1979 (3) TMI 43 - HC - Wealth-tax

Summary

Issues Involved:
1. Definition of a company under Section 2(h) of the Wealth-tax Act, 1957.
2. Determination of whether the assessee had a place of business in India.
3. Assessment of the relationship between the assessee and its Indian subsidiary.
4. Evaluation of whether the assessee was carrying on business in India.

Issue-wise Detailed Analysis:

1. Definition of a company under Section 2(h) of the Wealth-tax Act, 1957:
The primary issue was whether the assessee, a company incorporated outside India, fell within the definition of a company under Section 2(h) of the Wealth-tax Act, 1957. According to Section 2(h)(ii), a company includes "a company incorporated outside India which has a place of business in India."

2. Determination of whether the assessee had a place of business in India:
The Tribunal found that for a foreign company to have a place of business in India, it was not necessary for it to own or lease premises. It was sufficient if the foreign company sold its goods in India through a duly appointed selling agent, retaining ownership and control of its goods. The Tribunal concluded that the assessee had a place of business in India through its Indian subsidiary, which acted as its agent.

3. Assessment of the relationship between the assessee and its Indian subsidiary:
The relationship between the assessee and its Indian subsidiary was scrutinized. The assessee owned the entire share capital of the Indian subsidiary and had appointed it as the sole agent for its products in India. The Indian subsidiary handled, stored, and sold the assessee's products under the assessee's control and instructions. The Tribunal found that the Indian subsidiary was acting on behalf of the assessee, and the transactions were those of the assessee.

4. Evaluation of whether the assessee was carrying on business in India:
The Tribunal and the High Court evaluated whether the assessee was carrying on business in India. The court considered several factors:
- The assessee appointed the Indian subsidiary as its sole agent.
- The goods were stored and sold in India under the assessee's control.
- The Indian subsidiary sold the goods at prices fixed by the assessee.
- The sales proceeds were remitted to the assessee after deducting commission and expenses.
- The Indian subsidiary maintained books of account accessible to the assessee.

The court referred to various precedents to determine whether the business activities constituted carrying on business in India. It held that the assessee was carrying on business in India through its Indian subsidiary, which acted as its agent.

Conclusion:
The High Court concluded that the assessee, a company incorporated outside India, had a place of business in India and was carrying on business in India through its Indian subsidiary. Therefore, the assessee fell within the definition of a company under Section 2(h) of the Wealth-tax Act, 1957, and was assessable to wealth-tax for the relevant assessment years. The question referred to the court was answered in the affirmative, in favor of the revenue. The reference was disposed of with no order as to costs.