Business connection under income tax law was not made out, and the Indian company was not treated as non-resident agent.

Where the agreement and surrounding facts did not establish a business connection between the non-resident companies and the Indian company, the Indian company could not be treated as their agent under section 163 of the Income-tax Act, 1961, and the assessee succeeded on that issue. The Tribunal's finding that there was no business connection was also not shown to be vitiated by reliance on irrelevant material or by ignoring relevant evidence, so the assessment cancellation was left undisturbed. The Calcutta HC followed its earlier decision on the same assessee and found no independent ground to reach a different conclusion.

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Issues: (i) Whether, on the facts and the agreement between the parties, the non-resident companies had any business connection with the Indian company so as to make the Indian company their agent under section 163 of the Income-tax Act, 1961. (ii) Whether the Tribunal relied on irrelevant evidence and ignored relevant material in holding that there was no business connection under section 43 of the Indian Income-tax Act, 1922 and section 9 of the Income-tax Act, 1961, and in cancelling the assessment for the assessment year 1964-65.

Issue (i): Whether the non-resident companies had a business connection with the Indian company and whether the Indian company could be treated as their agent under section 163 of the Income-tax Act, 1961.

Analysis: The controversy was covered by the court's earlier decision on the same assessee. The agreement and surrounding facts did not warrant a different conclusion from the one already reached in that decision.

Conclusion: The question was answered in the affirmative in favour of the assessee.

Issue (ii): Whether the Tribunal's finding on absence of business connection was vitiated by reliance on irrelevant evidence and disregard of relevant material, and whether the assessment could therefore be sustained.

Analysis: The second question arose from the same factual and legal foundation and was also governed by the earlier decision concerning the same assessee. No independent basis was found to disturb the Tribunal's conclusion.

Conclusion: The question was answered in the negative in favour of the assessee.

Final Conclusion: The reference was disposed of by answering both questions in favour of the assessee, with the assessment cancellation left undisturbed.

Ratio Decidendi: Where the governing facts and agreement do not establish a business connection with the non-resident, the Indian company cannot be treated as its agent under section 163 of the Income-tax Act, 1961.

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