Harries, C.J:— These are two references made by the Commissioner of Income-tax, Bihar and Orissa, under Section 66(3), Indian Income-tax Act, Miscellaneous Judicial Case No. 18 of 1940 deals with the assessment year 1936-37, whereas Miscellaneous Judicial. Case No. 17 of 1940 deals with the assessment year 1937-38. The points involved in the two cases are identical, and the two references can be conveniently disposed of in one judgment.

2. By an order of this Court the Income-tax Commissioner was directed to state a case upon the following questions:—

“(1) Whether the assessee is resident in British India and carries on business here, and

(2) Whether the assessee has been rightly taxed under the Indian Income-tax Act.”

3. The Commissioner has suggested that the answers to both these questions should be in the affirmative. The assessee is a firm which owns a business styled as “Sri Hardeo Salt Company”. This firm consists of four brothers who appear to be joint, namely, Pearey Lal, Juggernath Prasad, Dwarka Prasad and Srinath Prasad. These four brothers admittedly reside in Muttra in the United Provinces. The business of the firm is that of selling salt which is obtained from the Sambhar Lake in Rajputana. According to the Income-tax authorities, this firm had a branch at Muzaffarpur, at which a business of selling salt to persons in the district was carried out. Accordingly the Income-tax authorities assessed the income from the Muzaffarpur business as income made by the assessee in Bihar and, therefore, British India.

4. The assessee, on the other hand, contended that the firm was a firm resident in Rajputana and further that no business was conducted by the firm in Muzaffarpur. It was said that all the firm had at Muzaffarpur was convassing agent who did not do any business himself but solicited business on behalf of the firm and that all such business was concluded not at Muzaffarpur but in Rajputana.

5. The Income-tax authorities, however, were satisfied that the assessee firm actually carried on business at Muzaffarpur and the Commissioner when asked to state a case refused on the ground that the points involved raised no question of law but were merely questions of fact. This Court, however, took the view that the Commissioner should be asked to state a case on the two questions which I have set out, and the opinion of the Commissioner is now before us.

6. The Commissioner has answered the first question, namely, whether the assessee is resident in British India and carries on business here, in the affirmative. The learned Commissioner appears to have thought that the first portion of this question, namely whether the assessee is resident in British India, was a question that this Court should not have asked. At first sight this would appear to be a pure question of fact; but this Court asked the question because it was not clear as to the evidence upon which the Income-tax authorities had arrived at their findings. That evidence is clearly set out, and there is undoubted material to support the finding that the assessee is resident in British India. I must, however, point out that the Income-tax authorities and the Commissioner have referred to a large number of documents which cannot possibly be admissible in evidence against the assessee. However, there is a clear admission by one of the partners that the proprietors of the firm were the four brothers here resident in Muttra. The point, however, is not of any importance by reason of the answer to the second part of this question. The answer to the first part would only be of importance if it was found that the assessee did not carry on business in India, and the first portion of the question was asked to meet the contingency of a negative answer being given to the second part of the question. The second part of the question is whether the assessee carries on business in British India and the suggested answer of the Commissioner is that it does. Whether an assessee does or does not carry on business in British India is in the main a question of fact, but, on the other hand, questions of law do arise. It may well be a question of law as to whether the proof of certain facts is sufficient to establish that actual business is being conducted which would make the assessee liable to assessment to tax. The Commissioner in the case has pointed out that though the head-quarters of the firm are at Rajputana the firm has a branch in Muzaffarpur. The order form used by the firm makes it clear that they have a branch at Mazaffarpur, the address of which is Sariyaganj, Muzaffarpur. The Commissioner also points out that this branch is located at a house rented by the assessee and the person carrying on the activities of the branch is a gomasta of the assessee, Further, the Commissioner points out that Srinath, one of the partners, comes to Muzaffarpur at intervals, and it is also pointed out that Srinath is one of the most important, if not the managing member of this firm. Mr. S.K Mazumdar who has argued this case very fully has contended that all that the assessee has at Muzaffarpur is a canvassing agent: but the facts which I have set out strongly suggest that the activity at Muzaffarpur is the activity of a branch of the firm and not the activity of a mere agent soliciting orders. Again the order forms used by the assessee at Muzaffarpur show that orders are accepted at Muzaffarpur and contracts for the sale and delivery of salt concluded there. It is true that these orders are sent to Rajputana, but that is inevitable because they have to be executed at Rajputana, The salt lake is situate there and not at Muzaffarpur, and therefore, the orders must, when accepted, be transferred for execution. Mr. Mazumdar has laid great stress on the fact that payment is made to the head office at Sambhar; but there is nothing strange in that. If the office at Muzaffarpur is only a branch, then it is natural that payment should be made not there but to the head office.

