TMI Blog1933 (2) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... articularly income derived from investments, profits from non-participating policies, and other income beyond the contributions from the participating policy holders, and as the company had not made a return disclosing those profits, we held that the Commissioner of Income-tax was entitled to assess the company under Rule 35, Income-tax Rules. Now, in respect of the year in dispute, the company has made a return of three sources of income which, they say, constitute all the income chargeable according to our former decision, those three sources being, renewal premiums received under non-participating policies 90-4-8, interest 3,149-1-0 and fees 2-9-0, a total of 3,241-14-8, and the company is prepared to be assessed on that income without making any deduction in respect of the expenses incurred in earning it. So that the company's case is that this sum of 3,241-14-8 is the only income taxable under the Indian Income- tax Act. The learned Commissioner took the view that the company ought to have made a return in the prescribed form under Sec. 22 of the Act, that as the company had not made a return in the prescribed form, he was at liberty to make the best assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from participating policies, although not profits or gains, are nevertheless premium income. It would be a matter of chance whether a comparison of the total premium income with the total Indian premium income would be more or less in favour of the assessee company than a comparison of the total non-participating premium income with the non-participating Indian premium income. If therefore the learned Commissioner was right in applying R. 35 at all, I think that he has applied it in the right way. But the contention of the company is that that rule only applies in the absence of more reliable data, and that as the company supplied the Income-tax Officer with the actual figures of their receipts of moneys accruing or arising in British India which are liable to tax, he got all the data he could require for making a proper assessment. If the matter rested only upon the arguments stated in the case, I should be disposed to agree with that contention. As I have already stated, I do not think that a return in the prescribed form would have provided the necessary data, and although failure to make a return in the prescribed form justified the Commissioner in making an assessment unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the profits made by the sale of those goods outside British India. These decisions show that in the case of a non-resident, income which neither accrues, nor arises nor is received, within British India, may be liable to tax under the combined operation of Ss. 3, 4 and 42, Income-tax Act: that is to say, a non-resident may be liable to tax in respect of, sources of income, which would not be liable to tax in the case of a resident. The proposition is no doubt a somewhat startling one, but it is desirable that decisions of the Courts in India under the Income-tax Act should be uniform as far as practicable and I think that we ought to follow these two cases without pausing to inquire whether we should ourselves have arrived at the same conclusion. I do not myself see any distinction in principle between the case of goods acquired in British India by an agent in British India, and sent to the principal resident outside British India and there sold at a profit, and the case of moneys collected by an agent in British India and sent to the principal outside British India and there invested by him at a profit. It is further to be observed that the Madras High Court in Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Investments might conceivably be in some form of business, and it might be very difficult to show what profits or gains have been derived therefrom. We were pressed also with the implications of the Advocate-General's argument. A person resident outside British India may receive moneys from a business connexion in British India in various ways. They may be moneys received from a firm in which he is a partner, or moneys received from a company in which he is a share-holder, or moneys received from a business which is managed on his behalf by an agent; they may be capital or income, and if income, they will probably have paid Indian Income-tax. Are profits derived from those moneys to be regarded for all time as profits or gains accruing or arising from a business connexion in British India, and as such liable to tax under S.42 by the machinery provided by that section, and S.43 I feel the force of the argument, but I do not see how to avoid the conclusion that the Income-tax Commissioner is entitled to the particulars which he claims; and if the assessee is unable to provide the necessary material on which to base an assessment then the legislature has thoughtfully provided th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e data. S. 22 (1) provides that the principal officer of every company shall furnish to the Income-tax Officer every year a return in the prescribed form and verified in the prescribed manner. The form which is prescribed is on the record as Ex. B. The learned counsel's argument is that having regard to S. 59 and the rules made thereunder and in particular to R. 25, the legislature recognised that the prescribed form referred to in S. 22(1) was not applicable to a company carrying on business such as the assessee company is doing. It seems to me that there is considerable force in this argument. Section 59 provides that the Central Board of Revenue may make rules prescribing the manner in which and the procedure by which the income, profits, and gains shall be arrived at in the case, among others, of insurance companies. R. 25 of the rules seems to support this contention, and shows that the method of assessing the profits or gains of life insurance companies must in its very nature be different from that employed in the case of an ordinary trading concern or business, and so does R. 35. In view of the conclusion to which we have come, it is not necessary to pursue the matter f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on High Court in Commissioner of Income-tax, Burma v. Messrs. Steel Brothers Co. Ltd. The question, then, is whether on the facts of this case Section 42 would apply. Before discussing it, I shall deal with the assessee company's complaint that the ground now put forward by the Advocate-General was not one of the grounds on which the Commissioner relied for holding that the return made by the company was not reliable data . It is undoubtedly true that this is not relied upon as one of the grounds by the Commissioner for holding that the data furnished by the assessee was not reliable. But the record shows that the real complaint of the Income-tax authorities was that the assessee was not disclosing the interest earned during the accounting period on the premium income derived from the holders of the participating policies, and this appears from p. 18 of the record. There the Income-tax Officer observed as follows:- The learned solicitor who appears for the assessee argues that the premiums received in Indian are remitted to the Head Office monthly and that the same are invested outside India and any interest realized on such investments is not liable to tax in India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a definition. The word includes in the interpretation clauses is intended to be enumerative and not exhaustive and it has and extending force and does not limit the meaning of the term. In the corresponding Section 3, English Finance Act of 1915, the words are through or from any branch, factories, agency, receivership or management. In my opinion, the expression business connexion is a more comprehensive expression as including not only the kinds of things specifically described as being included in the term, but the kind of things which are specifically mentioned in the English Act. All that is necessary is that there should be a business in British India and a connexion between a non-resident person or company and that business, and that the non-resident person or company has earned an income through such connexion. It has been held in Commissioner of Income-tax, Burma v. Messrs. Steel Brothers Co. Ltd., that the expression business connexion should be confined as described by what is stated in Section 2(4). With all respect, I am unable to agree. In the Calcutta case to which I have referred, it was held that there was a business connexion although all that happe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
