Business connection under income tax law requires an integrated relationship, not mere services outside British India.

Commission earned by a non-resident for procuring purchases outside British India was held not to accrue or arise through a business connection in British India under Section 42 of the Income-tax Act, 1922. The expression "business connection" was treated as broad in scope, but it depends on the facts and requires more than a single transaction or the mere rendering of services outside British India. A business connection generally requires a course of dealing, agency, control, or an integrated profit-making relationship linking the remuneration to business carried on in British India. On the stated facts, no such connection existed, so the reference was answered in favour of the assessee.

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Issues: Whether commission earned by a non-resident for procuring purchases outside British India from a resident businessman accrued or arose through or from a business connection in British India within the meaning of Section 42 of the Income-tax Act, 1922.

Analysis: The expression "business connection" was treated as one of wide import, but it could not be reduced to a universal formula and had to be inferred from the particular facts. The decided cases showed that a business connection exists where the resident and non-resident act in close concert or under substantial control so as to carry on an integrated profit-making activity. By contrast, a single transaction, or the mere rendering of services outside British India for remuneration by a non-resident to a resident businessman, without any course of dealing, agency, control, or dependence of the commission on business done in British India, is insufficient. On the facts, the commission was earned solely for purchases made outside British India and was not linked to business activity carried on in British India.

Conclusion: The commission did not accrue or arise to the non-resident through or from a business connection in British India, and the reference was answered in favour of the assessee.

Ratio Decidendi: Mere service rendered outside British India to a resident businessman, without a course of dealing or integrated business relationship connecting the remuneration to business in British India, does not constitute a "business connection" under Section 42 of the Income-tax Act, 1922.

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