Receipt in India of non-resident commission is taxable, and statutory agent liability can arise through business connection.

Commission credited in India to a non-resident's account was treated as receipt in India for income-tax purposes, even though the services giving rise to the commission were performed abroad and the amount was not physically remitted overseas. Section 4(1)(a) of the Income-tax Act, 1922, was applied to hold the commission taxable in India. The assessee was also held liable as statutory agent of the non-resident because a business connection existed and section 43 operated as an independent machinery provision, not confined to section 42. The result was that the commission was taxable in India and the assessee was assessable as agent.

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Issues: (i) Whether commission credited in India to the account of a non-resident, though earned through services rendered abroad, was chargeable as receipt of income within the taxable territories. (ii) Whether the assessee could be assessed as the statutory agent of the non-resident on that income.

Issue (i): Whether commission credited in India to the account of a non-resident, though earned through services rendered abroad, was chargeable as receipt of income within the taxable territories.

Analysis: The commission accrued abroad because the services were performed in Japan, but section 4(1)(a) of the Income-tax Act, 1922, applied to receipts in India whether the recipient was resident or non-resident. Once the commission was separated from the sale proceeds and credited in India to the non-resident's account under the agreement, it was received in India for income-tax purposes. The fact that the amount had not been physically remitted to Japan did not prevent it from constituting receipt in India.

Conclusion: The commission was taxable as receipt of income in India and the answer to this issue was against the assessee.

Issue (ii): Whether the assessee could be assessed as the statutory agent of the non-resident on that income.

Analysis: Section 43 of the Income-tax Act, 1922, was treated as an independent machinery provision and not confined to cases under section 42. A person could be treated as statutory agent if there was a business connection with the non-resident, even if that connection was not in the taxable territories. Since the assessee had a business connection with the non-resident and had received the non-resident's income in India, the assessee was chargeable as agent under sections 40(2) and 43.

Conclusion: The assessee was rightly assessed as statutory agent and this issue was against the assessee.

Final Conclusion: The reference was answered in favour of the Revenue, holding the commission taxable in India and the assessee liable as statutory agent for the non-resident's income.

Ratio Decidendi: Income credited in India to a non-resident's account constitutes receipt in India under section 4(1)(a), and a person having a business connection with the non-resident may be assessed as statutory agent under section 43 read with section 40(2) even where section 42 is inapplicable.

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