Foreign-sourced commission and remitted jewellery funds were held not taxable in India absent business connection or permanent establishment.

Brokerage and commission earned by a non-resident from activities carried on outside India, and first received abroad through foreign correspondent banks before remittance to an Indian account, was held not taxable in India because the mode of transfer did not alter the place of first receipt and there was no business connection or permanent establishment in India. Alleged unexplained jewellery could not be added in the assessee's hands where the jewellery was found with other persons and the explanation of gifts and stridhan was not displaced; in any event, the funds were traced to non-taxable receipts. The tax additions were deleted and the Revenue's appeals failed.

---

---

Issues: (i) Whether brokerage and commission remitted to the assessee's Indian bank account through cheques, demand drafts and telegraphic transfers were taxable in India under the Income-tax Act, 1961. (ii) Whether the addition sustained in respect of alleged unexplained jewellery could be made in the assessee's hands.

Issue (i): Whether brokerage and commission remitted to the assessee's Indian bank account through cheques, demand drafts and telegraphic transfers were taxable in India under the Income-tax Act, 1961.

Analysis: The income arose from activities carried on outside India, the assessee was a non-resident and had no business connection or permanent establishment in India. The remittances were first received by foreign correspondent banks abroad and only thereafter transferred to the Indian bank account. The mode of transfer, including telegraphic transfer, did not change the place where the income was first received. The right to receive the income also remained outside India.

Conclusion: The remittances represented income earned and received outside India and were not taxable in India.

Issue (ii): Whether the addition sustained in respect of alleged unexplained jewellery could be made in the assessee's hands.

Analysis: The jewellery was found in the possession of different persons and the appellate finding was that the explanation regarding gifts and stridhan in their hands had not been properly displaced. Even assuming the assessee had contributed funds for such jewellery, the funds came from non-taxable receipts and did not constitute taxable income in India. On that footing, no addition could survive in the assessee's assessment.

Conclusion: The addition in respect of alleged unexplained jewellery was not sustainable in the assessee's hands.

Final Conclusion: The Revenue's appeals failed and the assessee obtained relief on the cross objection, with the tax additions deleted on both issues.

Ratio Decidendi: Where income from services or commission is first received abroad by foreign correspondent banks and only later remitted to India, the place and time of remittance do not by themselves render it income received in India; absent a business connection or permanent establishment in India, such foreign-sourced income is not taxable in India.

---