Business connection for tax attribution fails where Indian agent lacks authority to bind the non-resident principal.

Business connection under the deeming provisions requires a real and intimate link between the non-resident's income-earning operations and activities in India, and income is attributable only to operations carried out in the taxable territory. On the stated facts, contracts were concluded abroad, price and delivery were outside India, and orders sent from India became binding only after acceptance overseas. The Indian company had no authority to accept offers or bind the non-residents, so privity necessary for treating it as their agent was absent. A del credere description did not change that position, because it did not itself confer authority to conclude contracts.

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Issues: Whether the Indian company had a business connection with the non-resident companies so as to make their income taxable in India and to justify treating the Indian company as their agent; whether the absence of authority to accept offers or bind the principals negatives such business connection; and whether the description of the Indian company as a del credere agent altered that conclusion.

Analysis: The relevant charging and deeming provisions required a real and intimate business connection between the non-resident's trading activity and activity in the taxable territories, and the income could be deemed to accrue in India only to the extent attributable to operations carried out there. On the facts found, the contracts were concluded outside India, price was received outside India, delivery was made outside India, and the orders sent from India became binding only after acceptance abroad. The Indian company had no authority to accept offers or to enter into contracts on behalf of the non-residents, and the record did not show privity of contract of the kind necessary to establish business connection. The reference to a del credere agency in one contract did not alter the legal position, because such an agent merely assumes responsibility for performance or payment and does not, by that description alone, obtain authority to bind the principal by accepting offers.

Conclusion: The Indian company was not shown to have a business connection with the non-resident companies, and it could not be treated as their agent for the purpose of deeming income to accrue or arise in India. The answer was against the Revenue and in favour of the assessee.

Ratio Decidendi: Business connection under the deeming provisions requires authority in the Indian actor to accept offers or otherwise bind the non-resident principal, together with a real and intimate relation between operations in India and the earning of income; a mere canvassing arrangement, even if coupled with del credere responsibility, is insufficient where contracts are accepted abroad and no such authority exists.

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