Shoorji Vallabhdas & Co., Bombay v. the Commissioner of Income-Tax/excess Profits Tax, Bombay.

Judgment

SUPREJVIE: COURT REPORTS SHOORJI VALLABHDAS & CO., BOMBAY THE 1COMMISSIONER OF 1NCOME-T AX/EXCESS PROFITS TAX, BOMBAY. (S. K. DAs, .J. L. KAPUR and M. HmAYATHULLAH, JJ.) Income-tax-Place of accrual of income-Business of transporting cargo to ports in and outside British India-Managing Agency commission, a percentage of freightage-Managing agents' services f erf armed in British lndia~Liability to tax of, entire ·managing agency commission-Excess Profits Tax Act, 1940 (15 of 1940), s. 5, proviso 3-lndian Income-tax Act, 1922 (II of 1922), s. 14(2)(c). The appellant was the ma~aging agent of a company which was, at the relevant time, carrying on the· business of transporting cargo in boats which touched ports in British India and in the Indian State of Cochin and other States. Under the managing agency contract the remuneration payable to the appellant was expressed in the following terms :

"That the managing agent shall as and by way of remuneration for its services receive a commission of ten per cent. of the gross freight charged to the shippers ... Such remuneration shall be payable to the ·managing. agents at the place where the same is earned ·by the company unless otherwise requested by the managing agent." The Income-tax Officer and the Excess Profits Tax Officer assessed the appellant to tax in respect of the whole of the managing commission received by it · on the footing that the entire commission accrued or arose in British India. The appellant claimed that a part of the managing agency commission accrued in the Indian States and not in British India· and that it would be entitled to an apportionment of the managing agency commission and to claim exemption from tax in respect of. the commission which accrued outside British India under s. 14(2)(c) of the Indian Income-tax Act, 1922, and the third ,proviso to s. 5 of the _Excess Profits Tax Act, 1940.

The Appellate Tribunal found that' except booking and collecting some freight at Cochin, all other important and responsible work of managing the company was done from the head office at Bombay and not 'from Cochin: Held, that normally the commission payable to the managing agent of a company accrues at the place where the business is actually done, that is, where rthe services of the managing agent are performed, and as ·On ·the finding in the present case the appellant practically .performed all the services at Bombay, the commission which it earned though computed on the· percentage of freight, accrued or arose in British India. Commissioner of Income-tax, Madras v. K. R. M. T. T. Thiagaraja Chetty and Co., [1950] S.C.R. 258, followed. Commissioner of Income-tax, Bombay v. Ahmedbhai Umarbhai and Co., Bombay, [1950] S.C.R. 335 and Commissioner of lncometax, Bombay Presidency 'ilnd Aden v. Ghunilal B. Mehta, [19381 6 I.T.R. 521, distinguised. 9-6 SCT/ND/82 April 19.

Shnnrji Vn!lnhhrfns & Co. r:ommissioner of hvo1w~·ln.\., F.xr1.u Prnjils TaxJ lJmnbn)' S. It. Dns .J. SUl'REME COURT REPORTS [1960] Salt and Industries AF;encies Ltd., Bombay v. Comtnissioner of Income-tax, Bombay City, [1950] 18 I.T.R. 58, considered. C1v1L APPELLATE juR1smcr10:-.;: Civil Appeal No. ~0:) of l 'lti:i. Appeal by special leave from the .indgment :rnd order dated March 81, 111:)2, and .\larch 2, l9:i'l, of the Bombay High Court, in Income-tax Reference No. '18 of l'l:il. R. .T. Ko/ah; Solirab N. Vnhil and S. N. A11dlr)•. for the appellant. C. K. Daf1litmy, Solicifor-Ger1eral of India, R. Gnnnpnthy l)•Cr and D. Gup!a, for the respondent. l %0. April l'l. The .Judgment of the Court was delivered by S. K. DAs, .J.-This is an appeal "'ith special leave from the judgment and orders elated March 'll.

