Agency of non-resident under income tax law requires receipt through the resident or a real business connection, not a solitary letting arrangement.

Section 43 of the Indian Income-tax Act, 1922 deems a resident to be an agent of a non-resident only where the resident is employed by or on behalf of the non-resident, has a business connection with it, or is a person through whom the non-resident receives income, profits or gains. A direct rent payment to the non-resident could not be treated as receipt through the resident, and a solitary letting arrangement without continuity or an intimate nexus with trading activity in the taxable territories did not amount to a business connection. On that basis, the resident was not liable to be treated as the non-resident's agent.

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Issues: Whether the assessee was liable to be treated as the agent of the non-resident company under section 43 of the Indian Income-tax Act, 1922, on the footing that the rent payment was received through the assessee or that there was a business connection between them.

Analysis: Section 43 deems a resident to be the agent of a non-resident if the resident is employed by or on behalf of the non-resident, has a business connection with the non-resident, or is a person through whom the non-resident receives income, profits or gains. On the facts, the payment of rent was a direct payment to the non-resident and could not be treated as receipt through the assessee. The transaction was a solitary letting arrangement, and there was no real or intimate relation between any trading activity of the non-resident and activity in the taxable territories that could amount to a business connection within the meaning of the Act.

Conclusion: The assessee was not an agent of the non-resident company under section 43, and the reference was answered against the Revenue and in favour of the assessee.

Ratio Decidendi: A direct payment to a non-resident, arising from an isolated transaction without continuity or an intimate business nexus with activities in the taxable territories, does not constitute receipt through the resident or a business connection for the purpose of section 43 of the Indian Income-tax Act, 1922.

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