under Section 4(1)(a). - Section 43 is for all purposes of the Act, not just for Section 42.

Which sections of the Income-tax Act were involved?

Section 4(1)(a),Section 4(1)(c),Section 42,Section 43,Section 3,Section 66(1)

AI-generated summary — verify with the full judgment below

19-53 Jan. 16. 5'20 SUPREME COURT REPORTS [191)3] . • 'rURNBR MORRISON & CO., L1'D v. COMMISSIONER OF INCOME-TAX, WEST BENGAL. [MEHR CHAND MAHAJAN, DAS, VIVIAN BosE and BHAGWATI JJ.] Indian Inc"'1ie-tax Act (XI of 1922), ss. 4(1) (a), 4 (1) (c), 42, 48-Non-resident cornpany-Sale in India uf goods 1nan11,factured outside India-Person e.-O'ecting sales in India-Whether agent of non-resident-Proji,ts received in India.from sales-Whether asses- sable under s. 4 (1) (a) ors. 42-Liability of agent-Scope of s. 43. 'l'he Port Said Salt Association Ltd., a company incorporated in the United Kingdom carried on business in Egypt and had its headquarters in Egypt. It manufactured salt in Egypt and part of the salt so manufactured was consigned to Turner Morrison and Co. Ltd., (the assessee) for sale in India.

The assessee effected sales in India through brokers at prices approved by the A_ssocia- tion, collected the sale proceeds and received a commission of 2-!% generally on all sales.

After deducting the expenses and commis- sion the balance was remitted to the Association in Egypt.

On these facts the assessee was treated as agents of the Association under s. 43 of

The order continues below.

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