TMI Blog1922 (10) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... t made and received in France and not here. By section 3(1) the Act is to apply to all income from whatever source it is derived if it accrues or arises or is received in British India, or is under the provisions of the Act deemed to accrue or arise or to be received in British India. By section 5, which is the charging section, certain classes of income are chargeable to income-tax and they include (IV) income derived from business. Chapter 4 of the Act, headed liability in special cases, contains a group of sections providing for taxation of certain persons although not the actual persons entitled to the income in question, such as. guardians, trustees, agents and partners in a firm which has discontinued business. Section 33(1), one of those grouped sections, is in the following words:- In the case of any person residing out of British India all profits or gains arising to such person, whether directly or indirectly through or from any business connection in British India, shall be deemed to accrue in British India and shall be chargeable to income-tax in the name of the agent of any such person, and such agents are to be deemed for the purposes of this Act to be assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , or management, and shall be so chargeable under section 41 of the Income-tax Act of 1842 in the name of the branch, factor, agent, receiver or manager. In Greenwood v. Swidth Co. [1922] 1 AC 417, the House of Lords affirming the decision of Rowlatt J., in Stnidth Co. v. Greenwood [1920] 3 KB 275, and of the Court of Appeal in Smidth Co. v. Greenwood [1921] 3 KB 583 decided that this section, though in terms wide enough to bring into tax non-residents in respect of profits earned abroad through direct or indirect dealing through an agency in England, did not bring into tax profits unless they were earned or received in Great Britain and held that that section was a machinery section and not a charging section. Lord Buckmaster at page 423 stated the principle in the following words:- It is important to remember the rule which the Courts ought to obey that when it is desired to impose a new burden by way of taxation it is essential that the intention should be stated in plain terms. The Courts cannot assent to the view that if a section in a taxing statute is of doubtful and ambiguous meaning it is possible out of that ambiguity to extract a new and added obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. The phrase shall be deemed to be income accruing or arising within British India relates back to section 3(1) where under the heading Taxable income it is enacted that This Act shall apply to all income from whatever source it is derived if it accrues or arises or is received, in British India, or is, under the provisions of this Act, deemed to accrue or arise or to be received in British India. Hence sections 3(1) and 33(1) read together import that the Act shall apply to all income accruing or arising to a non-resident in British India, whether directly or indirectly, through or from any business connexion in British India. The Government Pleader, on behalf of the Board of Revenue, contends that this renders liable to income-tax all business profits made by a non-resident received not only within but outside of British India in so far as these accrue or arise through or from any business connexion in British India. If the phrase business connexion is to be read as the Government Pleader contends as something much wider than the term trade or business itself, then the far-reaching effects of such a claim are obvious, and will extend far beyond what had been hitherto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on I cannot accept, as it violently contravenes the principle enunciated above that taxation must, be imposed by express words. The real question for decision is, is the phrase through or from any businees connexion in section 33(1) governed and controlled by the phrase derived from business in section 5 (iv) or not? That it is, seems to me to be obvious from the fact that section 33(1) is not designed or situated in the Act as a. charging section in addition to section 5. It is not found under the chapter Taxable-income alongside the charging section, but under the chapter headed Liability in special cases, a chapter which is designed to provide for the collection of the tax from persons other than the direct beneficiaries of the income received, that is guardians, trustees, agents, receivers and so on. That is, it is part of the machinery sections setting out the method by which the tax, if otherwise chargeable, is to be collected in certain cases when the direct beneficiary cannot be got at, and it is not a charging section designed to declare some other gains taxable beyond what has been declared by section 5 to be taxable. I am fortified in this conclusion by the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in British India which are taxable through the agent. In the present case the non-resident firm in India is merely buying: raw material for shipment and sale abroad, and the profits realized from the sale are realized in Paris. There is clear authority in the leading case of Sulley v. The Attorney-General [1860] 5 H N 711, which is an exactly parallel case, for holding that the firm does not thereby carry on trade or business in British India. It was there held that the place of trade is the place where the profits come home to the firm, and a non-resident firm is not assessable on profits made abroad merely because it has a resident agent for purchasing and shipping raw material, and that it is no part of the income-tax law so far as laid down that the firm shall be taxable in every country in which it has established buying agents. To a similar effect is the decision in Smidth Co. v. Greenwood [1921] 5 H N 711 , where it is laid down that a trade is exercised in the place where the business transactions are closed, that is, in the case of a selling business, the place where the sales are effected and the profit thereby realized. The latter decision interprets section 31(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
