Non-resident agency and business connection principles upheld for repeated cross-border transactions under income-tax law.

A non-resident could be treated as an agent under the income-tax agency provision because the statutory language contained no residence-based restriction; the agency provision only identified the person liable for recovery, while taxability depended on the separate business-connection rule. The dealings between the assessee and the non-resident principals were held to constitute a business connection because repeated supplies during the assessment year, together with the substantial and continuous nature of the transactions, showed continuity rather than a stray arrangement. The Department could proceed against either the principal or the agent in respect of the same income, and the assessment of the agent was sustained, while concurrent assessment of the principal was left open.

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Issues: (i) Whether a non-resident person could be treated as an agent under the income-tax provisions governing agents of non-residents; (ii) whether the dealings between the assessee and the non-resident principals constituted a business connection within the meaning of the Act; and (iii) whether the Department could assess both the principal and the agent concurrently under the relevant provision.

Issue (i): Whether a non-resident person could be treated as an agent under the income-tax provisions governing agents of non-residents.

Analysis: The statutory language in the provision dealing with appointment of agents contained no restriction limiting agency to residents. The liability to tax was separately determined by the provision dealing with income arising through business connections, while the agency provision merely identified the person who could be treated as the agent for recovery. The later Explanation could not be used to read a residence-based limitation into the earlier provision.

Conclusion: A non-resident could be treated as an agent under the provision.

Issue (ii): Whether the dealings between the assessee and the non-resident principals constituted a business connection within the meaning of the Act.

Analysis: Business connection depended on the nature and continuity of the dealings, not merely on the duration of time over which they occurred. Repeated supply of goods from time to time during the assessment year, coupled with the substantial value of transactions, furnished sufficient material to show continuity. The connection was not a stray or casual transaction but one which enabled income to accrue through that business relationship.

Conclusion: The dealings constituted a business connection within the meaning of the Act.

Issue (iii): Whether the Department could assess both the principal and the agent concurrently under the relevant provision.

Analysis: The provision gave the Department an option to assess either the principal or the agent in respect of the same income. On the facts recorded, only the agent had been assessed, and the question whether the principal could also be assessed was not ripe for decision at that stage.

Conclusion: The Department's assessment of the agent was upheld and the question of concurrent assessment of the principal was left open.

Final Conclusion: The reference was answered in favour of the Revenue on all questions actually decided, and the assessment of the agent was sustained.

Ratio Decidendi: In the absence of any statutory limitation, a non-resident may be treated as an agent if the conditions of the agency provision are satisfied, and repeated transactions within a short period may still constitute a business connection where the nature of the dealings shows continuity.

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