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TMI Blog1969 (2) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... come of Rs. 18,648 in its hands as the income of the non-resident, after deducting an estimated expense of Rs. 4,662. The Appellate Assistant Commissioner, on appeal, set aside the order of the Income-tax Officer. He held that the assessee was not an agent of the non-resident company because the rent which the assessee paid to the non-resident was not received by the latter " through " the assessee and there was no business connection between the assessee and the non-resident. The revenue preferred an appeal before the Income-tax Appellate Tribunal. It was urged before the Tribunal that the word " through " used in section 43, in the facts and circumstances of this case, also meant " from ". The Tribunal was unable to accept this contention. It was further argued on behalf of the revenue that the assessee had business connection with the non-resident. It was urged that an agreement between the resident company and the non-resident was an agreement between the two traders in their trading capacities and, as such, the amount of rent was paid in 7 instalments covering a period of 15 months. The Tribunal was of the opinion that a casual business cannot be held to establish business c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Officer as agent of the non-resident and such person is for all the purposes of this Act to be deemed to be such agent. The third category refers to a person through whom the non-resident is in receipt of any income, profits or gains. The portion of section 43, which refers to the person through whom the non-resident is in receipt of any income, profits or gains, does not necessarily attract the provisions of section 42, for the income, profits or gains received by the person who is treated as agent under section 43 may not fall within any of the several categories of income, profits or gains referred to in section 42. " It is, therefore, clear that if any of the three conditions mentioned in section 43 is fulfilled and the notice has been given by the Income-tax Officer to treat the person as agent, then such a person would be deemed to be the agent of the non-resident. Here it is the admitted position that the assessee is not employed by the non-resident company. The main contention of the learned counsel for the revenue is that the payment of money in this case was through the resident assessee. The expression that really requires decision in this case is whether the ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income-tax v. Bombay Trust Corporation Ltd. There what had happened was that the Bombay Trust Corporation Ltd. was a company having its office in Bombay. There was also a company called the Hong Kong Trust Corporation, incorporated in Hong Kong. The said Hong Kong Trust Corporation lent money, from time to time, on deposit to the Bombay Trust Corporation Ltd. at the rate of 5 3/4 per cent. and the Bombay Trust Corporation Ltd. duly paid interest at the rate on the money deposited. The Income-tax Officer duly served a notice upon the Bombay Trust Corporation Ltd. in terms of section 43 of the Indian Income-tax Act, 1922, that he intended to treat them as agents of the Hong Kong company, and after hearing the Bombay Trust Corporation Ltd. as to the liability, he assessed them to income-tax and super-tax as agents of the Hong Kong company in respect of the amount of interest in the year of charge. There was an appeal to the Commissioner under section 30 of the Act. The Commissioner held in appeal that it was properly assessed and there was a reference to the High Court on the following questions : " (1) Whether the interest paid by the Bombay Trust Corporation Ltd. to the Hong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 42. " But the High Court held that the " term ' agent ' was used in the same sense as ' agent ' is used in section 40, i.e., a person who receives the said profits and gains, and as the respondents, the Bombay corporation, did not receive the money, but on the contrary paid it, they answered questions Nos. 3 and 4 in the negative. " The Judicial Committee was unable to accept the said view of the High Court. Their Lordships were pleased to observe that : " Their Lordships are unable to accept this view, as they feel constrained by the explicit words of section 43, which being explicit must rule whatever may be the general considerations as to what the legislature was minded or was likely to do. Taking the words as they stand, the respondents have a business connection with the Hong Kong Company and 'through them' the company is in receipt of profits or gains. " It appears, therefore, their Lordships of the Judicial Committee having come to the conclusion that there was a business connection between the Bombay corporation and the Hong Kong company, held that the receipt of money by the Hong Kong company was receipt of money through the Bombay corporation. Their Lordships ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying on a part of the main business or activity incidental to the main business of the non-resident through an agent, 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 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. " It may be mentioned here that in the decision of Commissioner of Income-tax v. Currimbhoy Ebrhim & Sons Ltd. advance of a loan by a non-resident was held not to constitute business connection. There, what had happened was Currimbhoy Ebrahim & Sons Ltd., a private limited company carrying on business as managing agents of various companies a as dealers in cloth, obtained a loan from the Nizam of Hyderabad and executed a document in Bombay and as security for repayment of the loan deposited shares in joint st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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