9911796707
TMI Blog1935 (10) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... dent company as interest due upon a loan of ₹ 50,00,000 made by the Nizam to the respondent company upon the terms of a written instrument dated August 16, 1929. The latter claim was laid under the heading "Other Sources" as defined by Section 12 of the Act. This assessment of the respondent company in respect of income tax claimed to be due from the Nizam was based upon proceedings taken under Section 43 of the Indian Income Tax Act (Act XI of 1922) a notice having been issued upon the respondent company to the effect that the Income Tax Officer intended to treat them as agents of the Nizam. Notice having been issued on May 7, 1931, and the respondent company having appeared and objected, the Income Tax Officer on June 5, 1931, made an order in writing holding that a business connection existed between the respondent company and the Nizam, and that the word "property" appearing in Section 42, sub- section (1) of the Act includes movable property and investments. The final conclusion of this order was that there was income chargeable to income tax under Section 42 (1) of the Act and that Messrs. Currimbhoy Ebrahim & Sons, Limited, might be deemed to be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicants are liable to be assessed as Agent for His Exalted Highness the Nizam in respect of:- (a) Interest on the loan above referred to, (b) Property income above referred to. "(5) Whether the assessment levied on the applicant is valid in law." The opinion of the Commissioner submitted as required by sub-section (2) of Section 66 of the Act was to the effect that the interest income arose from a business connection in British India within the meaning of Section 42, sub-section (1). He also found that the respondent company were liable to be deemed the Nizam's agents for all the purposes of the Act by reason of the fact that they had a business connection with the Nizam. The High Court of Bombay answered all the questions propounded in the negative holding that there was no business connection between the Nizam and the respondent company, that the interest income did not arise to the Nizam through or from any property in British India, and that the respondent company is not hit by Section 43 of the Act either as having any business connection with the Nizam or as being persons through whom the Nizam is in receipt of any income, profits or gains. It is from thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (1) of Section 4, but it is said that by virtue of the first sub-section of Section 42 this income is deemed to be income accruing or arising in British India within the meaning of the concluding words of Section 4. Whether or not the income is to be deemed to accrue or arise in British India and so to be chargeable to income-tax in British India, depends on the two questions: (a) Did it accrue or arise to the Nizam through or from any business connection in British India? (b) Did it accrue or arise to the Nizam through or from any property in British India? In their Lordships' opinion both of these questions have been correctly answered in the negative by the learned Judges of the High Court of Bombay. It was contended on behalf of the respondents that the words "business connection" and "property" in Section 42(1) are intended as repetitions of the expressions "business" and "property" appearing in Section 6 to describe "heads of income",and that the interest income now in question, being admittedly taxable under the 6th heading "other sources", cannot be said to accrue or arise through or from any business conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t produces gain to the former, it is difficult to see in the facts of this case any distinguishing element of business connection which the legislature has chosen as the test for rendering chargeable to British Indian income-tax income which has not accrued in British India. There is no proof that the Nizam is carrying on business of money- lending either in Hyderabad or British India. So far as appears, he invested some surplus capital in making a loan to the respondent company taking security therefor. That the respondent company doubtless used the borrowed money in connection with their own business is not a fact which brings the Nizam any nearer to being a person who has business connection in British India. The circumstance that the repayments of the loan are contemplated to extend over a period of five years, and that the interest would be payable from time to time during this period,is equally ineffective to bring the case within the words of sub-section (1) of Section 42. Upon the question whether the interest income accrued or arose to the Nizam through or from property in British India, their Lordships agree with the view expressed by the learned Chief Justice of Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
