9911796707
TMI Blog1964 (10) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... /2 per cent. of the price. By letter dated March 24, 1951, the assessees were appointed " sole agents " for the Italian company " for sale " of worsted woollen yarns in the Indian territories terminable by one month's notice. The assessees had to " maintain the existing customers " and to secure new customers " conforming to their general terms of sales ", and were to receive 2-1/2 per cent. commission on the net cash amounts arising from the accepted business " concluded by the mediation " of the assessees or directly by the Italian company with the customers. The Belgian company appointed the assessees their representatives for the whole of India on condition that the latter did not represent any other Belgian mill or yarn producer and did not sell Belgian yarn in India on their own account. In proceedings for assessment of tax in the assessment year 1952-53 the income-tax Officer, " C " Ward, Amritsar, computed the income of the assessees by adding Rs. 54,558 being 5 percent. of the net total value of yarn sold by the non-resident companies to Indian merchants in the previous year, because in his view there subsisted business connections between the non-resident exporters an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All income, profits or gains accruing or arising, whether directly or indirectly, through or from any business connection in the taxable territories ... shall be deemed to be income accruing or arising within the taxable territories, and where the person entitled to the income, profits or gains is not resident in the taxable territories, shall be chargeable to income-tax either in his name or in the name of his agent, and in the latter case such agent shall be deemed to be, for all the purposes of this Act, the assessee in respect of such income-tax : . . (2) Where a person not resident or not ordinarily resident in the taxable territories, carries on business with a person resident in the taxable territories, and it appears to the Income-tax Officer, that owing to the close connection between such persons the course of business is so arranged that the business done by the resident person with the person not resident or not ordinarily resident produces to the resident either no profits or less than the ordinary profits which might be expected to arise in that business, the profits derived therefrom or which may reasonably be deemed to have been derived therefrom, shall be chargea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sident which yields profits or gains and some activity in the taxable territories which contributes directly or indirectly to the earning of those profits or gains. It predicates an element of continuity between the business of the non-resident and the activity in the taxable territories : a stray or isolated transaction is normally not to be regarded as a business connection. Business connection may take several forms : it may include carrying 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 a 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. But it must in all cases be remembered that by section 42 income, pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany by sale of the machines and dividends received by the American company from the assessee-company were held taxable on the ground that there existed a business connection. In Commissioner of Income-tax v. Currimbhoy Ebrahim and Sons Ltd. advance of a loan by a non-resident was held not to be a business connection. Currimbhoy Ebrahim and Sons Ltd., a private limited company carrying on business as managing agents of various companies and as dealers in cloth, borrowed 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 stock companies and created an equitable mortgage of immovable properties in British India. The loan was to be repaid in Hyderabad, then an Indian State. The taxing authorities treated the private company as agent in the taxable territories of the Nizam within the meaning of section 43 of the Indian Income-tax Act, and assessed to tax the interest on the loan which the taxing authorities regarded as profit or gain which must be deemed to have accrued or arisen to the Nizam, through or from a business connection or property in British India within the meaning of section 42(1) Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax the assessee acted as commission agent of a non-resident and entered into transactions within the taxable territories on behalf of the non-resident, but he was not the sole commission agent of the non-resident who did business through other agents as well. The assessee also purchased cloth on behalf of other constituents. It was held that there was a busness connection, because it was not predicated of a business connection that the broker must be exclusively retained by the assessee. Chagla C. J., in dealing with the provisions of section 42(1), observed : " . . . the language used by the legislature is very wide ; any business connection is not necessarily that business connection which is constituted by a permanent and exclusive agency. On the other hand a mere casual connection, a connection which has no continuity, would also not be a business connection as contemplated by the legislature under section 42. Therefore, in order that the agency which constitutes a connection between a non-resident and the assessee should be a business connection as contemplated by section 42 there must be an element of continuity in the agency. An isolated transaction through an agent, or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the agents did not purchase or sell goods for the non-resident : they merely canvassed orders which were in the nature of offers and communicated them to the non-resident who had the option to accept or reject the offers. The sales took place outside the taxable territories, and in the view of the Income-tax Appellate Tribunal " presumably also, the goods were paid for at Ujjain." The court was on the question framed and referred not called upon to consider whether because of payment of the invoiced price plus insurance and freight to a broker or banker in British India, and delivery in exchange of endorsed railway receipts, the case fell within section 4(1)(a) or section 4(1)(c). Turning to the facts of the present case, as found by the revenue authorities, contracts for the sale of goods took place outside the taxable territories, price was received by the non-residents outside the taxable territories, and delivery was also given outside the taxable territories. No operation such as procuring raw materials, manufacture of finished goods, sale of goods or delivery of goods against price took place within the taxable territories : the assessee merely procured orders from mercha ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
