Wallace Bros., & Co., Ltd. vs Commissioner Of Income-Tax, ...

on 22 March, 1943 Equivalent citations: 1943 11 ITR 559 Bom JUDGMENT JUDGMENT OF APPELLATE TRIBUNAL "The appellants are Messrs. Wallace Bros. & Co., Ltd., a company which was incorporated in the United Kingdom and which has no Director in India. It is, however, a sleeping partner in the Bombay firm, Messrs. Wallace & Co. In years preceding the assessment year 1939-40, Messrs. Wallace & Co., were treated as agents of the British Company and assessed as such. In the year of charge the Income-tax Officer found that the income of the appellant Company arising in British India in the accounting year exceeded its income arising without British Indian in that year and treating the Company as a resident in British India within the meaning of Section 4A(c), assessed in on its total income including that arising outside British India after making an allowance of Rs. 4,500 as income from outside not brought into British India. Before the Appellate Assistant Commissioner objections raised against the assessment were threefold :(1) that the business of the appellant company is directed and carried on, and the whole of its control and management abides, in London and that though it is a partner in the Bombay firm it does not carry on any business in British India; (2) that Section 4-A(c) of the Indian Income-tax Act is ultra vires the Indian Legislature; and (3) that Section 4-A could not be given retrospective effect so as to make the appellant firm resident in the previous year as the amending Act came into effect only as from April 1, 1939. All these contentions were negatived and hence this appeal. Before us, however, a further ground has been raised, viz., that in the event of Wallace Bros. & Co., Ltd., being held to be residents, who are hit by the provision of the Indian Income-tax Act, the assessment is nevertheless void since the provisions of Section 64 have not been complied with. 2. The income of the appellant firm arising in British India has been determined to amount of Rs. 17,85,831 and that arising outside British India has been found to be Rs. 7,43,927, the aggregate income thus being Rs. 25,29,758. These figures are not in dispute. Ex concessis its income arising in British India in the relevant accounting year exceeded its income arising without British India in that year and consequently sub-clause (b) of clause (c) of Section 4-A applies to the case, and in the absence of any paramount vitiating element such as the question of ultra raised in this matter, the British Company would be a resident in British India in the year preceding assessment year and would as such be liable under Section 4(i)(b)(ii) to be assessed on its entire income accruing or arising to it both in and without British Indian during that year. It is for this purpose that it has been strenuously contended that both Section 4-A(c) and Section 4(i)(b)(ii) are ultra vires the Indian Legislature and the grounds urged in support of this plea are (a) that legislation of this character, which has the effect of altering the domicile of a company and of declaring a foreign company registered outside the country and having the whole of its control and management elsewhere to be a resident in this country, is not warranted by the

provisions of Section 99 of the Government of India Act; (b) that such a provision is opposed to the canons of International law relating to the residence and domicile of trading corporations : and (c) that the legislation is vitiated on account of its being extra-territorial. 3. Before embarking upon an examination of these contentions, we have to note an objection traced in limine by the learned Advocate General who appeared for the respondent, that this Tribunal, created as it is by the particular statute some of whose provisions are impugned as ultra vires, cannot go into that question but should on the other hand adopt the attitude assumed by the Income-tax Officer and the Appellate Assistant Commissioner that it was their function merely to administer the Act as it was and not to entertain questions relating to the validity of any of its provisions. When, however, it was pointed out that the powers, duties and functions of the Appellate Tribunal are judicial in nature and that for a final adjudication of the questions raised by the assessee by the High Court the only machinery existing is that of a reference through the Tribunal under Section 66(1) of the Income-tax Act, the learned Advocate-General did not press his preliminary objection further. 