TMI Blog1983 (2) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... ee-company during the assessment year in question was carrying on business of mining and treatment of copper and other ores. On October 22, 1959, an agreement wag entered into between the assessee-company and one New Consolidated Gold Fields Ltd., London (hereinafter to be referred to as the Gold Fields ). In that agreement the Gold Fields were appointed as technical advisers to the assessed-company in regard to its exploration, mining and mineral dressing operations on the terms and conditions mentioned in that agreement. In cl. 2 of the agreement, the details of the nature of technical advice the Gold Fields were required to give was mentioned. The relevant part of cl. 2 aforesaid is as follows: 2. Gold Fields shall undertake through its staff all the duties normally undertaken by technical advisers to a mining company with regard to the technical advice in respect of the operation of the said undertaking and in particular but without detracting from the general nature of the above provisions Gold Fields shall: (a) give to the company all such technical advice including mechanical and electrical engineering matters incidental thereto as may from time to time be requested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1960-61 of the assessee-company, came to the conclusion that the assessee-company was an agent within the meaning of s. 163 of the Act and the annual remuneration of 7,000 sterling (Rs. 70,002) payable to the Gold Fields by the assessee company shall be deemed to be the income accruing to a non-resident which is taxable in the hands of the assessee-company. On appeal, the AAC came to the conclusion that even if the assesseecompany is held to be an agent within the meaning of, s. 163(1) of the Act, no business connection within the meaning of s. 9(1) of the Act had been established, so that any income accruing to such non-resident could have been taxed through its agent, the assessee-company. That finding has been approved by the Tribunal on appeal being filed on behalf of the Department. At the instance of the Department, the Tribunal has referred the questions mentioned above for the opinion of this court. Learned standing counsel for the Department submitted that once it is held that the assessee-company is an agent of the non-resident company within the meaning of s. 163 of the Act, there is no escape from the liability created on such company by virtue of s. 9 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the income of the assessee company for the purpose of assessment. From the different clauses of the agreement aforesaid entered into between the told Fields Ltd. and the assessee company, it appears that under cl. 6 the retaining fee at the rate of 7,000 per annum in sterling was to be paid in London for the general services mentioned in cl. 2 thereof. Under cl. 8 the assessee company had to repay to Gold Fields all incidental disbursements and out of pocket expenses incurred in the execution of its duty including reasonable travelling, living, hotel and other expenses incurred by the representatives of the Gold Fields. The controversy is only in respect of the payment of the said 7,000 sterling' which was admittedly paid in London in terms of cl. 6 of the agreement.,. There is no controversy in the present case regarding the payments if any, made in terms of cl. 8 of the agreement in India. The payment of 7,000 sterling cannot be held to be an income which a nonresident has received in India or an income which had accrued to a non-resident in India, within the meaning of cls. (a) and (b) of sub-s. (2) of s. 5 of the Act. About such an income now the only question to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxable territories. In the case of CIT V. Toshoku Ltd. [1980] 125 ITR 525 (SC), the scope of s. 9 of the Act has been construed. The Supreme Court took note of Expln. (a) to s. 9(1)(i) and pointed out that in the case of a business of which all the operations are not carried out in India, the income of the business deemed under that clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. In that connection, it was observed (p. 531): If no operations of business are carried out in the taxable territories, it follows that the income accruing or arising abroad through or from any business connection in India cannot be deemed to accrue or arise in India. In the facts of that case it was held that the commission amounts which were be in earned by the non-resident assessee for services rendered outside India cannot be deemed to be income which have either accrued or arisen in India. Taking into consideration the different clauses of the agreement and the findings recorded by the AAC and the Tribunal, it has to be held that 7,000 sterling was being paid to the nonresident at London for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the connection between the assessee and the non-resident was real and intimate and it was found that the non-resident had earned income by associating himself with the assessee in India. In that case there was no dispute that the income earned by the non-resident was co-related to the activity of such nonresident in India because the non-resident had appeared in the Calcutta High Court. So far as the facts of the present case are concerned, I have already pointed out that the non-resident received in London 7,000 sterling for the technical advice given to the assessee-company from London. The income to such a non-resident, in the facts and circumstances of the present case, cannot be co-related with the activity of any such nonresident within the territory of India so as to make it an income within the meaning of s. 9(1) of the Act. Mr. K. N. Jain, learned counsel for the assessee, while distinguishing the aforesaid case of the Supreme Court [1981] 129 ITR 295, has drawn our attention to Palkhivala's Income-tax Supplement to 7th Edn., where there is a commentary about the aforesaid case of the Supreme Court. In that commentary it has been pointed out that under the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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