Non-resident taxation through agent: reimbursement of tax deducted at source depends on income found and paid, not worldwide income proof.

Non-resident taxation under the Income-tax Act, 1922 is explained as operating through the agent and deduction-at-source machinery where income arises in British India. Income accruing through an agent could be taxed in the agent's hands, with the agent bound to deduct and pay tax under the statutory scheme. The liability to reimburse tax paid on the Hapur transactions was treated as recoverable from the non-resident contributory, and it did not depend on proof that the person's total world income was taxable. The analysis emphasises that tax is charged on income found and paid at source, while disputes about ultimate assessment are separate from the reimbursement liability.

---

---

Issues: Whether a non-resident contributory was liable to reimburse income-tax deducted and paid by the agent on profits arising from transactions entered into on his behalf, and whether such liability depended on proof that his total world income was taxable.

Analysis: The provisions governing non-resident taxation and deduction at source under the Income-tax Act, 1922 showed that income accruing through an agent in British India could be taxed in the hands of the agent, who was bound to deduct and pay the tax. The machinery provisions in sections 40(2) and 42(1), together with the deduction provisions in section 18, operated on income found in British India and were not dependent upon the ultimate assessment of the non-resident's entire world income. The Court also treated the Hapur firm as the respondent's agent for the relevant transactions and held that tax law proceeds on the basis that profits are taxed where they are found, leaving disputes about ultimate assessment to the proceedings between the assessee and the income-tax authorities.

Conclusion: The respondent remained liable for the tax paid by the agent on the Hapur transactions, and the amount was recoverable by the liquidator; proof that the respondent's total world income was assessable was not a condition precedent.

Ratio Decidendi: Where income of a non-resident is lawfully taxed and paid through an agent under the statutory deduction and agency provisions, the non-resident cannot resist reimbursement on the ground that his total world income has not been shown to be taxable; liability is determined by the tax deducted on income found and paid at source.

---