Business connection under income tax law requires continuity; a licence-like arrangement justified agent-based assessment of a non-resident.

Section 42 fastened tax liability on profits or gains accruing to a non-resident through a business connection, while Section 43 operated only as machinery to appoint a statutory agent for assessment of income already chargeable under Section 42. The expression "business connection" required a continuing commercial relationship and not a single isolated transaction. On the facts, the agreement was not an outright sale but a licence arrangement with continuing obligations on both sides and the non-resident's entitlement to a share of takings. The assessee was therefore properly treated as agent of the non-resident company, and the profits were chargeable through that business connection.

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Issues: Whether the assessee was liable to be assessed as agent of the non-resident company on the footing that the profits arose through a business connection within the meaning of the Income-tax Act.

Analysis: Section 42 fastened tax liability where profits or gains accrued or arose to a person residing outside British India, directly or indirectly, through or from a business connection in British India. Section 43 was treated as machinery for appointment of a statutory agent to give effect to Section 42, and by itself did not create the charge. The expression "business connection" was held to import some element of continuity in the relationship between the resident and non-resident; a single isolated transaction would not suffice. On the facts, the agreement between the parties was not an outright sale but was in the nature of a licence arrangement involving continuing obligations on both sides and the non-resident's entitlement to a share of the takings.

Conclusion: The assessee was properly treated as agent of the non-resident company, and the profits were chargeable through that business connection.

Ratio Decidendi: For Section 42, a business connection requires a continuous commercial relationship producing profits or gains to the non-resident, and Section 43 operates only as machinery to appoint an agent for assessment of income already chargeable under Section 42.

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