1 !J02, :rncl .\-l:irch 2, l 11.'i'l, of the High Court of Bombay in an I 11comc-I ax Reference No. -18 of l 'l!i 1 made by the Income-tax Appelbtc Tribunal, Bombay, under s. li6(l) of the Indian Income-tax Act, l'l22, aml s. 21 of the Excess Profits Tax Act, 1940. \\'e mav shortly state the relevant facts first. The assessce, i\lcssrs. Shoorji Vallabhdas and Company, Bomh:11•, appellant herein, is a firm registered under the Indian Income-tax Act. It helrl the managing agency of three companies, namely-(l) the Mahibar Steamship Company Ltd., (2) the :\'cw Dholcra Steamships Ltd.. and (3) the ;'\cw Dholera Shipping and Trading Comp:rny Ltd., for the periods material in this case. The appellant as cilso the aforesaid three managed companies were resident in the taxable territories within the meaning· of the Indian Income-tax Act.

The business of the i\Tabbar Steamship Company Ltd. and of the Nrn· Dholera Steamships Ltd. was ro carry cargo in cargo boats which touched ports in British Inclia, Cochin State. TraYancore State and Saurashtra, as they were then known. The appellant became the managing agent of the i\lalahar Steamship Comp:im· Ltd. "·ith effect from April l, l 94.3, and the firm consisted of Shoorji Vallabhdas and his two sons. Formerly, Shoorji Vallabhdas alone "·as the managing agent of the i\blabar Steamship Companv Ltd. and a managing :ip;ency :1greement dated September l Ii, 1938, was executed between the managing agent and the managed company, and. that agreement as varied by two subsequent: deeds dated June 26, 1942, and December 7, l 943, constituted the contract of managing agency between the appellant and the managed company. Under the managing agency contract the remuneration payable to the appellant after September I, 19-1\ was expressed in the following terms:

"That the remuneration of the Managing Agents as and from 1st September one thousand nine hundred and forty-three shall be ten per cent. ( 10%) on the freight charged to the shippers instead of annas fourteen per ton as mentioned in clause ( 1) of the said first supplemental agreement: dated the 26th clay of June, 194~~." The managmg agency agreement dated June 8, l 94(:i, between the appellant and the second managed company, New Dholera Steamships Ltd., provided inter alia as follows: wfhat the Managing Agents shall as and by way of remuneration for their services in relation to the shipping business of the Company receive a commission of ten per cent. (IO'j';,) of the gross freight charged to the shippern and/or passage money charged to the passengers. Such remuneration shall be payable to the l\fanag·ing Agents at the place where the same is earned by the Company unless otherwise requested by the Managing Agents.

The remuneration of the Managing Agents in relation to the business of Company other than the shipping bminess shall be (10%) ten per cent. on the gross profits that may be earned in such business." It may be· stated here, however, that no question arose as to the remuneration of the Managing Agent in 1relat:ion to business other than shipping business, because no business other than shipping business was carried on by the managed company during the relevant period. The third managed Company, viz., the New Dholera Shipping and Trading Company Ltd., confined its husi ness during the relevant accounting period to stevedoring and trading only. The managing agency agreement also elated June 8, 19,16, with the third Slwo1ji Vallobhdas & Co. Commissioner of lncOme-tax/ ~Excess Profits Tax, Bombay ShoorJi Valtabhdaj & Co. (.'ommissio1ur of lncome~lax/ Excess Profits Tax, Bombn.Ji S. K. Da' J. SUPRElVIE COURT REPORTS [1960] managed company provided inter alia for the payment of remuneration in the following terms:

"That the Managing Agents shall as and by way of remuneration for their services receive a commission at the rate of 25 per cent. of the net: profits of the co.mpany. Such remuneration shall be payable to the Managing Agents al the place where the same is earned by t.hc Managing Agents unless otherwise requested by the Managing Agents." The appellant was assessed lo income-tax fur three assessment years, namely, 1915-1946, 19·16-1947 and I 94 7-1948, the previous ye an being t.he financial years 1944-1945, I 94fi-l 'J-16 and l 94 6-1 !J47 respectively. The appellant was likewise assessed lo excess profits tax under t.he Excess Profits Tax Act, 1940, for the respective chargeable accounting periods which were also three in number, namely, Apt ii I, 1943, to March 31, 1944, Aprill, 1944, to March 31, 1'!45, and Aprill, 1945, to March 31, 1946.

