TMI Blog1950 (11) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... is a non-resident for the purpose of the Income-tax Act. He purchased in the Baroda State tobacco for Mohanlal Hargovind of Jubbulpore for the latter's 'bidi' business. Mohanlal Hargovind paid him a commission of ₹ 7,145 at 1 per cent approximately of the total value of the goods purchased by the non-resident for him. On these facts the Tribunal took the view that the commission so earned was from a business connection in British India and was therefore assessable to tax under Section 42 of the Act. Section 42 as made applicable to this case runs thus:- All income, profits or gains accruing or arising, whether directly or indirectly, through or from any business connection in British India,..........shall be deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f transactions which took place in 1924 and 1925. Tax was paid in respect of the transactions of 1926 without contest. The question was raised again in respect of a transaction of 1927. The case is reported in Commissioner of Income-tax, Bombay v. Bombay Trust Corporation [1936] 4 I.T.R. 323. Their Lordships found that the resident as well as the non-resident companies were all closely associated, their share capitals being held almost exclusively by members of the same family. It was found that they were working in concert as though under one control. Evidence was, however, lacking that in 1927 the loan from the Hongkong Company continued and that interest accrued or arose to that company thereon. It was, therefore, held that the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his income their Lordships observed:- It is not shown that the Nizam has at any time had an interest direct or indirect in the respondent company. There is not evidence of a course of dealing between the parties such as might fairly be described as a business connection previously subsisting between them......If the words 'accruing or arising to such person whether directly or indirectly through or from any business connection in British India' are not to be deemed satisfied in every case in which a single monetary transaction by a non-resident with a resident produces gain to the former, it is difficult to see in the facts of this case any distinguishing element of business connection which the Legislature has chosen as the tes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concert with a view to producing profit it is difficult to draw inference. Where, however, as in Currimbhoy Ebrahim's case [1935] 3 I.T.R. 395, the non-resident has no interest direct or indirect in the resident company and there is only a single transaction between the non-resident and the resident resulting in gain to the former, without any further evidence of a course of dealing between the parties, the inference of business connection cannot be drawn. The learned Counsel for the Commissioner strongly relies on Hira Mills Ltd., Cawnpore v. Income-tax Officer, Cawnpore##, and Bangalore Woollen, Cotton and Silk Mills Co. v. Commissioner of Income-tax [1950] 18 I.T.R. 423. But the department can derive little support from either of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y by the agents and the entire proceeds were realized by the agents who also made all disbursements connected with the business of the Mills. The agents acted also as bankers. The agents were given absolute discretion with reference to the purchases as to from whom to buy, where to buy and at what rate. In short, the managing agents in British India carried out in British India most of the activities connected with the business of the non-resident. It is thus a clear case of income received by the non-resident from business connection in India. The mere lending of money purely as a loan to a person in business does not establish a business connection with the person; the business of the borrower does not thereby necessarily become conne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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