4. Section 99 of the Government of India Act enacts inter alia that subject to the provisions of that Act, the Federal Legislature may make law for the whole or any part of British India. Under the transitory provision made in Section 316, the powers conferred on the Federal Legislature shall be exercisable by the Indian Legislature for the time being and until the establishment of the Federation. Section 100(1) of the Act refers to List (1) of the Seventh Schedule to the Act and provides that the Federal Legislature has power to make laws with respect to any of the matters enumerated therein and item 54 of that List is "Taxes on income other than agricultural income." The question that falls to be decided is whether in enacting Section 4-A(c) and 4(1)(b)(ii), the Indian Legislature was not making a law concerning taxes on income for the whole or any part of British India. So far Section 4-A(c) is concerned, what the Indian Legislature enacted was that in certain circumstances a foreign company would be deemed to be a resident in British India in a particular year. The sub-clause (a) provided that it would be a resident if the control and management of its affairs are situated wholly in British India in that year. There can be no doubt about the correctness of that test as it is strict conformity with the legislative trend and the current of judicial opinion in the United Kingdom. Sub-clause (b), with which alone we are concerned, contemplates the case of a foreign company which is carrying on trade or business in British India which causes income to arise in British India. It will be idle to contend that legislation of that kind covering trading corporation engaging in trade in the country is anything but legislation for the whole of British India. If then it is within the legislative competence of the Indian Parliament to make a law imposing tax on such incomes, it is equally within its power to determine the rate or incidence of such a tax and the principle embodied in sub-clause (b), providing the larger proportion of income made in British India as compared with that arising outside as the test of residence, is in the ultimate analysis a method of determining the rate or incidence of the tax. This acid test we have to apply to the case is whether the company was performing any acts or having any dealings which had the effect of yielding income in the taxing country, and if these premises are satisfied, there is scarcely any difficulty in holding that it was a law made for the whole of British India and as such intra vires the powers of the Indian Legislature. The mere fact that a portion of the income assessed arose or accrued outside British India does not, to our minds, make the provision incompetent. In this case although the appellant firm is incorporated in the United Kingdom, it is a partner in a firm in

Bombay and has through that firm been carrying on business in this country and deriving income therefrom which is greatly in excess of the income that arose or accursed to it outside this country. The consideration that the appellant company is only a sleeping partner in the Bombay firm does not make the slightest difference. So long as the incorporated company is taxed by virtue of its having carried on business and earned profits here, it is legitimate to treat it as a resident in British India for the purpose of income-tax and there is no inherent impropriety or injustice in bringing such concerns within the pale of the fiscal statute. It must further be observed that if Section 4-A(c) is found to be intra vires as a law made for the whole of the British India, it would follow as an inevitable result that the legislature would be competent to make laws in any form it pleases affecting the residents in the country or those who have been duly declared under Section 4-A(c) to be residents in British India. The question of the constitutionally of Section 4(i)(b)(ii) does not, therefore, arise for separate consideration. 5. The two remaining objections based on international law and extra-territorial character of the legislation do not call for elaborate treatment. The Courts in Grate Britain are barred from entertaining an objection to the validity of an Act of Parliament on grounds such as these and on that analogy it would appear that the municipal courts in this country would also be incompetent to entertain an objection based on grounds of repugnance to international law. Secondly, the objecting based on international law does not apparently fit in with the plea of ultra vires. Thirdly, "residence" is radically different from "domicile" and in this case the legislation in question does not, even in the remotest manner, affect the domicile of the British Company. So far as domicile is concerned, we are alive to the principle of the international law that it has to be at the place considered by the law to be the centre of its affairs which in the case of a trading corporation is its principle place of business, that is to say, the place where the administrative business of the corporation is carried on. But residence is not inherent in a company in the nature of things and "residence" for the purpose of taxation is a matter of express legislation which has to be determined by artificial rules. There is nothing contrary or repugnant to international law in enacting that the larger proportion of income made in British India as against that arising outside shall be the test of residence. A corporation may very well be considered resident in a country for one purpose and not for another as observed by Professor Dicey in "Conflict of Laws." As observed by Lord Loreburn, Lord Chancellor, in De Beers Consolidated Mines Ltd. v. Howe, residence of a company within the meaning of Income-tax Act is not necessarily the same thing as residence for the purpose of serving a writ. Again Viscount Cave, Lord Chancellor, pointed out in Swedish Central Railway Co., Ltd. v. Thompson, "The effect of this decision is that, when the central management and control of a company abides in a particular place, the company is held for the purposes of income-tax to have