The Tncome-tax Officer and the Excess Profits Tax Officer assessed the appellant to tax in respect. of the whole of the managing agency commission received from the three m'111aged companies on the footing that the entire managing· agency commission accrued or arose in British India. The appellant went up in appeal to the Appellate Assistant Commissioner from the assessment orders on the ground inter alia that. a part of the managing ag·ency commission received from the three managed companies accrued in the Cochin and TraYancore States and not in British India and was therefore exempt from tax under the relevant provisions (as they stood at the material time) of the Indian Income-tax Act, 1922, and the Excess Profits Tax Act, 1940. Thus, the dispute was about the place of accrual of the income in question.

As to the managed companies, the Income-tax authorities accepted the position that the profits of the three managed companies partly accrued in British India and partly in the Indian States; but they did not accept the claim of the appellant that part of its 111a11agi.ng agency con1n1ission fron1 the three rnanag-ecl companies accrued or arose in the Cochin and Travancore Srates. The Appellate Assistant. Commissioner hy different orders all dated r T 3·S.C.R. StJPR 1l~}ME 'C0UR'r REPORTS May 4, 1950, dimissecl all the appeals. The Appellant went in appeal to the Income-tax Appellate Tribunal. Bv its order elated December 11, 1950, the Tribunal also. dismissed_ the appeals. The appellant then made an application to the Tribunal to refer certain questions of law which arose out of its order, to the High Court of Bombay. The Tribunal referred two such questions: " ( l)

Did a part of the managing agency commission earned by the assessee accrue or arise in the Cochin State inasmuch as the managing agency commission is · computed on the basis of . the freight earned by the managed company in the Cochin State or otherwise? (2) Did the whole or part of the dividend income accrue or arise in the Cochin State?" The expression Cochin State in the questions obviously referred to both Cochin and Travancore States. On l'>'larch 31, 1952, the reference ·came up for consideration before the High Court, and after hearing Counsel, the High Court reformulated the first question as follows: "vVhere the actual business of managrng agency was done which yielded the commission which is sought to be taxed?" The High Court directed the Tribunal to submit a supplemental statement of the case on the first question as reformulated.

The second question was not pressed by learned counsel for the appellant and does not no\1r survive. , The Tribunal submitted a supplemental statement of the case on August 29, 1952 .. The reference was fipally heard on March 2, 1953, and the High Court answered the question by saying that the actual business of the managing agency which yielded the commission was done at Bombay and not at Cochin. In arriving at the conclusion the High Court proceeded on the footing that the finding of the Tribunal in effect was that baning freight and collecting it at Cochin, all other important' and responsible work of managi11g the managed companies was clone from the head office at: Bombay. It has been argued on behalf of the appellant that the High Court erroneously reformulated the question, Shoo1ji Vallabhdas & r:o.

Commissioner of lncome-tox/ Excess Profits Tax, Bombay [ 1960J JY6o and that the real question of law is whether on the facts and circunrstances of the· case, an !'art of the Slwa1ji V11/Lc.bhdas & Co. 111anagi11g agency co1nn1ission accruccl outside British c,,,,,,.;:,;,,,u of lndia so that the appellant would be entitled to an lucom~-tax/ ap}JOrtionrnc11t of the 1na11aging agency co1nn11ss1011 E:i:cess Pro.lits T 11x, ancl to clain1 exetll)Jtion fro111 tax i11 resjJCCt of tl1e Bombay commission which accrued outside British lndia under s. K. Va> J. s. 14(2)( c) of the I nclian l ncome-tax Act, 1 YZZ (as it then stood) and the third proviso to s. 5 of the Excess Profits Tax Act, 1940.

IL has been further contended that in vie11· of the findings of the Tribunal that (a) the commission earned was a pcrcentag·e of the freight and passage money received by two of the managed companies in Cochin and Travancorc States, (b) a part of the commission "·as payable there and (c) a part of the services was also rendered by the appellant: as manag· ing agent in those States, the High Court was in error in coming to its conclusion that the \\'hole of the 1nanaging agency co1nn1i~sion accruell or at"ose in Bon1~ bay. Whil.e 11·e agree with learned coumcl for the appellant that the real <1ucstion in this case is 11·hether any part of the 111anaging agency co111111ission accrued outside British J nclia, we do not agree with him that the High Court was wrong in reformulating the ques· tion.