7. Again the Commissioner points out that the salt was frequently stored at Muzaffarpur and payments appear in the books of the other assessees relating to such storage. From the accounts of the assessee itself and the accounts of the other merchants in Muzaffarpur it is clear that a business was being conducted at Muzaffarpur by the assessee.

8. Mr. Majumdar has contended that even accepting the facts as found this Court should not hold that the assessee carried on business at Muzaffarpur. He has relied upon a decision of the House of Lords in Grainger & Son v. William Lane Gough (Surveyor of Taxes) 1896 A.C 325., in which it was held that a foreign merchant, who canvasses through agents in the United Kingdom for orders for the sale of his merchandise to customers in the United Kingdom, does not exercise a trade in the United Kingdom within the meaning of the Income-Tax Acts, so long as all contracts for the sale and all deliveries of the merchtndise to customers are made in a foreign country. Mr. Majumdar has contended that the present case all contracts for the sale of salt and all deliveries of that commodity to the customers are made not in British India but in Rajputana outside the confines of British India. In my view the case of Grainger & Son v. William Lane Gough is clearly distinguishable from the present case. Lord Herschell in his speech at page 333 stresses the fact that the agents in the United Kingdom did not enter into any contract but merely forwarded offers to the foreign merchants) in France. At page 333 he states;—

“Taking the findings together, I think it clear that no contracts to sell wine were ever made by the appellants on behalf of Roederer. All that they did was to transmit to him the orders received, and until he had agreed to comply or complied with them there was no contract. He was under no obligation to the person giving the order to the appellants to execute any one of them.”

9. In short, no contract was completed in England, and all that the agent did was to forward any proposal for business to his principal in France who accepted or rejected offers as he thought proper. The acceptance of a contract occurred in France, and it was from France that the goods were delivered. The facts of the present case, as I have already stated, differ in most material particulars.

10. Lord Watson also observed in the same case that contracts were not made in England, and he pointed out that if contracts were made in England then business would be carried on in the country as held in Werle & Co. v. Colquhoun 1888 20 Q.B.D 753., and Erichsen v. Last 1881 8 Q.B.D 414.. At page 340 Lord Watson observes:—

“There is, in my opinion, a very broad distinction between the case of a foreigner making contracts in England with his English customers for the sale of his wines, either personally or through a representative, and the case of his making similar contracts with these customers in his own country. In the present instance the orders forwarded to Louis Roederer were, in law, nothing more than offers to purchase until the contract between him and each offerer was completed by his acceptance at Reims; and he fulfilled his part of the contract by making delivery of the wine sold to the purchaser, and at his risk, in Reims”.

11. It is true that in the present case the orders are forwarded to Rajputana for execution, but what are forwarded are orders and not the offers. The offers are accepted at Muzaffarpur, and that being so, there is abundant material upon which it can be held that the assessee carries on business in British India. Once that is held, it is obvious that the answer to the second question “whether the assessee has been rightly taxed under the Indian Income-tax Act” must be in the affirmative. For the reasons which I have given, I would answer both the questions in the affirmative. The assessee should, in my view, pay the costs of these proceedings. As the point involved is common to both the references, there will only be one hearing fee which I would assess at seven gold mohurs. The sum deposited in each case with the Income-tax authorities will be retained by them.

Fazl Ali, J.:— I agree.

12. Reference answered in the affirmative.