1978 (2) TMI 28 - HC - Income Tax

Summary

Issues Involved:
1. Whether the applicant was an agent of M/s. Skoda Export, Praha, Czechoslovakia, a non-resident, within the meaning of section 163(1) of the Income-tax Act, 1961, for the assessment years 1969-70, 1970-71, 1971-72, and 1972-73.
2. Whether there was any material or evidence to establish that M/s. Skoda Export, Praha, had business connection in the taxable territories through the applicant during the previous years relevant to the assessment years 1969-70 and 1970-71.

Summary:

Issue 1: Agent of Non-Resident u/s 163(1)
The court examined whether the applicant was an agent of the non-resident company, M/s. Skoda Export, Praha, within the meaning of section 163(1) of the Income-tax Act, 1961. The agreements between the assessee and the non-resident company involved delivery of machinery, equipment, and technical co-operation for the erection of a Plate and Vessels Plant. The Income Tax Officer (ITO) held that the non-resident company received taxable income through the assessee, who was deemed an agent u/s 163(1)(c). The Appellate Assistant Commissioner (AAC) and the Income-tax Appellate Tribunal confirmed this view, stating that the non-resident had a business connection with the assessee, thus attracting provisions of s. 9(1)(i) and s. 163(1)(b). The court upheld this decision, affirming that the activities and agreements between the two companies constituted a business connection, thereby justifying the assessee being treated as an agent of the non-resident company.

Issue 2: Business Connection u/s 9(1)(i)
The court analyzed whether there was material or evidence to establish a business connection between M/s. Skoda Export, Praha, and the assessee. The agreements detailed continuous consultancy services, technical assistance, and delivery of machinery, indicating a real and intimate connection between the two entities. The court referred to several precedents, including CIT v. Remington Typewriter Co. and CIT v. R. D. Aggarwal & Co., to define "business connection" as a relationship involving continuity and mutual interest. The court found that the non-resident company's activities, such as deputing experts and providing technical documentation, established a business connection. The court distinguished this case from Carborundum Co. v. CIT, noting that in the present case, the foreign personnel were not employees of the assessee and were controlled by both companies. Thus, the court concluded that there was sufficient material to establish a business connection, affirming the assessee's role as an agent of the non-resident company.

Conclusion:
The court answered both questions in the affirmative, ruling in favor of the revenue. The assessee was deemed an agent of the non-resident company u/s 163(1)(b), and there was sufficient evidence of a business connection u/s 9(1)(i). There was no order as to costs, and the advocate's fee was set at Rs. 250.