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TMI Blog1969 (2) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... stalments, Rs. 23,310 being the payment during the relevant previous year for the assessment year 1957-58. The Income-tax Officer treated the assessee-company as the agent in India of the aforesaid U.K. company under section 43 of the Indian Income-tax Act, 1922, and assessed a net income of Rs. 18,648 in its hands as the income of the non-resident, after deducting an estimated expense of Rs. 4,662. The Appellate Assistant Commissioner, on appeal, set aside the order of the Income-tax Officer. He held that the assessee was not an agent of the non-resident company because the rent which the assessee paid to the non-resident was not received by the latter " through " the assessee and there was no business connection between the assessee and the non-resident. The revenue preferred an appeal before the Income-tax Appellate Tribunal. It was urged before the Tribunal that the word " through " used in section 43, in the facts and circumstances of this case, also meant " from ". The Tribunal was unable to accept this contention. It was further argued on behalf of the revenue that the assessee had business connection with the non-resident. It was urged that an agreement between the resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by or on behalf of a non-resident, (b) having any business connection with such non-resident, or (c) through whom such non-resident is in receipt of any income, profits or gains. A person who comes within one or other of these three categories may, under this section, be treated by the Income-tax Officer as agent of the non-resident and such person is for all the purposes of this Act to be deemed to be such agent. The third category refers to a person through whom the non-resident is in receipt of any income, profits or gains. The portion of section 43, which refers to the person through whom the non-resident is in receipt of any income, profits or gains, does not necessarily attract the provisions of section 42, for the income, profits or gains received by the person who is treated as agent under section 43 may not fall within any of the several categories of income, profits or gains referred to in section 42. " It is, therefore, clear that if any of the three conditions mentioned in section 43 is fulfilled and the notice has been given by the Income-tax Officer to treat the person as agent, then such a person would be deemed to be the agent of the non-resident. Here it is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it does. " Their Lordships of the Judicial Committee were not concerned in that case with the construction of the expression " through " or whether it can he construed as " from ". The next case relied upon by Mr. Gupta is the decision of the Judicial Committee in the case of Commissioner of Income-tax v. Bombay Trust Corporation Ltd. There what had happened was that the Bombay Trust Corporation Ltd. was a company having its office in Bombay. There was also a company called the Hong Kong Trust Corporation, incorporated in Hong Kong. The said Hong Kong Trust Corporation lent money, from time to time, on deposit to the Bombay Trust Corporation Ltd. at the rate of 5 3/4 per cent. and the Bombay Trust Corporation Ltd. duly paid interest at the rate on the money deposited. The Income-tax Officer duly served a notice upon the Bombay Trust Corporation Ltd. in terms of section 43 of the Indian Income-tax Act, 1922, that he intended to treat them as agents of the Hong Kong company, and after hearing the Bombay Trust Corporation Ltd. as to the liability, he assessed them to income-tax and super-tax as agents of the Hong Kong company in respect of the amount of interest in the year of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Committee was of the opinion that the High Court was " clearly right in holding that the interest in question was a profit or gain accruing or arising to a person residing out of British India, to wit the Hong Kong company from a business connection in British India, and therefore falling under the words of section 42. " But the High Court held that the " term ' agent ' was used in the same sense as ' agent ' is used in section 40, i.e., a person who receives the said profits and gains, and as the respondents, the Bombay corporation, did not receive the money, but on the contrary paid it, they answered questions Nos. 3 and 4 in the negative. " The Judicial Committee was unable to accept the said view of the High Court. Their Lordships were pleased to observe that : " Their Lordships are unable to accept this view, as they feel constrained by the explicit words of section 43, which being explicit must rule whatever may be the general considerations as to what the legislature was minded or was likely to do. Taking the words as they stand, the respondents have a business connection with the Hong Kong Company and 'through them' the company is in receipt of profits or gains. " It ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earning of those profits or gains. It predicates an element of continuity between the business of the non-resident and the activity in the taxable territories, a stray or isolated transaction not being normally regarded as a business connection. Business connection may take several forms ; it may include carrying on a part of the main business or activity incidental to the main business of the non-resident through an agent, or it may merely be a relation between the business of the non-resident and the activity in the taxable territories, which facilitates or assists the carrying on of that business. In each case the question whether there is business connection from or through which income, profits or gains arise or accrue to a non-resident must be determined upon the facts and circumstances of the case. A relation to be a ' business connection ' must be real and intimate, and through or from which income must accrue or arise whether directly or indirectly to the non-resident. " It may be mentioned here that in the decision of Commissioner of Income-tax v. Currimbhoy Ebrhim Sons Ltd. advance of a loan by a non-resident was held not to constitute business connection. There ..... X X X X Extracts X X X X X X X X Extracts X X X X
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