JUDGMENT Vaidialingam, J. 1. In these proceedings under Article 226, Shri K. P. Abraham, learned counsel for the petitioner challenges the order of the first respondent, namely, Ext. P-9, dated 26th October 1958. That is an order making an assessment on the petitioner for the year 1955-56 and making it liable to pay tax of Rs. 12,018.25 on or before 26th November 1958. 2. The main contention that is taken before us by the learned counsel is that the order of assessment, namely, Ext. P-9, is without jurisdiction inasmuch as it relates to income of an agent employed by the petitioner for canvassing business on behalf of the petitioner in Australia. 3. In order to appreciate the contentions of the learned counsel a few facts may be stated. The petitioner carries on business in coir in Aroor and it has employed Messrs. Clifton H. Joseph and Son, Ltd., Australia, as its agents for securing in Australia purchasers for its articles-. It is also stated that the said agent canvasses and secures orders in Australia from intending purchasers and when orders are received, the goods are shipped by the petitioner in C.I.F. terms to the port of destination in Australia. The shipping papers, invoices, insurance, bills of exchange and other documents are drawn on the buyer and they are delivered to the National Bank of India, Ltd., Cochin. The petitioner realises the price of the goods from the said Bank at Cochin. 4. The National Bank of India then forwards the shipping documents and other documents of title and presents the same through their agents in Australia, and after the bills are retired, any balance amount that may be due to the petitioner is given by the National Bank of India, Ltd., Cochin. 5. So far as the commission due to the agent is concerned it is mentioned in paragraph 4 of the affidavit filed in support of this application, that there is a letter incorporating the terms under which the agent is to function, namely, Ext. P-1. According to the petitioner, as soon as all the bills in any quarter are retired, the commissions due to the agent is made up and remitted to the National Bank of India, Ltd., with a request to transmit the same to the agent in Australia. P-1. According to the petitioner, as soon as all the bills in any quarter are retired, the commissions due to the agent is made up and remitted to the National Bank of India, Ltd., with a request to transmit the same to the agent in Australia. The petitioner also relies upon certain correspondence that passed between the petitioner and the bank concerned as also on certain invoices in this connection. They will be adverted to a little later. 6. Ultimately, the National Bank of India arranges to make the payment of the commission to the Australian agent through their bankers in Australia. 7. On 28th March 1957, the first respondent passed an order, namely, Ext. P-7 appointing the petitioner, namely, the Royal United Carpet Factories, Limited as the agent of the said Messrs. Clifton H. Joseph and Son, Ltd., for the income-tax assessment year 1955-56. That order purports to have been made under section 43 of the Indian Income-tax Act. It is stated in Ext. P-7 that the Melbourne party, namely, Messrs. Clifton H. Joseph and Son, Ltd , is a non-resident agent of the company, namely, the petitioner company, and receives commission for orders canvassed by them. The order further proceeds to say that according to the terms of the agreement between the petitioner and its agent, the commission received by the agent from the resident company is an item of income, according to the Income-tax Officer, liable for payment of Indian income-tax. 8. The order further states that when the petitioner company was approached by the income-tax authorities to collect and deduct the amount of tax payable on the commission which, according to the Income-tax Department, was earned or received by the non-resident agent, in India, the petitioner objected to the same. But notwithstanding the objections raised, the order proceeds to appoint the petitioner as agent for purpose of collecting the tax due on the commission for the year 1955-56. There is one significant point to be adverted to in this order, namely, the officer proceeds on the basis that the commission payable to the foreign agent "accrues in India and is also first received in India by the assessee". There is one significant point to be adverted to in this order, namely, the officer proceeds on the basis that the commission payable to the foreign agent "accrues in India and is also first received in India by the assessee". Therefore, the officer appoints the petitioner as agent under section 43 of the Income-tax Act for deducting the tax due on the commission paid by them to the foreign agent on two grounds, namely, that the commission due to the foreign agent (a) accrues in India and (b) that such commission is first received in India by the assessee. We are mentioning this aspect because in the final order of assessment, namely, Ext. P-9, a slightly different stand is taken by the assessing officer, the first respondent. 9. It may be stated at this stage that the petitioner sought to challenge this order, Ext. P-7, itself, by filing a writ petition in this court, namely, O.P. No. 186 of 1957. But for some reason best known to the petitioner itself, it allowed it to be dismissed and the learned Judge passed the following order on 4th June 1958 in the said O.P. "The petitioners propose to move this Court afresh after assessment orders are passed. Subject to their right to do so, if advised, this petition will stand dismissed. No costs." 