The Tribunal formulated the question as though the computation of the appellant's remuneration on the basis of freight det:ennincd the place of accrual; in this the Tribunal was in error, and the High Court rightly pointed out that the test to he applied "·as not how the remuneratiop was to be computed or quanti· fled, but where the services "·ere performed by the appellant, which yielded the profits sought to be t;ixed. The High Coun rightly reformulated the question ou that basis, and asked the Tribunal to submit a supplemental statement of the case on the matcri;tls avaihiblc and placed before it by the appellant bearing on the question as reformulated by the I-lig·h Court. \Vhat did the Tribunal find in this case as to the place "·here the actual business was done, i.e.. !he services were performed by the appellant as rnanag111g ;went which vieklccl the commission?

After referring t~ the :igrrrments rcl:11ing to the cornp1llat ion of remuneration, the Trib1!11al said in its order dated · 3 S.C.R. December l 1, 1 <J:)O, that (a) from time to time one of the p:1rtners of the appellant firm went to Cochin to attend to the business, (b) the managed companies had an officer in Cochin, and ( c) the payments said to have been made to certain employees at Cochin were fictitioi:1s. In the supplementary statement, the Tribunal pointed out that it was not known ,\rhether the partner who went to Cochin went in his capacity as partner of the appellant: firm or as a director of one of the managed companies: the appellant firm had rented a flat at Cochin on Rs. 20 per month and rnaint::-iined some employees at Cochin for securing freight: and the local office of the appellam firm at Cochin rented at Rs.' I 0 per month maintained only one. book containing cash, journal and ledger. The Tribunal concludedits supplementary statement thus:

"As for the staff maintained at Cochin, . it was alleged that K. P. Joshi and subsequently G. H. Narechania were p;iid Rs. 18,000 each ye;ir. The so-called payment was disallowed by the Appellate Tribunal. It observed that debit entries in regard to th<; salaries paid by the assessee firm were collusive and fictitious. As for the presence of the partners of the,assessee firm at Cochin, it appears from the Appellate Assist;int Commissioner's order tlut it was adrni-ttr\1 before him tlut none of the partners of the firm ever attended to the comp;iny's business at Cochin or Alleppey. "There i:s no clear evidence on the record as to wh:it the assessee firm did as the managing agents of the three managed companies; in other words. how the assessee firm "·as carrying on the managing agency business. The partners of the assessee firm (not necessarily all) were on the Bo:ircl of Directors of the managed companies. They held a large number of shares in the 'managed companies.

The Mala bar Steamship Co. I.Id. h~d an. office of it own "to secure freight".. The Cochin office of the assessee firm, as far as one could make out, did practically nothing, except receive l 0% of .the gross freight at Cochin and retain the net income therefrom". Shnmji Vallabhrlas & Co. Commissioner of Income-Tax/ Excess Profits T nx, Bombtl)' S. K. Das}. Sfwmji Vaflabhdns & Co. Commissioner o.f Income-lax/ Rxre.u Profits Tax, Bomba)' S. IL. Das J. [19601 No\\', the question is-on the aforesaid findings of fact reached by the Tribunal-where did the commission payable to the managing agent accrue? It is "·ell to remember that the problem in this case is not so much when the commission accrued as where it accruecl, thou.~h the question as to \\'here and when may be interlinked. \Ve think that normally, the r<1n11n1ss1nn payable to the rnanaging ag-ents oE a company accrues at the place where the services are performed b\· the managing agents. It was so held by this Cqurt in K. R. M. T. T. Thi11gnrnja Chrll)' and Comj>nn)• v. Commissioner of Income-tax, Madras, No. 2(').

The assessee in that case, Thiagaraja Chettiar, claimed that a portion of the commission credited to it in the company's accounts accrued to it in the Indian States "·here the company had opened branches for selling nrn and as the commission was not remitted to British India. it \\'as not assessable to tax. This Court obser\wl: "The short answer to this argument is that the business of the company was carried on in British India, that the commission earned bv the firm on 'he profits made h,- the company in the States arose out of one indivisible agreement to charge the reduced commission of Ci per cent. on the profits of the companv and t.ha.t the managing agents had been rloing the business of the agency in British India and not in the States. It. is not sugg·estcd that the managing agents performed anv fnnct.ions in the States." The same question of the place of accrual arose in a somewhat. different context in Commissioner of lncorne-tax. Bomlrn)' Presidr:nC)' and Aden \'.

