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Commissioner of Income Tax, Burma Versus P.V.R.M. Visalakshi Achi

[1937] 5 ITR 448 - Civil Ref. No. 9 of 1936 - Dated:- 2-4-1937 - Roberts (CJ), Leach And Mackney, JJ. For the Commissioner of Income Tax, Burma : E. W. Lambert (Asst. Govt. Advocate) For the Assessee : R. Clark JUDGMENT Roberts, CJ. This is a reference made by the Commissioner of Income Tax to the High Court under Sec. 66(2) of the Income Tax Act, 1922, for the determination of a question of law. The assessee P.V.R.M. Visalakshi Achi resides in Royavaram, Pudukotta State, outside British India a .....

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India and one to a non-resident who nevertheless has a business in British India and has used the loan in question in that business. The profits arising from these loans were assessed under Sec. 42(1) of the Act and the items are enumerated in Sch. B. The assessee contended that Sec. 42(1) did not apply. Sec. 42(1) of the Act runs as follows:- "In the case of any person residing out of British India, all profits or gains accruing or arising to such person, whether directly or indirectly, th .....

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in British India: for that purpose it is necessary to see whether they accrue or arise, directly or indirectly through or from any business connection or property in British India. The question propounded is: Whether there was any material before the Income Tax Officer upon which he could find that the sum of ₹ 2,048-6-0 or any part of it accrued or arose to the assessee, whether directly or indirectly through or from a business connexion in British India and as such was assessable to inco .....

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t lend money outside British India to persons residing in British India or for use in their businesses in British India and if there were evidence that she did so, she would clearly be liable to assessment for income tax purposes on the profit of such loans. But it is not contended here that the loans had anything to do with the business connexion which the respondent had with the P.V. Bogale firm even in an indirect manner. The persons who borrowed from her outside British India are not shown t .....

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respondent carried on a money lending business and lent money to many persons in Burma, then a part of British India, and that from this business the business connexion arose. It is contended that when a person carries on the business of lending money each loan emanates from a business connexion with the borrower. If this contention is right then the words "business transaction" might apply have been used in the Act. But the mere fact of a business transaction having taken place betwe .....

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facts that a business connexion had been established. On the other hand in Commissioner of Income Tax v. Currimbhoy Ebrahim & Sons, 60 Bom. 172; their Lordships of the Privy Council held that where the Nizam of Hyderabad (residing out of British India) in an isolated transaction lent money to the respondents in Bombay no business connexion within the meaning of Sec. 42(1) had been established. The Nizam was not carrying on the business of a money lender in British India or in Hyderabad, and .....

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pondent and these particular borrowers (using the words of Sir George Rankin at p. 180) "such as might fairly be described as a business previously subsisting between them". Sir George Rankin remarked that the mere fact that Messrs. Currimbhoy Ebrahim and sons used the loan from the Nizam in connexion with their own business did not bring the Nizam any nearer to being a person who had a business connexion in British India. It was not shown that he had any interest direct or indirect wi .....

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nced, or that the interest taken by the lender in the borrower's business was such, as to constitute a course of dealing amounting to a business connexion with the firms enumerated in Sch. B. The other authorities cited to us Oriental Investment Corporation Ltd. Bombay v. Commissioner of Income Tax, and Income Tax Commissioner v. Remington Typewriter Co. Ltd. are very different from the present case, among the disinguishing features being in the first case the amount of the loan and the fact .....

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Separate Revenue, Madras v. Ramanathan Chetty, should be followed and that the assessee should normally be heard first. I do not say that circumstances might never arise in which it might be desirable to hear the Commissioner of Income Tax first, but the Madras practice is in conformity with that of the Calcutta and Allahabad High Courts; [See Killing Valley Tea Co. v. Secy. of State, Re John and Co.] and good reason should be shown before any departure is made from it. The Commissioner of Inco .....

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ndia. I also agree with the remarks of the learned Chief Justice with regard to the right to begin. MACKNEY, J.-I agree. The reference has been worded in rather a curious manner; for evidently the point upon which our opinion is desired is whether the Income Tax Officer in applying his mind to the facts of the case has employed an interpretation correct in law, to Sub-S. (1) Sec. 42 Income Tax Act. With regard to Sub-S. (1) of Sec. 42 Income Tax Act it appears to me that the expression "bus .....

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nexion" (taking that phrase in the special sense of "existence of a regular clientele") where the existence of such regular clientele brings fresh business, but clearly the actual profits or gains which it might be possible to tax arise through or from the fresh business itself. Inasmuch, therefore, as in this section the reference is to actual profits or gains, the expression "business connexion", must denote something which produces profits or gains and not a mere stat .....

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c. 2(4) of the Act and denote an adventure or concern in the nature of trade, commerce or manufacture: and the word "connexion" must be used in the sense of "that with which one is connected," so that in order to make clear the meaning of the expression "any business connexion" we may expand it thus: "any adventure or concern in the nature of trade, commerce or manufacture being a business with which he (that is the person residing out of British India) is conn .....

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or gains 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 this Act, be deemed to be such agent: Provided that no person shall be deemed to be the agent of a non-resident person, unless he has had an opportunity of being heard by the Income Tax Officer as to his liability." "Having any business connexion with such person" must be interpreted consistently with wh .....

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Visalakshi Achi referred to as the assessee has no agent for any seat of business in British India. She is a partner in money-lending firm in Burma known as P.V. Bogale, but the loans in question have nothing to do with that firm. She also carries on a money-lending business in Royavaram which is in British India. The loans in question (shown in Sch. B.) were made at Royavaram in the course of that business. Many of the loans shown in Sch. A were also made in Burma in the course of the same busi .....

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