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TMI Blog1937 (4) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... on-resident who nevertheless has a business in British India and has used the loan in question in that business. The profits arising from these loans were assessed under Sec. 42(1) of the Act and the items are enumerated in Sch. B. The assessee contended that Sec. 42(1) did not apply. Sec. 42(1) of the Act runs as follows:-- "In the case of any person residing out of British India, all profits or gains accruing or arising to such person, whether directly or indirectly, through or from any business connexion or property in British India, shall be deemed to be income accruing or arising within British India, and shall be chargeable to income tax in the name of the agent of any such person, and such agent shall be deemed to be for all the purposes of this Act, the assessee in respect of such income-tax". It is admitted that the respondent resides in Pudukotta. The sole question is whether the items in Sch. B must be deemed to be income accruing or arising within British India: for that purpose it is necessary to see whether they accrue or arise, directly or indirectly through or from any business connection or property in British India. The question propounded is: Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income Tax v. Bombay Trust Corporation (52 Bom. 702) and Commissioner of Income Tax v. Bombay Trust Corporation (54 Bom. 216) the Hong Kong Trust Corporation lent deposits to the Bombay Company amounting to over 15 crores annually, this was about 16 times the paid up capital of the Bombay Company; there appears to have been no security and it was held on a review of the facts that a business connexion had been established. On the other hand in Commissioner of Income Tax v. Currimbhoy Ebrahim & Sons, 60 Bom. 172; their Lordships of the Privy Council held that where the Nizam of Hyderabad (residing out of British India) in an isolated transaction lent money to the respondents in Bombay no business connexion within the meaning of Sec. 42(1) had been established. The Nizam was not carrying on the business of a money lender in British India or in Hyderabad, and thus there was no business from which a business connexion might arise. In the present case the respondent was carrying on the business of money-lender and the question is whether a business connexion arose from it. There is nothing in the Letter of Reference to show that these loans were other than isolated transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income Tax first, but the Madras practice is in conformity with that of the Calcutta and Allahabad High Courts; [See Killing Valley Tea Co. v. Secy. of State, Re John and Co.] and good reason should be shown before any departure is made from it. The Commissioner of Income Tax must pay the costs of this reference, 20 Gold Mohurs, and in addition the ₹ 100 deposited under Sec. 66(2) should be refunded to the assessee. LEACH, J.--I agree that the question propounded must be answered in the negative. There is no evidence that the profits which the income tax authorities seek to tax have arisen from any business connexion in British India. On the facts stated in the reference the loans can only be treated as isolated transactions entered into outside British India. I also agree with the remarks of the learned Chief Justice with regard to the right to begin. MACKNEY, J.--I agree. The reference has been worded in rather a curious manner; for evidently the point upon which our opinion is desired is whether the Income Tax Officer in applying his mind to the facts of the case has employed an interpretation correct in law, to Sub-S. (1) Sec. 42 Income Tax Act. With regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson employed by or on behalf of a person residing out of British India, or having any business connexion with such person, or through whom such person is in the receipt of any income, profits or gains upon whom the income tax officer has caused a notice to be served of his intention of treating him as the agent of the non-resident person shall, for all the purposes of this Act, be deemed to be such agent: Provided that no person shall be deemed to be the agent of a non-resident person, unless he has had an opportunity of being heard by the Income Tax Officer as to his liability." "Having any business connexion with such person" must be interpreted consistently with what has been said in the foregoing and must mean "conducting a business being a business with which such person is connected". And "through whom such person is in the receipt of any income" does not mean "from" whom that is, a person paying interest to a person out of British India on a loan taken by him from that person is not one through whom income is received but one from whom income is received and he cannot be deemed to be an agent of that person. Now P.V.R.M. Visal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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