Chunilnl B. 1Wehta (') where a person resident in British India and carrying on business there controlled transactions abroad, and the question was if he was liable to pay tax upon profits deriYcd by him from contracts made for the nurch;ise and sale of commodities in various markets-' Liverpool, London, New York, etc. The assessee disputed his liability in respect of such profits on the ground that they were not profits "accruing or arising in British India". It was held that the .mere fact. that the profits made depended on the exercise m ti) [1953] 24 l.T.R 535. (2) fl93B] 6 J.T.R. 521.

British India of knowledge, skill and judgment on the part of the assessee did not mean that the profits arose Sho01ji Vallabhdas or accrued in British India, and there was no necessity & Co. arising out of the general conception of a business as Commi~ioner of an organisation that the 1xofits of the btlsjness must Income-Tax Excess Profits tax/ 4nse only at one place, namely, the place of central Bombay control of the business. Delivering the judgment of the Privy Council in that case, Sir George Rankin observed: "I'he words "accruing or arising the British India" may be taken, provisionally and in the first place, as an ordinary English phrase ·which derives no special meaning from the Act. The alternative "accruing or arising in" and the antithesis ·between these words and the words "received in" or "brought into" afford no safe inference of any special meaning.

"Profit. ..... accruing or arising in British India" are words which in their ordinary meaning seem to reqt1ire a place to be assigned as that at which the result of trading operation comes, whether gradually or suddenly, into existence." "Their Lordships are not laying· down any rule of general application to all classes of foreign transactions, or even ·with respect to the sale of goods. To do so would be nearly impossible and wholly unwise. They are not saying that the place of formation of the contract prevails against everything else. In some circumstances it may be so, but other matters-acts clone under the contract, for example-cannot be ruled out a priori. In the case before the Board the contracts were neither framed nor carried out in British India; the High Court's conclusion that the profits accrued or arose outside British India is well-founded." A similar view was expressed in two e·arlier decisions: (1) In Re: The Aurangabad Mills Ltd. (1) where a reference was made to Commissioner of Taxation v. Kirk, (1900)

Appeal Cases, page 588 and it was pointed out that the circumstance that the affairs of the company were directed from Bombay was not the detetmining test; but the test was where the processes (1) [1921] I.L.R. 45 Born. 12$6, 10-6 SCI/ND/SZ S. K. Das]. Shon~ji Vallnb}ufas & Co. Commissionl!r of lnr.:ome-taxf Excess Pro.fits Tax, Bo,nba)' [1960) which yielded tl1e income were carried oul and 1.k1t was outside British India; (2) The Co111111issioner of fncome-lax, Bom/)(1)' Presidr;ncy v. l\1es.1rs. S11r11/1chand Hulrnrnchand of Born/)ln', a firm (') where the assessees acted as the secretaries, treasurers and agents of a mill company registered at Indore, outside British India, and under· the terms of' agreement, the assessees were entitled to charge and receive as selling ag·ents commission on the gross sale proceeds of all doth produced by the mill and the company opened a shop in Bombay for the sale of cloth produced by the mill which was managed by the assessees.

The sale proceeds "·ere sent to Indore and the assessees were paid the commission at Indore. The· question arose whether the commission was liable to be assessed to income-tax in Bombay, and it was held that the income accrued in British India. Jn Comrn.issiona of T-nco111e-l11x. Bomlwy v. Alm1crl/Jhni U11111r/1/111i and Co., JJ0111bny(2) this Court dccilt with a case where a firm resident in British Inclia carried on the business of manufacturing ;rncl selling groundnut oil; it owned some oil mills within British India and a mill in Raichur in the l-1\'Clcrabad Stcite where oil was manufactured. One of th~ questions for decision was whether the profits of that part of the business, viz., the manufacture of oil at the mill in Rciichur accrued or arose in Raiclrnr within the meaning of the thircl proviso to s. ') of the Excess Profits Tax Act, l !l40.

