TMI Blog1938 (11) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... , Cochin, China. In 1929 they formed the Chettinad Bank (sic. Bank of Chettinad) Ltd., which has its headquarters at Kanadukathan in British India. Kanadukathan lies about two miles from the border of the State of Pudukotta and 18 miles from the town of Pudukotta the capital of the State. In 1930 they formed the Pudukotta Bank and also registered in Pudukotta a company called the Chettinad Corporation Limited, both of which have their registered offices at Pudukotta. The business carried on by the Rajah and his sons were wound up and all the assets and liabilities transferred to the three companies. The assets and liabilities of the branches in Burma (which until the 1st April 1937 was a part of British India) were transferred entirely to the Kanadukathan Bank. The assets and liabilities of the branches in the Federated Malay States were mostly transferred to the Pudukotta Bank. The assets and liabilities of the branches in Ceylon were transferred partly to the Colombo branch of them Kanadukathan Bank and partly to the branches of the Pudukotta Corporation Limited in Ceylon. Part of the value of the excess over liabilities was adjusted against the paid up capital of the three compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (7) The Rajahs three married daughters (170 shares each). ... 510 (8) The Rajahs unmarried daughter. ... 170 (9) The Kumara Rani Meyyammai Achi ... 1 (10) K. M. S. KR. Karuppan Chettiar (General Manager of the Pudukotta Bank) ... 1 (11) A. MR. M. P. Subrahmanyan Chettiar. ... 1 (12) K. RM. VR. Virappa Chettiar ... 1 Total... 20,000 The Kanadukathan Bank has 22 branches, 20 in Burma of which one is in Rangoon one at Bentong in the Federated Malay States and one at Colombo. The Pudukotta Bank does no money lending business in the Pudukotta State but it has a branch at Kualalampur, a distance of 30 miles from Bentong and another branch at Ipoh, which is also in the Federated Malay States. According to the books between September 1930 and February 1933 loans amounting to ₹ 1,32,86,888 were advanced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd all that has been done meant nothing. Expect as regards the ₹ 9,74,100 some such procedure was adopted in respect of all the loans from the Pudukotta Bank to the Kanadukathan Bank. The loans were made without security and for indefinite periods. There can be no doubt that the effective control of the two banks is in the Rajah and the members of his family in Kanadukathan. It is true that a minute book is kept in Pudukotta showing resolutions passed sanctioning loans by the Kualalumpur branch of the Pudukotta Bank to the Bentong branch of the Kanadukathan Bank. When such a resolution was to be passed the directors in Chettinad motored to Pudukotta for the purpose. The Pudukotta Bank does no real business in the Pudukotta State and the resolutions could just as well have been passed in Kanadukathan were the control is. The Income Tax authorities have treated the two banks as distinct organisations and as I have already indicated have assessed on the basis of profit accruing to the Pudukotta Banks non resident company through a business connection in British India the tax being levied on the Kanadukathan Bank as the agent of the Pudukotta Bank. The Kanadukathan Bank, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any business connection with such person, or through whom such person is in the receipt of any in come, profits 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. There can be no doubt that if the Pudukotta Bank has a business connection in British India within the meaning of Section 42 (1) its agent is the Kanadukathan Bank and the assessment was rightly made on the Kanadukathan Bank. In fact it has not been contended to the contrary. It is not necessary for the purpose of forming a business connection in British India that contracts between the statutory agent and the non-resident company should be entered into in British India or that the profit should accrue to the non-resident company in British India. Transactions outside a country may lead to a business connection within it as the decision of the Privy Council in The Commissioner of Income Tax v. Remington Typewriter Company (Bombay) Limited shows. There a company registered in New York manufactured and sold typewriting machines to threercompanies regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business connection may be implied from a course of dealings. In The Commissioner of Income Tax v. Remington Typewriter Company (Bombay) Limited, LORD RUSSELL OF KILLOWEN observed : Although no contractual obligation exist by which the Bombay Company is compelled to purchase any of the manufactures of the American Company, the flow of business between the two companies is secured by the fact that ultimate and company which owns all its shares . Therefore in that case the business connection was held to exist from the fact that the ultimate and complete control of the Bombay Company was vested in the American Company . Whether there is a business connection depends on the particular facts of each case, and the facts in the present case may be summarized as follows :- The Rajah and his family own all the shares in the Kanadukathan Bank and all shares but three in the Pudukotta Bank; (2) the control of both the banks is in the Raja and his family at Kanadukathan in British India; (3) the main function of the Pudukotta Bank is to finance the Kanadukathan Bank; (4) the loans advanced by the Pudukotta Bank of the Kanadukathan Bank represent more than half of the capital of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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