a residence in that place; but it does not follow that it cannot have a residence elsewhere. An individual may clearly have more than one residence (See Cooper v. Cadwalader); and on principle there appears to be no reason why a company should not be in the same position." After reviewing exhaustively all the authorities, the Lord Chancellor stated on p. 505 of the report, "From the above examination it would appear that, while the authorities may not establish the possibility of a company having more than one residence for income-tax purposes, they are at least not inconsistent with that view. I do not cite the decisions as to the residence of a company for the purpose of founding jurisdiction, because they relate to a different subject matter : but, so far as they go, they point to the same conclusion. I hold, therefore, that a company may, for income-tax purposes, have a residence here as well as a residence abroad." Lord Buckmaster, who was also a party to that decision, made the following

observation : "The levying of tax is essentially a matter of domestic jurisdiction. A company may do such acts within the jurisdiction of this country as causes it to be liable here as resident to income-tax without excluding the possibility that it may also be held to be resident in another jurisdiction for the same or another purpose." (I bid p. 519). The decision in London & South American Investment Trust Ltd. v. British Tobacco Co., (Australia) Ltd., has no bearing on the facts of the present case as in that case there was no question of any business having been carried on in the taxing country. It is thus by no means clear that either the place of incorporation or the principal place of business or the place of its real control and management constitute exclusively the place of residence of a company for the purpose of the imposition of income-tax. It has been conceded in the various decisions bearing upon the point that for the purpose of income-tax a company may reside in more than one place and "residence" for the purpose of taxation is, as pointed out by Viscount Sumner in Egyptian Delta & Land Co. v. Todd, a matter for express legislation and not inherent in a company in the nature of things, as in the case of an individual. Quite apart from this aspect of the matter, it would be possible to countenance the view that even if the legislation in question tended to or had the effect of impinging upon the international law or was extra-territorial in its scope, the legislation would none the less be competent since the Indian Legislature has been held to have plenary powers of legislation as wide and extensive as the Parliament itself. It is hardly necessary to traverse the catena of decisions in which that principal has been propounded or applied, and we shall content ourselves with a brief reference to the dicta of the Privy Council in Croft v. Dunphy, in which while dealing with a case from the Dominion of Canada, Lord Macmillan said : In the well-known case of Queen v. Burah, Lord Selborne in expressing the views of the Board in the comparable instance of India, uses this very significant language : The Indian Legislature has powers expressly limited by the Act of the Imperial Parliament which created it and it can of course do nothing beyond the limits which circumscribe these powers, but when acting within those limits, it is not any sense an agent or delegate of the Imperial Parliament but is and was intended to have plenary powers of legislation as large and of the same nature as those of Parliament itself." Again on page 165 his Lordship observed :"The sole question is whether the Imperial Parliament in conferring upon Canada, as it admittedly has done, full power to enact customs legislation bestowed or withheld the power to enact the provisions now challenged. No question of any infraction of international law arises. The question is a domestic one between the Imperial Parliament and the Dominion Parliament." It is not denied that the Parliament has unrestricted powers and its legislation would be valied notwithstanding that it may be contrary to or in conflict with international law, and it follows without any doubt that the Indian Legislature also has similar unrestricted and coexhaustive powers to legislate on subjects allotted to it irrespective of whether the legislation is extraterritorial in nature and whether it is not in conformity with the principles of international law. We hold for the foregoing reasons that Sections 4-A(c) and 4(i)(b)(ii) are not ultra vires and Indian Legislature and that consequently the Income-tax authorities were justified in treating the appellant company as a resident in British India within the meaning of Section 4-A(c) for the