10. After the original petition was disposed of in the terms mentioned above, quite naturally, as could be expected in the circumstances, the first respondent took up the question of making an assessment oh the petitioner itself and that resulted in the order Ext. P-9. the first respondent after adverting to the pre- vious appointment of the petitioner as agent under section 43 of the Act and the infructuous attempts made by the petitioner to challenge that appointment, Ext. P-7, in O. P. No. 186 of 1957, the first respondent deals with the main objections raised by the petitioner for making an assessment in respect of the commission paid by it to the foreign agent, namely, Messrs. Clifton H. Joseph and Son. 11. The first respondent accepts the position taken up by the petitioner that the services were rendered by the non-resident agent only in Australia and that those services were all done outside the taxable territories. Clifton H. Joseph and Son. 11. The first respondent accepts the position taken up by the petitioner that the services were rendered by the non-resident agent only in Australia and that those services were all done outside the taxable territories. But the officer is of the view that the petitioner has opened an account in respect of the non-resident agent and the commission due to him is credited by the petitioner in these books of account. The officer, no doubt, takes note of the fact that the remittance is made by the petitioner to the foreign agent only at the end of every quarter. But the officer concludes "It is, therefore, obvious that the commission is received by the non-resident in the taxable territories." This conclusion is arrived at after stating earlier that the remittance made by the petitioner to the foreign agent is made at the end of every quarter and that the commission due to the agent is credited in the books by the petitioner maintained by it in respect of the foreign agent. We have to proceed on the basis that the conclusion arrived at by the officer that the commission is received by the nonresident agent in the taxable territories is mainly and exclusively based upon the circumstances mentioned above. 12. The first respondent further proceeds to say that if the company has got any claims for damages or similar matters as against the non-resident agent, it would have been perfectly entitled to adjust that claim in respect of the credits made by them in the books regarding commission payable to the non-resident. The first respondent is also of the view of the moment the amount of the non-resident is credited in the books of the company in the taxable territories, the non-resident acquires title over it and it has to be deemed as a receipt in the taxable territories in so far as the non-resident can operate on the credit balance to discharge his debts in the taxable territories or spend that money otherwise on instructions to the company. 13. So far as this last reasoning of the first respondent referred to above is concerned, we must state that there is absolutely no material on record from which we can come to the conclusion that the non-resident has in any way taken such steps as visualised or contemplated by the first respondent. 14. 13. So far as this last reasoning of the first respondent referred to above is concerned, we must state that there is absolutely no material on record from which we can come to the conclusion that the non-resident has in any way taken such steps as visualised or contemplated by the first respondent. 14. Finally, after rejecting the objections of the petitioner, the first respondent holds that the petitioner is liable to pay the tax due by the non-resident and in this view ultimately taking into account the commission actually estimated by them the first respondent passed an order making the petitioner liable for payment of the tax on the said amount as mentioned earlier. It is this order that is attacked by the learned counsel Mr. K. P. Abraham, on behalf of the writ petitioner. 15. Mr. K. P. Abraham referred us to the fact that the course of dealing stated by the petitioner to exist as between itself and the foreign agent has not been in any way challenged or controverted by the Revenue. On the other hand, the learned counsel urged that even the Income Tax Officer, in the first instance, and even here in the counter-affidavit the Revenue accepted as correct the course of dealing as mentioned by the petitioner. 16. The learned counsel in this connection drew our attention to the letter which more or less can be considered to be the contract governing the rights of the petitioner and its agent at Melbourne, Ext. P-1, dated 1st January 1951. It is in the form of a letter and it is very brief. That is a letter addressed by the petitioner to its foreign agent in Australia and the material part of it is- "With reference to our previous correspondence we have pleasure informing you that you are hereby appointed as our sole agents for Australia. It is understood that a commission of 7 per cent on the F.O.B. value of sales will be paid to you quarterly as and when the outstanding bills over such periods have been paid. " Therefore, this letter is evidence of appointment of Messrs. Clifton H. Joseph & Son, Ltd., Australia, as the agents of the petitioner in Australia. It is understood that a commission of 7 per cent on the F.O.B. value of sales will be paid to you quarterly as and when the outstanding bills over such periods have been paid. " Therefore, this letter is evidence of appointment of Messrs. Clifton H. Joseph & Son, Ltd., Australia, as the agents of the petitioner in Australia. The terms of the agency are also stated in the letter, namely, the petitioner to pay a commission of 7 per cent on the sales a quarterly as and when the outstanding bills are collected by the petitioner. 