Deemed accrual through business connection and manufacturing income were both held taxable under the Indian income tax scheme.

Profits or gains arising directly or indirectly through a business connection in British India were treated as deemed to accrue or arise in British India under the 1918 and 1922 Income Tax Acts, bringing a non-resident's Indian business-linked income within charge to tax; the broader construction of business connection extended to purchasing operations, and English territorial-limit authorities were distinguished. Income from the company's Wyndhamganj manufacturing branch was also taxable as business income because manufacture fell within the statutory definition of business. The reference was answered in favour of the revenue.

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Issues: (i) Whether profits or gains accruing to a non-resident through or from a business connection in British India are deemed to accrue or arise in British India and are chargeable to income-tax under the Indian Income Tax Acts of 1918 and 1922. (ii) Whether income from the company's manufacturing branch at Wyndhamganj is taxable as business income.

Issue (i): Whether profits or gains accruing to a non-resident through or from a business connection in British India are deemed to accrue or arise in British India and are chargeable to income-tax under the Indian Income Tax Acts of 1918 and 1922.

Analysis: The charging scheme under Section 3(1) of the Indian Income Tax Act, 1918 and the corresponding provisions of the Indian Income Tax Act, 1922 applies not only to income actually accruing, arising or received in British India but also to income deemed by the Act to accrue or arise there. Section 33(1) of the 1918 Act and Section 42(1) of the 1922 Act were read as creating a deeming provision that brings within the tax net profits or gains arising directly or indirectly through or from a business connection in British India. The expression business connection was construed broadly and was held to cover the company's purchasing operations in British India. The English authorities were distinguished because the Indian statutes do not proceed on the same territorial limitations.

Conclusion: The issue is answered in the affirmative and against the assessee. The profits attributable to the business connection were held chargeable to tax.

Issue (ii): Whether income from the company's manufacturing branch at Wyndhamganj is taxable as business income.

Analysis: The factory at Wyndhamganj was an admitted manufacturing branch. Under Section 2(3) of the Indian Income Tax Act, 1918, business includes manufacture, and income from such manufacture falls within the head of business income chargeable under the Act. On that footing, the income from the factory was within the taxable field independently of the broader business-connection question.

Conclusion: The issue is answered in the affirmative and against the assessee. The factory income was held taxable.

Final Conclusion: The reference was answered in favour of the revenue, affirming liability to income-tax on the non-resident company's income attributable to its Indian business connection and its manufacturing operations.

Ratio Decidendi: Where a taxing statute expressly deems profits or gains arising through or from a business connection in the taxing territory to accrue or arise there, such income is chargeable notwithstanding the non-resident character of the recipient, and English territorial-limit decisions do not control a materially different statutory scheme.

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