accounting year and in assessing the company on the aggregate income received both within and outside British India during that year. 6. The second objection is that Section 4-A(c) cannot be applied in respect of the previous year as it came into force on April 1, 1939, and the previous year ended before that date. We had occasion to examine the entire case law bearing upon the point in R.A.A. No. 175, (Bombay) of 1941-42 (Sir Cowasjee Jehangir, Second Baronet, Bombay v. Income-tax Officer, Bombay), and, as a result of the investigation we recorded out conclusion in the following passage : "From the dicta of the various High Courts extracted above, it is manifest that it is not strictly speaking correct to characterise the application of Section 16(1)(c) to the income of the previous year as amounting to giving retrospective effect but what is really done is to apply the principles in force in the year of assessment to the income of the previous year as computed under the provisions of the Act." We are of the opinion that the same principle holds good with regard to the present case as well and that the Act as amended applies to the case as the assessment relates to the year 1939-40. This objection also fails. 7. The only question that remains is as to the alleged failure on the part of the Income-tax Officer to conform to the procedure prescribed in Section 64 of the Income-tax Act. Under the first clause of that section where an assessee carries on a business at any place, he shall be assessed by the Income-tax Officer of the area in which he resides. It seems to us that both the clauses apply to the case. We have held that the assessee company was carrying on business in Bombay as the partner of Messrs. Wallace & Co., and they were, therefore, rightly assessed by the Income-tax Officer, Bombay. We have also found that the Company is a resident and since it is deemed to be a resident by Bombay, it must be held that the Company is a resident in Bombay. In this view there is no could assess a British Company whose principal place of business was in London. 8. The result is that the appeals fails and it is consequently dismissed." On the application of the assessee under Section 66(1) the Tribunal referred the case to the Bombay High Court :JUDGMENT BEAUMONT C.J. - This is a reference made by the Income-tax Appellate Tribunal raising four questions, but in substance only one question calls for serious consideration, and that is whether the provisions of Section 4-A (c) of the Indian Income-tax Act, 1922, a sub-section introduced by the amending Act of 1939, are ultra vires in whole or in part. That sub-section provides that a company is resident in British India in any year (a) if the control and 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 excess its income arising without British India in that year. It is not suggested that paragraph (a) is invalid. The provision that the residence of a company depends on where the control and management of its affairs is situated is in accordance with English law. But it is

suggested that paragraph (b) is ultra vires in that in involves the taxation of a non-resident in respect of income derived outside British India. The facts found by the Tribunal are that the assessee, Wallace Bros. & Co., Ltd., is a company incorporated in the United Kingdom, that the control and management of its affairs is situated wholly in that country and that the company has no director in India, but is a sleeping partner in the firm of Messrs. Wallace & Co., which carries on, and has a place of business in Bombay. What exactly is meant by the expression "sleeping partner", I am not sure. Seeing that the English company is entitled under the articles of partnership to a 14/32 share in the profits of the Bombay firm and that it can dismiss any other partner on six months notice, I apprehend that, although it may leave the management of the affairs of the firm in India to the partners resident in India, its views on matters of general policy are likely to meet with considerable respect from those partners. However, I do not think it matters what the exact relationship of the partners inter se may be; it is sufficient to find that the assessee-company is a partner in the firm of Wallace & Co., which carries on business in Bombay. The share of the assessee-company in the profits of Wallace & Co., for the accountings year was something over eight lacs, and it had other income derived from British India, bringing the total to over seventeen lacs, and its income accruing or arising outside British India in the material year was about seven and a half lacs. I should have said that the year of assessment is the year 1939-40, so that the accounting year is 1938-39, and these figures relate to the accounting year. It is therefore clear that in respect of the accounting year the income of the assessee-company arising in British India exceeded its income arising without British India. In order to understand the effect of Section 4-A of the Indian Income-tax Act, it is necessary to look at some of the other provisions. Section 3 is the charging section, which provides that 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, the Act in respect of the total income of the previous year. Then Section 4(1) provides, so far as material, that 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 to him in British India during such year, or (ii) accrue or arise him without British India during such year." or (c) "if such person is not resident in British India during such year, accrue or arise or are deemed to accrue or arise to him in British India during such year." So that a person resident in British India has to pay tax on income which accrues or arises to him without British India during the year in addition to the income accruing or arising within British India. Then Section 4-A defines that is meant by "residence in British India." It says : "For the purposes of this Act - (a) any individual is resident in British India in any year if he - (i) is in British India in that year for a period amounting in all to one hundred and eighty-two days or more." Then there are other circumstances enumerated which constitute residence of an individual. Then comes sub-section (c) which is the material one, and which I have already read, and so far as relevant for the present purpose it provides that a company is resident in British India if any if its

