TMI Blog1952 (3) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Income-tax Officer to Abdullabhai Abdul Kadar respectively on 14th February, 1945, 19th February, 1945, and 10th October, 1945. These notices were issued by the Income-tax Officer in the following form: You are hereby informed that under Section 4;i of the Indian Income-tax Act, 1922, I intend to treat you as the agent of Haji Mahomed Syed Alberbary of Port Sudan (non-resident) for the income-tax year............... If you wish to be heard by me as to your liability, you should appear before me to state your objection at this office on the.........at the above address. A formal order under Section 43 of the Indian Income-tax Act in respect of the assessment year 1942-43 was passed on 12th March, 1945, and a similar formal order in respect of the assessment years 1943-44, 1944-45 and 1945-46 was passed on 27th June, 1946, that is to say, about 3 months after the death of the non-resident. A copy of the formal order under Section 43 in respect of the assessment year 1943-44 is Annexure A and forms part of the case. There were similar formal orders in respect of the assessment years 1944-45 and 1945-46. The fact that the non-resident died ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf of other principals outside British India. In regard to this contention, the Tribunal observed as follows: The allegation that the non-resident was a 'broker was not made before the Income-tax Officer. No evidence in support of this allegation was produced before the Income-tax Officer. A declaration made by one Mahomed El-Syed El-Barbary and an affidavit filed by one of the partners of the assessee firm were produced before the Appellate Assistant Commissioner. Some invoices were also produced. But we are not impressed either by the invoices, or by the declarations or by the affidavit. It is possible that the non-resident acted as a broker on behalf of some of his constituents while placing some of the orders with the assesses. It was, however, for the assesses to prove what orders were placed by the non-resident on behalf of his constituents. This he has not done. We arc informed that the nonresident is non-co-operating with the assessee, It may be so. But if that is so, we cannot obviously give relief to him. All that we can say is that we sympathise with the assessee. Abdullabhai Abdul Kadar in his application under Section 66(1) of the Act states as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act provides, inter alia, that all income, profits or gains accruing or arising from any business connection in British India shall be deemed to be income accruing or arising within British India, and where the person entitled to the income, profits or gains is not resident in British India, shall be chargeable to income-tax either in his name or in the name of his agent, and in the latter case such agent shall be deemed to be, for all the purposes of the Act, the assessee in respect of such income-tax. The income which is deemed to have accrued in British India prior to 26th March, 1946, is chargeable to income-tax either in the non-resident's name or in the name of his agent. It is, however, pointed out to us that the assessee was appointed as an agent by the Income-tax Officer for the assessment years 1943-44, 1944-45 and 1945-46 on 27th June, 1946. Section 43 provides, inter alia, that any person having any business connection with a person residing out of British India 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 the Act, be deemed to be such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii), but for the sake of clarity question No. (iii) has been separately stated. 11. At the time of finalising the case Mr. Kolah drew our attention to the fact that no reference has been made in the case to the sinking of a ship known as S.S. Rehmani in July, 1943. The assessee wanted to raise an additional ground of appeal. It was in this connection that the question regarding the sinking of S.S. Rehmani came up before the Tribunal. Paragraph 2 of the Tribunal's order is as follows: The appellant wanted to raise an additional ground in one of the appeals. It was alleged that some goods shipped by the appellant by S.S. Rehmani were lost in July, 1943. It was further alleged that the fact that the goods were lost as a result of the sinking of S.S. Rehmani came to his knowledge only some time in December, 1947. The appellant, therefore, wanted to raise an additional ground in connection with the alleged loss of the goods. After examining the evidence produced before us we are satisfied that the appellant's allegation, that became to know about the loss only in December, 1947, is not true. We, therefore, refuse to give permission to the appellant to raise the additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayed El. Barbary. A copy of the affidavit sworn by El. Sayed Mohammed El. Sayed Barbary is annexure 'B' and forms part of the case. 4. In this connection, we should like to add a few words. In quite a number of cases disposed of by the Appellate Tribunal under Section 42 of the Indian Income-tax Act, it was held that the business connection between a non-resident principal and a resident agent was send goods to the non-resident acting as an agent. That being the past practice, to which no exception was taken, the parties, when the case was finalised, agreed that the facts in the case had been correctly stated and that there had been no omission of any material fact. 5. The High Court has also raised the following question: Whether there was any evidence on record to justify the finding of the Tribunal that the statement of the applicant that the loss of S.S. Rehmani and the said goods came to the knowledge of the applicant only in December, 1947, is not true 6. The question relating to the loss of S.S. Rehmani was raised under Rule 12 of the Appellate Tribunal Rules, 1946. The rule is in the following terms: The appellant shall not, except by leave o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he second witness examined was Devidas Mulchand, a clerk of Nemchand Jamnadas Co. He states that the brokers informed people who came to ask about the safe arrival of the Habib, a partner of the assessee firm, came to make certain enquiries in December, 1947. The third witness examined was Mahomed Habib, a partner of the assessee firm. He states that he got intimation about the loss of S.S. Rehmani in the beginning of December, 1947. He further states that he had seen Devidas frequently before December, 1947, but had no talk with him about the safe arrival of the cargo shipped by S.S. Rehmani. He further states us follows: I cannot say whether the non-resident wrote about the receipt of goods booked by other