17. There are certain other letters and invoices filled by the petitioner to show how exactly itself has been sending he goods and collecting the price of goods and how they lave been remitting the commission payable to the agent n Australia. We do not think it is really necessary to go into everyone of those items because the course of dealing as would be clear by these letters has not been in anyway challenged by the Revenue.. 18. But one exhibit, namely, Ext. P-3, can be usefully referred to as it will show a statement prepared by the petitioner regarding the actual goods that have been despatched and also the commission that is payable to the foreign agent. Everyone of these matters are mentioned item-war, and there is evidence to show that the identical amount which is stated to be due to the foreign agent by way of commission is remitted by the petitioner through the bankers, namely, the National Bank of India, Ltd., Cochin. There is no controversy about that. There is one other letter which has to be adverted to, namely, Ext. P-6. That is, dated 17th August 1955. That is a letter sent by the petitioner to the National Bank of India Ltd., Cochin advising the latter to remit an amount of commission of £ 496-14-8 to its foreign agent of Melbourne. The second paragraph of that letter is to the effect : "Regarding the mode of remittance we request you to remit the amount to the National Bank of Australia, Ltd., London, for credit of the beneficiaries' account with them under advice and debit our account with the cost thereof." This throws some light as to whether the commission is received by the Agent at Melbourne or in the taxable territories of the Indian Union. In the first place, it will be seen that the petitioner asks the amount to be remitted to the National Bank of Australia, Ltd., London, for the credit of the account of the foreign agent. Therefore, the payment is credited to the agent, if at all only in London. The second point to be remembered is that the petitioner asks the National Bank of India, Ltd., Cochin, to debit their account with the cost of the remittance. That again will show that the entire amount that accrues as commission and is payable as commission by the petitioner to the foreign agent at Melbourne are completely paid without in any way debiting the foreign agent with the charges for sending those amounts. This aspect may, have, in our opinion, some bearing on the question that we have to consider whether in the circumstances of this case the view of the first respondent that the foreign agent should be considered to have received his commission in the taxable Union territory is correct or not. 19. The other correspondence that is referred to is not necessary to be considered. 20. Therefore, the position is this. While under Ext. P-7 the first respondent proposes to make the petitioner liable on two grounds, namely, that the commission due to the foreign agent has accrued in the Union territories and also secondly that the commission has been earned or received by the foreign agent in the Union territory, in the assessment order as such passed finally, Ext. P-9, the case of the Department that the commission should be considered to have accrued in the Union territory has been given up. That is, the sole circumstance on the basis of which the petitioner is sought to be made liable under Ext. P-9 is this, namely, that the petitioner maintained books of account in which the commissions due to the non-resident are entered and these amounts are remitted by the petitioner at the end of every quarter and therefore, according to the first respondent, the commission is received by the non-resident in the taxable territory. 21.Mr. P-9 is this, namely, that the petitioner maintained books of account in which the commissions due to the non-resident are entered and these amounts are remitted by the petitioner at the end of every quarter and therefore, according to the first respondent, the commission is received by the non-resident in the taxable territory. 21.Mr. K.P.Abraham, learned counsel for the petitioner, is, in our opinion, well founded in his contention that in the circumstances of this case as disclosed by the correspondence, which are not controverted before us by the revenue, the position is clear that the entire business or work is done by the commission agent in Australia and ordinarily that will be the place where he is entitled to be paid the commission that is legally due to him. That also becomes clear as we have stated from one of the letters addressed by the petitioner company to its bankers at Cochin wherein it has specifically asked the bankers to deduct the charges for remitting the amount. No deduction is made by the petitioner from and out of the commission that is remitted to the foreign agent by way of charges for sending the amount to Australia. 22. On the other hand, if actually the petitioner company is found to pay the amount to the Australian agent only within the Union territory, one would expect the charges for remitting the commission due to the agent at Melbourne would have been deducted from the commission amount and only the balance would have been spent. 23.Though several matters arose for decision by the Supreme Court in Commissioner of Income-tax v. Mysore Chromite, Ltd. 29 I.T.R. 138, the position seems to be fairly established that the mere fact that the petitioner has opened an account book in which the petitioner enters for their purposes now and then the commission that may be payable to the agent in respect of sales, will not certainly by itself be conclusive of the fact that such payments are made by the petitioner within the taxable Union territory or that it is so received by the commission agent within the taxable territory. 