income arising in British India in that year exceeds its income arising without British India in that year. That sub-section plainly justifies the present assessment, if it is valid, but the contention of the assessee is that it is ultra vires. Now, the Indian Legislature is not, as we know, a Sovereign Legislature. Its powers are conferred by the Government of India Act, 1935, but within the ambit of the very wide legislative powers conferred by that Act the Indian Legislature is a Sovereign Legislature. The question whether or not this sub-section is ultra vires must necessarily turn on the construction of the Government of India Act, the contention of the assessee being that it is incompetent for the Government of India to provide that the income of a non-resident which accrued outside British India shall be subjected to Indian Income-tax, because that would be extra-territorial legislation of a character not sanctioned by the Act. Before I discuss the terms of the Government of India Act. I will notice one or two arguments advanced by Sir Jamshedji Kanga, arguments of a more or less general character designed, I think, to induce in us a state of mind sympathetic towards the construction he desires us to adopt when we approach the Act. He points out, in the first place, that the English system of incometax taxation is to tax a resident in England upon the whole of his income derived from any source and from any place, and to tax income derived from any property in England wherever the owner of the property may be resident, and from that English practice he affirms a fundamental principle underlying all income-tax legislation that you can only tax a person resident, or property situate, within the taxing country. But the English Legislature is a Sovereign Legislature, and there is nothing whatever to prevent it from extending its practice by imposing income-tax on foreign income of a non-resident in cases where there are assets within the country which enable such taxation to be effective. It is, in my opinion, impossible to maintain that, because the English Legislature has not chosen to tax income of that nature, therefore no other system of legislation can tax such income. Nor am I impressed with the argument, which found some favour with the learned Chief Justice of Calcutta in a case to which I will refer presently, that one ought in construing the Government of India Act to approach the matter with a presumption that the English Parliament did not intend to confer upon the Indian Legislature a power which it possessed itself, but had never thought it desirable to exercise. Conditions in England and India are quite dissimilar. There is not evidence on the point, but it may well be, and I have no doubt in my mind that it is a fact, that in British India a much larger proportion of businesses send a part of their profits out of the country than is the case in England, and I see no reason, therefore, why the Indian Legislature should not be empowered to impose taxation on a class of income which the English Legislature has left alone. It was said that this English practice constituted a sort of legislative practice, which tended to how that it cannot have been intended that income of this sort should be subjected to taxation. I do not think in this case any question of legislative practice arises, because we are not called upon to consider the construction of any particular word of the Government of India Act, so that we cannot be asked to construe them in the light of former legislative practice. Then it was argued that the only moral justification for imposing income-tax, if one may use such an expression in relation to such a subject, was that a man is taxed in return for the protection afforded him by the laws of the taxing country. But that argument does not help here, because it is the basis of sub-section (c) of Section 4-A (which I will refer to as "the impugned

sub-section" that the bulk of the assessees income is derived from British India, and, therefore, is earned under the protection of British Indian laws. Then it was argued by Sir Jamshedji that there was something unfair and improper in taxing the foreign income of a non-resident. In contrary to natural justice, but he could not resist saying so in reply. But, with all respect, there does not seem to me anything inherently unfair in providing that a man who earns income in British India, but does not reside here, should be taxed rather more heavily than a man who does reside here, and who, therefore, spends his income in this country, and engages in those social services which a normal resident, in greater or less degree according to his taste, does engage in. However, all these arguments, as I have said, were only designed to induce us to approach the construction of the Government of India Act in a spirit sympathy tic to the assessees