ships. He may have. It is according to the usual custom. Copies of our accounts are sent to the relevant parties every year in about 18 months' time when the staff finds time. The non-resident did not inform me at any time that the accounts were not correct. There is correspondence in the office for the period August, 1943, to end of 1944 in connection with the statement of accounts, and it can be produced. It was he who had filed the affidavit annexure C . When ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 22nd of March, 1950. On that day we directed the Tribunal to submit a supplementary statement of the case. That supplementary statement has now been submitted by the Tribunal ; and on this supplementary statement various questions arise which have got to be considered. The first question which has been argued by Sir Jamshedji on behalf of the assessee is that with regard to the assessment years 1943-44, 1944-45 and 1945-46 his client cannot be assessed as an agent under Section 43 in view of the death of the non-resident. Now, the facts with are necessary to be considered with regard to this contention 43 for the year 1942-43 on the 12th of March, 1945. The nonresident died on the 26th of March, 1947, and the orders appointing the assessee statutory agent with regard to assessment years 1943-44, 1944-45 and 1945-46 were passed on the 27th of June, 1946. Sir Jamshedji's contention is that inasmuch as the non-resident was dead, no order can be passed after his death, appointing the assessee as statutory agent. It is perfectly true that when one has to deal with a contractual agency, death of the principal brings the agency to an end. But under Section 43 we are dealing, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as a commission agent of the non-resident for several years and that the assessee entered into several transactions on behalf of the non-resident. The Income-tax Officer who has made an order under Section 43 found that the assessee had been regularly purchasing and selling goods on behalf of the non-resident and under his instructions. The assessee also transacted ready and forward business in cotton piece-goods and other articles on behalf of the non-resident and they were regularly purchasing and selling goods on behalf of the non-resident and under his instructions. These findings have been accepted by the Tribunal. The question is whether on these facts it can be stated that the assessee was rightly made a statutory agent of the non-resident under Section 43 of the Act. Now, it is not necessary to emphasize the fact that Section 43 merely sets up a machinery to give effect to the substantive provisions of Section 42. Therefore, before we can go to Section 43 we must find that the non-resident was liable to pay tax under Section 42. It is only when he is so liable that the question of appointing a statutory agent under Section 43 can arise. Now, the non-resident would only be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as contemplated by Section 42 there must be an element of continuity in the agency. An isolated transaction through an agent, or even a connection for a short period, would not necessarily constitute business connection. It is impossible to give an interpretation to this expression which would be a good interpretation for all the innumerable cases which may arise. It is only possible to interpret the expression negatively rather than positively. I can only point out what is excluded from the expression business connection but it is not possible to say what is included in it. In most cases it would depend upon the facts of the particular case as to whether the business connection has been established or not. Now applying this test to the facts of the present case it is clear that the connection between the assessee and the non-resident was not of a casual character. We have not here a case where an assessee entered into a few isolated transactions with the non-resident. Continuity of agency has been definitely established on the facts of the case. As I pointed out for several years the assessee has been acting as a commission agent of the non-resident. During these years h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim upon the goodwill of the brokers. Sir Jamshedji says that these sentences make it clear that their Lordships of the Allahabad High Court were emphasizing the fact that the agent must be retained by the principal before he can be constituted a statutory agent under Section 43. In other words Sir Jamshedji says that there must be contractual obligation upon the agent to accept the work sent to him by the principal. According to Sir Jamshedji a distinction was drawn in this case between the freelance brokers, as the learned Judges called the brokers in Cawnpore who entered into the transaction on behalf of the constituents in British India with the mills, and an agent under an obligation to act as such. Now, in my opinion, that is not the true reading of this case. The learned Judges have used the expression retained not in the sense in which Sir Jamshedji wants us to understand it. All that the learned Judges emphasized (as they were entitled to do) is that the brokers were not employed or engaged by the mills. The brokers were free lance brokers in the sense that they offered to purchase cloth on behalf of their constituents. No occasion arose for the Allahabad High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e have not to review or re-assess the evidence led before the Tribunal or to consider its sufficiency. The only question of law that arises is whether there was any material on which the finding of the Tribunal that the loss of S. S. Rehmani was known to the applicant prior to December, 1947, was justified. Now materials may be direct evidence or they may be circumstances and probabilities on which a Tribunal may act. Inferences may be drawn from proved facts and the fact finding Tribunal may act on those inferences. The question of law will only arise when there is no material at all which would justify the finding of a particular fact. Now the assessee can only ask us to interfere with the finding of the Tribunal provided he satisfies us that there was no material at all on which the finding of the Tribunal could be justified. Mr. Kola has taken us through the evidence led before the Tribunal which is annexed to the supplementary statement of the case. Now, as I said before, we refuse to reassess that evidence ; but certain salient and undisputed facts emerge on which really the finding of the Tribunal is based. The most important of these facts is that on the 3rd of August, 1943 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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