TMI Blog1987 (4) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... A had business connection with the Indian company and, therefore, that the Indian company was correctly treated as an agent of the said non-resident companies under section 163 of the Income-tax Act, 1961 ? (2) If the answer to question No. 1 is in the affirmative, then, whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that any profit could be deemed to accrue or arise in India to the six non-residents in the United Kingdom in respect of the goods sold by them to customers in India ? (3) Whether, on the facts and in the circumstances of the case, and on a proper construction of the agreement dated March 22, 1955, between the Indian company and Crane Packing Ltd. (company in Group-B), the Tribunal was right in holding that the non-resident company had business connection with the Indian company and, therefore, the Indian company was correctly treated as an agent of the said non-resident company under section 163 of the Income-tax Act, 1961 ? (4) If the answer to question No. 3 is in the affirmative, then, whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that any profit could be deem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Group in the United Kingdom with which the Indian company had no direct contract, but which supply goods to India as per orders placed by the Indian company through the non-residents ........" The Income-tax Officer also found that the Group-A companies belonging to the T. I. Group were connected with the Indian company through the export company. Appeals challenging the assessments were taken to the Appellate Assistant Commissioner. Before him, the assessee tried to establish the actual course of dealing between the Indian company and the ten non-residents and contended that no liability under the Act accrued. The appellate authority dismissed the contentions of the assessee by holding that " the assessee has produced no proof of its assertions and, on the contrary, has blocked the enquiry by me thereon ". Along with the grounds of appeal filed before the Tribunal, an affidavit dated December 27, 1965, of Carol Stuart Cameron was filed. Cameron stated in that affidavit that he was the secretary of the assessee and was in super-intendence of the proceedings relating to the assessments of the assessee as representative assessee of the ten non-residents. In that affidavit, he de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or it may merely be a relation between the business of the non-resident and the activity in the taxable territories, which facilitates or assists the carrying on of that business. In each case, the question whether there is a business connection from or through which income, profits or gains arise or accrue to a non-resident must be determined upon the facts and circumstances of the case." " A relation to be a business connection must be real and intimate, and through or from which income must accrue or arise whether directly or indirectly to the non-resident. But it must in all cases be remembered that by section 42, income, profit or gain which accrues or arises to a non-resident outside the taxable territories is sought to be brought within the net of the income-tax law, and not income, profit or gain which accrues or arises or is deemed to accrue or arise within the taxable territories. Income received or deemed to be received, or accruing or arising or deemed to be accruing or arising within the taxable territories in the previous year is taxable by section 4(1)(a) and (c) of the Act, whether the person earning is a resident or non-resident. If the agent of a non-resident r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome which could be deemed to accrue or arise in India by invoking the provisions of section 9 as no operation is carried out in India." The order of the Appellate Assistant Commissioner shows that Cameron appeared before him at the hearing on September 3, 1965, and September 4, 1965, and the appeals were dismissed by order dated September 17, 1965. This court's judgment in CIT v. R. D. Aggarwal Co. [1965] 56 ITR 20 (SC), was pronounced on October 6, 1964. The order of the Appellate Assistant Commissioner makes casual reference to this judgment but the ratio thereof had not been put to use in any manner and the same does not appear to have had any perceptible effect on the decision of the Appellate Assistant Commissioner. Along with the memoranda of appeal filed before the Tribunal, the assessee filed the affidavit of Cameron. That affidavit is dated December 27, 1965. The Revenue had notice of it and the Tribunal in its decision has stated " along with the grounds of appeal before us, there is an affidavit by Shri Cameron setting out the course of dealing and alleging that several of these representatives files were inspected by the Appellate Assistant Commissioner at the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of any of these non-residents whether they belonged to Group-A or Group-B. The Department, as we have stated, has not adduced any evidence to contradict the facts stated by Cameron either from the course of dealings between the parties or otherwise. The position, therefore, is that in a case like this there can be no business connection unless the Indian assessee has the authority to accept offers or to enter into contracts on behalf of the non-residents. The Tribunal has found that in the case of one company only there was an express prohibition against acceptance of offers. But in the other contracts there was no such express prohibition. The Tribunal has granted relief in the case of express prohibition but has taken a different view with regard to those contracts in which there was no such prohibition. In our opinion, having regard to the facts stated by Cameron and the course of dealings between the parties, the absence of express prohibition, in the instant case, is immaterial. It is true that the Indian company was the sole agent of the Group-B companies. But it appears from the evidence on record that in spite of being the sole agent, the Indian company had no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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