A majority of .Judges held that the profits arose in Rciichur, and in a composite business, the profits need not arise at one place only but may arise at more than one place aml an apportionment may b~ necessary. Th is "·as not, however, a case of ma nag1 ng agency. "'c now come to the decision in Salt and fndwtries Agniri~s f,f:d., Bo111/Jny v. Co111111issioncr of Tncome-tax, Bomba)> City (') a decision of the same learned Chief Justice, in respect of which learned counsel for the appellant has made some very serious comments. The facts of that case were these: the assessees, a company incorporated in Bombay were the managing agents of another company incorporated in Bombay and having its salt works at Aden and at Kanclla in die Kutch (1) [1930] I.LR. 55 Rom. 231. (2) [1950] S.C.R. 335. (3) [1950] 18 I.T.R. ;,s. State.

The assessee's registered office was in Bombay, where the board of directors met,· the books of account were· maintained and various types of work connected with the company were clone. Under the managing agency agreement the assessees were entitled to a commission at the rate of 12~- per cent. per annum on the annual net profits of the company and in any event a minimum of Rs. :W,000 per annum. The agreement also provided that such portion of the commission as was attributable to the net profits of the company arising or accruing in the Indian State was to be paid to the managing :1gents in such State and that with regard to the minimum commission half of it was to be paid in the State. In pursuance of the assessees' articles of association the board of directors passed a ·resolution delegating a particular director to guide the company's operation in the State of Kutch and during the year of account that director supervised the salt works at Kanclla.

The qvestion was whether the sum of Rs. 88,065 representing assessee·s commission attributable to the salt works at .Kanclla accrued or arose at Kanclla or in British India. First, the learned Chief Justice referred to the test to be applied in order to determine where the profits of the assessee company accrned or arose, and he said that the test was to find out where the actual business of the company was clone which yielded the profits sought to be taxed. In that connexion he said: "The work of the maHaging agents must be looked upon as a unit and not as divided up into so many different categories, to each one of which a certain portion of the commissi9n earned by the managing .agents can be attributed or allocated."

He then went on to consider when the right to managing agency commission arose in that case and came to the conclusion, which was decisive in his op1111on, that it arose when all the accounts of the working of the company were submitted to the head office in Bombay and the profits were determined: therefore, the sum of Rs. 88.065 accrued or arose to the :1sscssccs in Bombay and not in the Indian State both for purposes of income-tax and excess profits tax. S!ll!orji Vallahhdas & Co. Commissioner of Income-tax/ Excess Profits Tax, Bombay S.K. Das]. [1960] Now, learned counsel for the appellant has no Shoarji Vallabhd" quarrel with the decision in so far as it laid down & :_a. that (a) the Lest is to find out where the business is Commissi011er of actually done, i.e., wl1ere tJ1e services are performed, Incam•-tax/ d (b) h Excess Profits Tax, an t e rig 1t to managing· agency co111n11ss1on arose Bambay in that case when all the accounts of the working of s. K. DasJ. the company were submitted to the head office in Bombay and the profits were determined.

Learned counsel has contended that in the case under our consideration the services were performed partly in British India and partly .in. Cochin and the right to 111anag1ng agency con11111ss1011 arose as soon as the freight was paid at least in respect of two of the managed companies. He has submitted, however, that the learned Chief .Justice was m error if he intended to lay down a rule of universal application that the work of the managing agents must always be looked upon as a unit and can never to be divided into categ'Ories. It. is· contended that the services of a managing agent can be performed at more than one place, and legally it is possible to apportion the commission and attribute a pan of it: to services rendered outside the taxable territories.

We consider it unnecessary in the present case to decide the question of performance of services and resultant apportionment, if any, on a theoretical or hypothetical basis, because the case can be disposed of on the short ground that on the findings of the Tribunal, the remuneration of Lhe managing agents accrued at Bombay. vVe had referred earlier to the findings reached by the Tribunal. These findings show that except for an attempt at make-believe, no services were really performed by the appellant at Cochin. No doubt, some freight was secured and paid for at Cochin. But the managed company also had an office at Cochin to secure freig·ht. It has been argued that under the terms of the managing agency agTeements, the managing agents employed the staff, etc., and for two of the companies which carried on the cargo business, securing freight was the principal part of the managing agency business. The Hi~h Court, however. rightly pointed out: 3 S.G.R. "In our opm10n, it is not possible to read the managing agency agreement in that light.

