Madhavan Nair JUDGMENT
Uthwatt, J.
1. This is an appeal by leave of the Federal Court of India from a judgment of that Court dismissing an appeal by the appellant, Wallace Brothers and Co. Ltd., from a judgment of the High Court of Bombay answering in favour of the respondent the Commissioner of Income Tax, Bombay District certain questions of law referred to the High Court by the Income Tax Appellate Tribunal.
2. Two questions are in issue : first the validity of certain provisions of the Indian Income Tax Act, 1922-1939, by virtue of which there was made on the appellant Company an assessment to Income Tax on income which included income arising without British India, and second, the jurisdiction of a particular Income Tax officer to make that assessment.
3. The directly relevant provisions of the Income Tax Act, 1922-1939, are contained in Sections 3, 4, 4A and 64. These so far as it is necessary to state them are as follows:
3. Where any Act of the Central Legislature enacts that Income Tax shall be charged for any year at any rate or rates tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of this Act, in respect of the total income or the previous year of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or members of the association individually.
4. - (1) Subject to the provisions of this Act, the total income of any previous year of any person includes all income, profits and gains from whatever source derived which -
(a) are received or are deemed to be received in British India in such year by or on behalf of such person, or
(b) if such person is resident in British India during such year-
(i) accrue or arise are deemed to accrue or arise to him in British India during such year, or
(ii) accrue or arise to him without British India during such year, or
4A. For the purposes of this Act-
(c) a company is resident in British India in any year (a) if the control or management of its affairs is situated wholly in British India in that year, or (b) if its income arising in British India in that year exceeds its income arising without British India in that year.
64. - (1) Where an assessee carries on a business, profession or vocation at any place, he shall be assessed by the Income Tax Officer of the area in which that place is situate or, where the business, profession or vocation is carried on in more, places than one, by the Income Tax Officer of the area in which the principal place of his business, profession or vocation is situate.
4. The material facts are that the appellant Company was incorporated in the United Kingdom and that the control and management of its affairs are situate exclusively in that country. It is a member of the firm of Wallace and Co. which carries on business in Bombay. The Income Tax appellate Tribunal found as a fact that the appellant company was a "sleeping partner" in that firm. Their Lordships understand this finding to mean that the appellant Company took no part in the management of the firm's affairs. In the year 1938-1939 - "the previous year" for the purposes of this case - the income of the appellant company arising in British India was Rs. 17,85,831 and its income arising without British India was Rs. 7,48,427. On 12-2-1941, the appellant Company was assessed to tax for the assessment year 1939-1940 on the whole of its income. That assessment was made by the Additional Income Tax Officer within whose district the firm's place of business was situate.
5. Upon these facts, which are to be found in the case stated by them, the Tribunal referred the following questions of law to the High Court:
(i) Whether in the circumstances found, by the........