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Issues:
1. Whether the Assistant Commissioner was right in deeming the assessees agents for Culver Export Corporation. 2. Whether the Assistant Commissioner was correct in applying Rule 33 generally. Analysis: 1. The judgment involves a reference made by the Commissioner of Income-tax raising two questions. The first issue is whether the Assistant Commissioner was correct in deeming the assessees as agents for Culver Export Corporation. The relevant sections under consideration are Section 42 and Section 43 of the Income-tax Act. Section 42 states that profits or gains accruing to a person residing outside British India through a business connection in British India shall be deemed as income accruing within British India. The judgment emphasizes the need for continuity in the relationship between the parties for the section to apply. In this case, the agreement between Culver Export Corporation and Metro Goldwyn Mayer (India) Limited establishes a business connection involving the sale of motion picture rights, sharing of profits, and various contractual obligations. The court concludes that the arrangement constitutes a business connection, and the non-resident company is receiving profits through this connection. Therefore, the question is answered in the affirmative. 2. The second question regarding the application of Rule 33 has been adjusted between the parties and is struck out from consideration. The judgment clarifies that Section 43 is a mechanism to appoint a statutory agent for tax purposes, but its significance lies in giving effect to Section 42. The appointment of an agent under Section 43 is consequential to the tax liability under Section 42. The judgment highlights the distinction between tangible property and business connections in determining tax liability. It underscores the need for a continuous relationship between the parties for income to be deemed as accruing within British India. The court's interpretation focuses on the nature of the transaction and the presence of a business connection to establish tax liability under the Income-tax Act. In conclusion, the High Court of Bombay answers the reference in the affirmative, affirming the tax liability of the assessees as agents for Culver Export Corporation based on the business connection established through the agreement. The judgment provides a detailed analysis of the relevant sections of the Income-tax Act and emphasizes the importance of continuity and business relationships in determining tax liability for non-resident entities operating in British India.
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