case. Now, coming to the Government of India Act, Section 99(1), read with Section 316, provides that, subject to the provisions of the Act, the Indian Legislature may make laws for the whole or any part of British India, and a Provincial Legislature may make laws for the Province. In that sub-section there is no reference whatever to extra-territorial legislation, though the object of legislation must be British India. But sub-section (2) provides that without prejudice to the generality of the powers conferred by the preceding sub-section, no Indian law shall, on the ground that it would have extra-territorial operation, be deemed to be invalid in so far as it applies to five matters of legislation which a re therein enumerated. That sub-section seems to show that the Legislature realised that the general power in Section 99(1) to make laws for the whole or any part of British India might involve a question as to whether a law with extraterritorial effect would come with in the power. The Legislature thought of five matters, on which a doubt might arise, and expressly dealt with them; but it realised that there might be others and, hence the opening words of sub-section (2), "Without prejudice to the generality of the powers conferred by the preceding sub-section." Then Section 100 and the Seventh Schedule enumerate in three lists the matters on which the India Legislatures may make laws, the first list being matters on which the Central Legislature can legislate, the second list being those on which the Provincial Legislature may legislate, and the third list being matters on which the Central and the Provincial Legislatures may both legislate. It is to be noticed in passing that several of the items in the first list involve some sort of extra-territorial operation, for instance, items 22 to 25. Item 54 in List I deals with income-tax, and includes "Taxes on income other than agricultural income." Taxes on agricultural income are included in the Provincial list. So that two things seem to me clear from those sections and the Seventh schedule, first, that the mere fact that an Act of the Central Legislature has some extra-territorial operation is not enough to invalidate it, and, secondly, that the power to impose income-tax is vested in the Indian Legislature. Sir Jamshedji Kanga contends that the impugned sub-section is of purely extra-territorial effect. That is clearly going too far, since the basis of the sub-section is that the bulk of income has been earned in British India. On the other hand, Mr. Setalvad, for the Commissioner of Income-tax, maintains that, properly considered, the sub-section has to extra-territorial effect, and he has referred us to certain authorities of the Federal Court of Australia in which the meaning of the expression "extra-territorial legislation" has been considered. I do not think it necessary to go into that question in any detail, because there is no expression in the Government of India Act which we are called upon to interpret which mentions extra-territorial legislation. There is clearly

no provision in the Act which says that any extra territorial legislation shall be outside the powers of the Indian Legislature. I will only refer to one passage in Colonial Gas Association Ltd. v. Federal Commissioner of Taxation from the judgment of Mr. Justice Dixon, in which he says : "To derive income from a country involves the person deriving it in a territorial connection with the country sufficint to support the vaidity of an exercise of thepower in respect of the person as distinguished from the income." That is to say if a person is deriving income from a business carried on in country, he has a sufficient teritorial connection with that country to prevents law imposing tax upon him being regarded as extra-territorial. Mr. Setalvad contends that inasmuch as the whole basis of the liability to tax under the impugned sub-section is based on the bulk of the assessees income arising in British India, the sub-section would not fall within an express prohibition against any extra-territorial legislation. It is no doubt, true that there is some extra-territorial effect in the impugned sub-section. It does enable the foreign income of a non-resident to be taxed. But other sections have some extra-territorial effect, for instance Section 4-A(a)(i), which directs that an individual shall be regarded as resident in British India if he has been there for a period amounting to one hundred and eighty-two days; so that, although he has been in India only for half a year, he is to be taxed for the whole year : in that some there is some extra-territorial effect in that provision. So I think there is in Section 42, which enables a non-resident to be taxed in respect of income derived from a business connection in British India. That extra-territorial effect is not so great as in the case of the impugned sub-section, because the income taxed under section 42 must be derived from British India : but still it does enable a non-resident to be taxed. If one is going to say that the Government of India Act precludes all legislation which has any extra-territorial effect, it would be difficult to justify, not only the impugned sub-section, but Section 4-A(a)(i) and Section 42. But, as I have said, there is nothing in the Government of India Act which lays it down that