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TMI Blog1922 (10) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ow it makes its profits, if it is in fact made and received in France and not here. By section 3(1) the Act is to apply to all income from whatever source it is derived if it accrues or arises or is received in British India, or is under the provisions of the Act deemed to accrue or arise or to be received in British India. By section 5, which is the charging section, certain classes of income are chargeable to income-tax and they include "(IV) income derived from business." Chapter 4 of the Act, headed "liability in special cases," contains a group of sections providing for taxation of certain persons although not the actual persons entitled to the income in question, such as. guardians, trustees, agents and partners in a firm which has discontinued business. Section 33(1), one of those grouped sections, is in the following words:- "In the case of any person residing out of British India all profits or gains arising to such person, whether directly or indirectly through or from any business connection in British India, shall be deemed to accrue in British India and shall be chargeable to income-tax in the name of the agent of any such person, and such ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther directly or indirectly through or from any branch, factorship, agency, receivership, or management, and shall be so chargeable under section 41 of the Income-tax Act of 1842 in the name of the branch, factor, agent, receiver or manager." In Greenwood v. Swidth & Co. [1922] 1 AC 417, the House of Lords affirming the decision of Rowlatt J., in Stnidth & Co. v. Greenwood [1920] 3 KB 275, and of the Court of Appeal in Smidth & Co. v. Greenwood [1921] 3 KB 583 decided that this section, though in terms wide enough to bring into tax non-residents in respect of profits earned abroad through direct or indirect dealing through an agency in England, did not bring into tax profits unless they were earned or received in Great Britain and held that that section was a machinery section and not a charging section. Lord Buckmaster at page 423 stated the principle in the following words:- "It is important to remember the rule which the Courts ought to obey that when it is desired to impose a new burden by way of taxation it is essential that the intention should be stated in plain terms. The Courts cannot assent to the view that if a section in a taxing statute is of doubtful and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be deemed to be for all the purposes of this Act the assessee in respect of such income-tax." The phrase "shall be deemed to be income accruing or arising within British India" relates back to section 3(1) where under the heading "Taxable income" it is enacted that This Act shall apply to all income from whatever source it is derived if it accrues or arises or is received, in British India, or is, under the provisions of this Act, deemed to accrue or arise or to be received in British India." Hence sections 3(1) and 33(1) read together import that the Act shall apply to all income accruing or arising to a non-resident in British India, whether directly or indirectly, through or from any business connexion in British India. The Government Pleader, on behalf of the Board of Revenue, contends that this renders liable to income-tax all business profits made by a non-resident received not only within but outside of British India in so far as these accrue or arise through or from any business connexion in British India. If the phrase "business connexion" is to be read as the Government Pleader contends as something much wider than the term &quo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." At one stage of his argument the Government Pleader contended that such a phrase might be implied under sub-section (vi) of Section 5, "income derived from other sources" but such a contention I cannot accept, as it violently contravenes the principle enunciated above that taxation must, be imposed by express words. The real question for decision is, is the phrase "through or from any businees connexion" in section 33(1) governed and controlled by the phrase "derived from business" in section 5 (iv) or not? That it is, seems to me to be obvious from the fact that section 33(1) is not designed or situated in the Act as a. charging section in addition to section 5. It is not found under the chapter "Taxable-income" alongside the charging section, but under the chapter headed " Liability in special cases," a chapter which is designed to provide for the collection of the tax from persons other than the direct beneficiaries of the income received, that is guardians, trustees, agents, receivers and so on. That is, it is part of the "machinery" sections setting out the method by which the tax, if otherwise chargeable, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness, and, in order to guard against the section-feeing taken to mean that it is merely the agent's own profits which are chargeable, language is used implying that it is the profits of his firm accruing in or arising through its, business connexion in British India which are taxable through the agent. In the present case the non-resident firm in India is merely buying: raw material for shipment and sale abroad, and the profits realized from the sale are realized in Paris. There is clear authority in the leading case of Sulley v. The Attorney-General [1860] 5 H& N 711, which is an exactly parallel case, for holding that the firm does not thereby carry on trade or business in British India. It was there held that the place of trade is the place where the profits come home to the firm, and a non-resident firm is not assessable on profits made abroad merely because it has a resident agent for purchasing and shipping raw material, and that it is no part of the income-tax law so far as laid down that the firm shall be taxable in every country in which it has established buying agents. To a similar effect is the decision in Smidth & Co. v. Greenwood [1921] 5 H & N 711 , where it i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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