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TMI Blog1980 (8) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... . During the previous year relevant to the assessment year 1962-63 the statutory agent purchased tobacco in India and exported it to Japan, where it was sold through M/s. Toshoku Ltd. (the assessee involved in Civil Appeal No. 782 of 1973), a Japanese company, and admittedly non-resident. Under the terms of the agreement between the statutory agent and the assessee referred to above, the latter was appointed the exclusive sales agent in Japan for selling tobacco exported by the former. The assessee was entitled to a commission of 3% of the invoice amount. The sale price received on the sale of tobacco in Japan was remitted wholly to the statutory agent who debited his commission account with the amount of commission payable to the Japanese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular (XX-VII-I) of 53 No. 26 (II/53) dated July 17, 1953, which stated : "A foreign agent of an Indian exporter operates in his own country and no part of his income arises in India. Usually his commission is remitted directly to him and is therefore not received by or on his behalf in India. Such an agent is not liable to Indian income-tax." The ITO, however, came to the conclusion that the sums in question were taxable in view of the decision of this court in P. V. Raghava Reddi v. CIT [1962] 44 ITR 720 and assessed them under s. 143(3) read with s. 163 of the Act. The appeals preferred by the statutory agent against the orders of assessment before the AAC and the Income-tax Appellate Tribunal were unsuccessful. Thereafter, the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income in India, or through the transfer of a capital asset situate in India shall be deemed to accrue or arise in India. The Explanation to this clause provides that in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India and in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export. An agent of a non-resident including a person who is treated as an agent under s. 163 of the Act becomes, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to establish its case, the revenue has strongly relied on the decision of this court in the case of Raghava Reddi [1962] 44 ITR 720. A perusal of that decision shows that the said case is distinguishable on facts. In that case, the assessee had exported in the years 1948-49 and 1949-50 certain quantity of mica to Japan. Mica was not exportable directly to Japanese buyers during those years as Japan was under military occupation but to a State organisation called Boeki-Cho (Board of Trade). To negotiate for order and to handle its other affairs in Japan in connection therewith the assessee engaged San-Ei Trading Co. Ltd., Tokyo, as its agent. The Japanese company was admittedly a "non-resident" company. Under the agreements, the assessee un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the fiction at all. The agreement, from which we have quoted the relevant term, provided that the Japanese company desired that the assessee-firm should open an account in the name of the Japanese company in their books of account, credit the amounts in that account, and deal with those amounts according to the instructions of the Japanese company. Till the money was so credited, there might be a relation of debtor and creditor; but after the amounts were credited, the money was held by the assessee-firm as a depositee. The money then belonged to the Japanese company and was held for and on behalf of the company and was at its disposal. The character of this money changed from a debt to a deposit in much the same way as if it was credited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of receipt of income actual or constructive in the taxable territories during the relevant accounting period. The second aspect of the same question is whether the commission amounts credited in the books of the statutory agent can be treated as incomes accrued, arisen, or deemed to have accrued or arisen in India to the non-resident assessees during the relevant year. This takes us to s. 9 of the Act. It is urged that the commission amounts should be treated as incomes deemed to have accrued or arisen in India as they, according to the department, had either accrued or arisen through and from the business connection in India that existed between the non-resident assessees and the statutory agent. This contention overlooks the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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