24. No doubt, Mr. Rama Iyer, learned counsel for the Revenue, rather strenuously relied upon the decision of the Andhra Pradesh High Court reported in Income Tax Commissioner v. Raghava Reddi A.I.R. 1957 A.P. 923. 24. No doubt, Mr. Rama Iyer, learned counsel for the Revenue, rather strenuously relied upon the decision of the Andhra Pradesh High Court reported in Income Tax Commissioner v. Raghava Reddi A.I.R. 1957 A.P. 923. In our opinion, the facts and the nature of the agreement which were the subject of consideration by the learned Judges are closely looked into, that decision will not in any way help the Revenue in view of the circumstances which exist in this case. In the decision of the Andhra Pradesh High Court, the learned Judges have extracted the agreement that was entered into between the principal and the nonresident agent. The actual agreement itself was to the effect that the non-resident shall secure mica business, for the assessee from Japan for the particular years mentioned therein. It was also proved that the assessee was to pay commission at a certain percentage on the gross sale proceeds of mica that takes place in Japan. 25. Then there was a very significant arid crucial clause in the agreement to the effect: "In view of the difficulties in this country (Japan) it is requested that the first party credits all these amounts to the account of the second party with them without remitting the same until definite instructions are received by the first party. " It may be mentioned that the first party mentioned therein was the assessee constituted within the taxable territories of the Indian Union and the second party referred to therein was the non-resident agent for the canvassing business in Japan. In the face of this clause, the learned Judges ultimately came to the conclusion that as and when the accounts of the non-resident agent were credited with commission by the assessee and separately treated, it must be considered that non-resident has received this amount as commission within the Indian Union. 26. That is not the position here. But one circumstance which, in our opinion, is against the contention of the learned counsel is seen from the Judgment of the Andhra Pradesh High Court to this effect. The learned Judges are of the view that the agency commission accrues at the place where the services were performed by the non-resident agent. 26. That is not the position here. But one circumstance which, in our opinion, is against the contention of the learned counsel is seen from the Judgment of the Andhra Pradesh High Court to this effect. The learned Judges are of the view that the agency commission accrues at the place where the services were performed by the non-resident agent. That is, in that case, ordinarily the learned Judges would have, if no other circumstances exist, come to the conclusion that the foreign agent canvassing business in Japan got his commission accrued at the place where he performed his service, namely, in Japan. But the learned Judges were also faced with the specific clause in the agreement to which we have already made reference. Therefore, after considering the particular agreement the learned Judges come to the conclusion ultimately that the foreign agent must be considered to have received his commission within the taxable territory under section 4 (I) (s) of the Indian Income-tax Act. That judgment in our opinion will not assist the Revenue at all. On the other hand, the observation, namely, regarding the accrual of the commission in Japan is clearly against the learned counsel's contention that in this case also it can be considered that there is an accrual in Aroor itself. 27. So far as this question of accrual itself is concerned, it is not at all really necessary for us to go into that aspect, because as we mentioned earlier, in the final assessment, the officer himself has not proceeded to rely for purposes of assessment on the basis that the income in this case should be considered to have accrued in taxable territory. Even otherwise, we are not satisfied in view of the specific nature of the dealings that we have pointed out that existed between the petitioner and the foreign agent, that there can be any accrual of the income in this place either. 28. No doubt, Mr. Rama Iyer contended that as soon as the particular sales are effected by the party mentioned in Ext. P-l, it must be considered that the foreign agent has earned his commission and therefore it must further be considered that the amount has been received by him or he has become entitled to receive that amount in the taxable territory. We are not able to accept this contention either. P-l, it must be considered that the foreign agent has earned his commission and therefore it must further be considered that the amount has been received by him or he has become entitled to receive that amount in the taxable territory. We are not able to accept this contention either. No doubt, as soon as the conditions mentioned in Ext. P-1 are satisfied, the foreign agent may have earned his commission. But the question is where? In our opinion, not certainly in the taxable territories of the Indian Union. Therefore the order of the first respondent, Ext. P-7, and the final orders of assessment passed by the first respondent, namely, Ext. P-9, will both stand quashed. The respondents are not entitled to take any further proceedings for recovery of the amounts on the basis of these orders. 29. The original petition is allowed. The parties will bear their own costs.