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TMI Blog1938 (11) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... Burma, Ceylon the Federated Malay States and French, Cochin, China. In 1929 they formed the Chettinad Bank (sic. Bank of Chettinad) Ltd., which has its headquarters at Kanadukathan in British India. Kanadukathan lies about two miles from the border of the State of Pudukotta and 18 miles from the town of Pudukotta the capital of the State. In 1930 they formed the Pudukotta Bank and also registered in Pudukotta a company called the Chettinad Corporation Limited, both of which have their registered offices at Pudukotta. The business carried on by the Rajah and his sons were wound up and all the assets and liabilities transferred to the three companies. The assets and liabilities of the branches in Burma (which until the 1st April 1937 was a part of British India) were transferred entirely to the Kanadukathan Bank. The assets and liabilities of the branches in the Federated Malay States were mostly transferred to the Pudukotta Bank. The assets and liabilities of the branches in Ceylon were transferred partly to the Colombo branch of them Kanadukathan Bank and partly to the branches of the Pudukotta Corporation Limited in Ceylon. Part of the value of the excess over liabilities was adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has a branch at Kualalampur, a distance of 30 miles from Bentong and another branch at Ipoh, which is also in the Federated Malay States. According to the books between September 1930 and February 1933 loans amounting to ₹ 1,32,86,888 were advanced by the Kualalumpur branch of the Pudukotta Bank to the Bentong branch of the Kanadukathan Bank. Almost the whole of this amount is show as having been lent by the Bentong branch to the Rangoon branch of the Kanadukathan Bank. Of the ₹ 1,32,86,888, ₹ 88,11,796 was retained for use at Rangoon and the balance ₹ 46,75,092 was transferred to the head office at Kanadukathan for use at Colombo. The ₹ 86,11,796 represents more than half of the paid up capital of the Pudukotta Bank. Except to the extent of ₹ 6,74,100 no moneys were actually remitted to Rangoon. The moneys were already there. Excluding the remittance of the ₹ 9,74,100, all that happened was that branch of the Pudukotta Bank passed hundis to the Bentong Branch of the Kanadukathan branch (sic. Bank) and Bentong Branch passed them on to Rangoon after crediting Kualalumpur and debiting Rangoon in its books. The Bentong branch of the Kanaduk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicated have assessed on the basis of profit accruing to the Pudukotta Banks non resident company through a business connection in British India the tax being levied on the Kanadukathan Bank as the agent of the Pudukotta Bank. The Kanadukathan Bank, as the assessee, denies that the business connection exists in British India and says that as the transactions between the two Banks took place at Kualalumpur and Bentong the business connection must be deemed to be there. The arrangement between the two banks was that the moneys advanced by the Pudukotta Bank to the Kanadukathan Bank should bear interest at the rate of 6 3/4 per cent. The Income Tax Officer determined the total taxable income to be ₹ 2,58,622 and issued a demand for ₹ 60,075-13-0 representing Income Tax and super tax on this amount. The question which has been referred is as follows :- "Whether on the facts of this case the Income Tax authorities were entitled to hold that the income from the first six items of loans referred to in paragraph 21 of the Income Tax Officers assessment order accrued and arose to the Pudukotta Bank directly or indirectly through or from a business connection in British ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess connection within it as the decision of the Privy Council in The Commissioner of Income Tax v. Remington Typewriter Company (Bombay) Limited shows. There a company registered in New York manufactured and sold typewriting machines to threercompanies registered in British India. The Indian companies bought and paid for in New York typewriters which were shipped to India for sale here. The respondent company, the company doing business in the Bombay Presidency,had purchased from the American company for shares the goodwill of that company in the Bombay Presidency and adjoining territory. The American company held all its shares except three issued to that company's nominees. The two other Indian companies stood in the same position towards the American company as the Bombay company. It was held that this constituted a business connection within the meaning of Section 42(1) and Section 43, and the Bombay company was chargeable to Income Tax in respect of profits made by the American company. The decision of the Bombay High Court in The Commissioner of Income Tax Bombay Presidency and Aden v. The National Mutual Association of Australasia Ltd., is also in point. In that case the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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