any legislation having and extra-territorial effect is invalid, and short of such a prohibition, I cannot see any principle on which the impugned sub-section can be held to be ultra vires. Whether it is impolitic as being calculated to drive capital out of the country, it is not for us to consider. As the Tribunal has pointed out, in the ultimate analysis the effect of the sub-section is to increase the amount of the assessment on the taxpayer. In clothing a company with an artificial residence for the purpose of income-tax, the Income-tax Act is merely employing machinery for levying additional tax in relation to income rising within British India. The same result could be achieved by providing that in the case of an assessee who is shown to possess income arising outside British India the amount of his assessment should be increased proportionately to the amount of his income accruing outside British India. Referring to some of the cases cited. There is, I think, no doubt from the English cases in the House of Lords, particularly Egyptian Delta Land and Investment Co. v. Todd and Swedish Central Railway Co. v. Thompson that, in the case of a company, residence is always artificial, and should be the subject of express legislative enactment, and furthermore that a company may have two places of residence. There can, therefore, be no objection to the impugned sub-section merely because it enacts a definition of an artificial character in respect of the residence of companies. It seems to me clear from the power of the have power to determine who is to pay the tax, and for that purposes to lay down rules as to who is to be regarded as resident in, and what

income is to be deemed to arise in, British India. I can see no real basis for the assessees argument. We were, referred to a very recent decision of a Calcutta High Court in Raleigh Investment Co., Ltd. v. Governor General in Council in which the Court held that Explanation (3) to Section 4 of the Indian Income-tax was ultra vires, no doubt partly on the ground that it was of an extraterritorial character. I do not find myself in agreement with all the views expressed by the learned Judges in that case, but the actual decision has no operation on the matter before us. There may be much more to be said for the invalidity of Explanation (3) that for the invalidity of the sub-section with which we have to deal. In my opinion, the contention that Section 4A(c) is invalid is not well founded, and that really disposes in substance of all the questions. The first question is : "Whether in the circumstances found by the Tribunal in its order under Section 33 the assesseecompany was taxable to income-tax and super-tax for the assessment year 1939-40 in respect of the income (Rs. 7,48,437 less Rs. 4,500) which accrued or arose to it without British India in the previous year ?" The answer is in the affirmative. The second question is : "Are the provisions of Section 4-A(c) and 4(1)(b)(ii) of the Income-tax Act ultra vires the Indian Legislature ?" The answer is in the negative. The answer to this question depend on that to the first one. The third question is : "Is sub-clause (b) of Clause (c) of Section 4-A of the Amended Act applicable to the assessment of the assessee-company for the year 1939-40 ?" I gather that the argument before the Tribunal was that retrospective effect could not be given to the impugned sub-section, but, as the Tribunal points out, there is no question of giving retrospective effect. No doubt, the Amended act came into operation after the close of the previous year, but under that Act income of the previous year has to be ascertained in accordance with the provisions of the Amended Act in order to determine the assessment for the current year. Sir Jamshedji Kanga raised a further point that the sub-section did not apply, because there was no finding that the assessee was to be treated as resident in British India in the year of assessment, the finding only relating to the previous year. But, in my opinion, it is only the previous year which is relevant, so that the third question must be answered in the affirmative. The fourth question is :

"Whether on the fats found by the Tribunal the Additional Income-tax Officer, Companies Circle, Bombay, had jurisdiction under Section 64(1) or Section 64(2) to make the assessment ?" Under Section 64(1) the assessment has to be made by the Income-tax Officer of the area in which the assessees place of business is situate. Here the assessee has been found to be a partner in the firm of Wallace & Co., and the assessment was made by the Income-tax Officer for the areas in which Wallace & Co., carry on business. Therefore, it seems to me plain that the answer to question 4 is that the Officer had jurisdiction under Section 64(1). The question whether jurisdiction also arose under Section 64(2) does not arise. Sir Jamshedji Kanga was anxious to raise certain other questions, which the tribunal had been asked, and had refused to raise, but we can only deal with questions before us. As far as we can judge, they adequately raise all the questions which can properly be raised, and we see no reason whatever for amending or adding to such questions. The assessee must pay the Commissioners costs. RAJADHYAKSHA, J. - I agree and have nothing to add. Reference answered in the affirmative.