All that clause 2 of the agreement does is to lay clown the standard by which the commission is to be computed and determined, and it lays down two different standards, one with regard to the shipping business and the other with regard to the other businesses, but as far as the business of the managing agency is concerned their responsibilities and their duties are integrated duties and responsibilities which are set out in the different clauses of the agreement. It is impossible to contend that they had not to supervise, control and manage the shipping business and, as we have already said the business of a shipping company is vastly more detailed and responsible than the mere task of finding people to go by ship or send their goods by ship and for that purpose paying freight. . Freight is merely the resultant profit which accrues to a shipping company.

In order that that profit should result the company has got to have ships, it has got to have seaworthy ships, it has got to have sailors and officers, it has g·ot to look to the repairs of the ships, the renovation o.f the ships and the replacements of the ships. All this is part of the shipping company's business and all this business had to be attended to by the managing agents and the question is, where did they attend to this business. The finding on this question is clear. The finding, in effect, is that barring booking freight, and collecting freight at Cochin, all other important and responsible work of managing the managed companies was done from the head office at Bombay and not from Cohin." On the findings reached, the position in law is quite clea1'.

The decisions to which we have referred clearly establish that normally, the commission payable to the managing agents accrues at the place where the business is actuallv clone, that is, where the services of the managi~g agents are performed. In th is case the appellant practically performed all the services at Bombay, and therefore the commission which it earned though computerl on the percentage of freight and /or passage money in respect of two .of the managed companies, accrued or arose in British Shoorji Vallabhdas & Ca. Commissiontr of ln.ome-tax/ Excess Profits Tax, Bombay S. K. Das]. Sftaorji Vatlabhdas & Co. Commissioner of lucome-laxf Excess Profits T1,x, Bombay S . .K. Das J. A.fHif 20 [1960] India. As to t.hc t.hir<l mauaged company whose business was stevedoring and t.rading and t.hc remuneration was payable at 2:"i per cent. of the net profits, there can be no doubt that the remuneration accrued at Bombay.

Therefore, the High Court of Bombay correctly answerc<l the question against. the appellant. The appeal accordingly fails and is dismissed with cusr.s. A j1j1eal dismissed. R/\JK!;f\JARI KAUSHALYA DE\11 BAWA PRJJ":'.JA SINGH AND ANOTHER. (P. B. GAJEXDRAGADKAR, K. N. \VAl'\CHOO and K. c. DAS GUPTA, JJ.) Mortgage-Whether a "pecuniary liability"-The Displaced Persons (Debts Adjustment) Act (LX X of 1951), ss. 2(6), sub-els. (a) (b) (c) 13, 15, 16(5), 17, 21. The appellant executed two usufructuary mortgages in favour of the respondents in 1946 with respect to two properties situated in Ferozepur city and herself took the properties on lease on the same date. 1~he respondents filed an applicationunder s. 13 of the Displaced Persons (Debts Adjustment) Act, LXX of 1951, for recovery of the principal sum due and also the arrears of rent.

The appellant contested the application on the ground, 1'"7·~ inter alia, that the liability was not a debt under the Act as it was not a pecuniary liability and that mortgages in relation to properties situated now in India were not covered by it. The Tribunal allowed the application and passed a preliminary decree for sale. The appellant's appeal to the High Court and another under the Letters Patent were both dismissed. On appeal by special leave: Held, that a mortgage debt would create a pecuniary liability upon the 1nortgagor and would be covered bv, the definition of the word "debt" in s. 2(6) of the Act. There is nothing in any provision of the Act which would cut down the plain meaning of the words "pecuniary liability" as used in s. 2(6) read with sub-cl. (c) thereof or restrict those wide words to liability other than that secured by a mortgage. Under sub-cl. (c) o[ s.

2(6) a displaced person to whom a mortgage debt is due f rorn any or her person, whether a displaced person or not, ordinarily residing in the territories to which the Act extends can take the benefit of this Act.