1952 (3) TMI 33 - HC - Income Tax

Issues Involved:
1. Whether Haji Mahomed Syed Alberbary had a business connection in British India within the meaning of Section 42(1) of the Indian Income-tax Act.
2. Whether Abdullabhai Abdul Kadar was rightly treated as the agent of the non-resident person for the assessment years 1942-43, 1943-44, 1944-45, and 1945-46.
3. Whether the death of Haji Mahomed Syed Alberbary affected the liability of Abdullabhai Abdul Kadar under Section 42(1) of the Indian Income-tax Act.
4. Whether Abdullabhai Abdul Kadar could be taxed under Section 42(1) on the profits made by the non-resident on the sale of goods purchased through other commission agents in British India.

Detailed Analysis:

1. Business Connection in British India:
The Tribunal found that Haji Mahomed Syed Alberbary had a business connection in British India through Abdullabhai Abdul Kadar, who acted as his commission agent for several years. The assessee regularly purchased and sold goods on behalf of the non-resident. The High Court agreed with the Tribunal's finding, emphasizing that a business connection must involve some continuity and not just isolated transactions. The High Court noted that the term "business connection" is broad and can include various types of relationships, provided there is an element of continuity.

2. Treatment of Abdullabhai Abdul Kadar as Agent:
The Tribunal held that Abdullabhai Abdul Kadar was rightly treated as the agent of the non-resident under Section 43 of the Indian Income-tax Act. The High Court confirmed this, noting that the assessee had a continuous business relationship with the non-resident, acting as his commission agent over several years. The High Court emphasized that the statutory agency under Section 43 is different from a contractual agency and can be established if the conditions of the section are met, regardless of the non-resident's death.

3. Impact of Non-Resident's Death:
The Tribunal rejected the contention that the death of Haji Mahomed Syed Alberbary on 26th March 1946, affected the liability of Abdullabhai Abdul Kadar. The High Court upheld this view, stating that the relevant period to consider is the accounting year during which the business connection existed. Since the non-resident was alive during the accounting periods in question, the statutory agency could be established posthumously.

4. Taxation on Profits through Other Agents:
The Tribunal accepted Abdullabhai Abdul Kadar's contention that he should not be taxed on the profits made by the non-resident through other commission agents in British India for the assessment year 1945-46. The High Court agreed, stating that the deemed income chargeable to the assessee should be limited to the income accrued through him and not through other agents.

Additional Issues:

Loss of S.S. Rehmani:
The Tribunal found that the assessee's claim that he only became aware of the loss of the S.S. Rehmani in December 1947 was not credible. The High Court upheld this finding, noting that the Tribunal had sufficient material to conclude that the assessee must have known about the loss earlier, given the widespread knowledge among shippers and ongoing correspondence with the non-resident.

Conclusion:
The High Court answered the questions as follows:
1. In the affirmative (Haji Mahomed Syed Alberbary had a business connection in British India).
2. In the affirmative (Abdullabhai Abdul Kadar was rightly treated as the agent).
3. In the negative (The death of Haji Mahomed Syed Alberbary did not affect the liability).
4. Withdrawn by the Solicitor General (no answer provided).

The additional question regarding the loss of S.S. Rehmani was answered in the affirmative, affirming the Tribunal's finding that the assessee knew about the loss earlier than claimed. The assessee was ordered to pay three-fourths of the costs of the reference.

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