TaxTMI 
TaxTMI 
1952 (3) TMI 33
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..... In respect of the assessment years 1943-44, 1944-45 and 1945-46 notices were issued by the Income-tax Officer to Abdullabhai Abdul Kadar respectively on 14th February, 1945, 19th February, 1945, and 10th October, 1945. These notices were issued by the Income-tax Officer in the following form: "You are hereby informed that under Section 4;i of the Indian Income-tax Act, 1922, I intend to treat you as the agent of Haji Mahomed Syed Alberbary of Port Sudan (non-resident) for the income-tax year............... If you wish to be heard by me as to your liability, you should appear before me to state your objection at this office on the.........at the above address." A "formal" order under Section 43 of the Indian Income-tax Act in respect of the assessment year 1942-43 was passed on 12th March, 1945, and a similar "formal" order in respect of the assessment years 1943-44, 1944-45 and 1945-46 was passed on 27th June, 1946, that is to say, about 3 months after the death of the non-resident. A copy of the "formal" order under Section 43 in respect of the assessment year 1943-44 is Annexure ....
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....Indian Income-tax Act. This 7. The next contention of Abdullabhai Abdul Kadar was that the non-resident was a broker acting on behalf of other principals outside British India. In regard to this contention, the Tribunal observed as follows: "The allegation that the non-resident was a 'broker was not made before the Income-tax Officer. No evidence in support of this allegation was produced before the Income-tax Officer. A declaration made by one Mahomed El-Syed El-Barbary and an affidavit filed by one of the partners of the assessee firm were produced before the Appellate Assistant Commissioner. Some invoices were also produced. But we are not impressed either by the invoices, or by the declarations or by the affidavit. It is possible that the non-resident acted as a broker on behalf of some of his constituents while placing some of the orders with the assesses. It was, however, for the assesses to prove what orders were placed by the non-resident on behalf of his constituents. This he has not done. We arc informed that the nonresident is non-co-operating with the assessee, It may be so. But if ....
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....he non-resident died on 26th March, 1946, cannot in any way affect the assessee's liability for the assessment years 1943-44, 1944-45 and 1945-46. The relevant previous years are the S. Ys. 1998, 1999 and 2000. S.Y. 2000 ended on 17th October, 1944. Section 42 of the Act provides, inter alia, that all income, profits or gains accruing or arising from any business connection in British India shall be deemed to be income accruing or arising within British India, and where the person entitled to the income, profits or gains is not resident in British India, shall be chargeable to income-tax either in his name or in the name of his agent, and in the latter case such agent shall be deemed to be, for all the purposes of the Act, the assessee in respect of such income-tax. The income which is deemed to have accrued in British India prior to 26th March, 1946, is chargeable to income-tax either in the non-resident's name or in the name of his agent. It is, however, pointed out to us that the assessee was appointed as an agent by the Income-tax Officer for the assessment years 1943-44, 1944-45 and 1945-46 on 27th June, 1946. Section 43 provides, inter alia, that any person having any....
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....yed Alberbary in any way affected the liability of Abdullabhai Abdul Kadar under Section 42(1) of the Indian Income-tax Act? (iv) Whether Abdullabhai Abdul Kadar could be taxed under Section 42(1) on the profits made by the non-resident on the sale of goods purchased through other commission agents in British India? We may add that question No. (ii) covers question No. (iii), but for the sake of clarity question No. (iii) has been separately stated. 11. At the time of finalising the case Mr. Kolah drew our attention to the fact that no reference has been made in the case to the sinking of a ship known as S.S. Rehmani in July, 1943. The assessee wanted to raise an additional ground of appeal. It was in this connection that the question regarding the sinking of S.S. Rehmani came up before the Tribunal. Paragraph 2 of the Tribunal's order is as follows: "The appellant wanted to raise an additional ground in one of the appeals. It was alleged that some goods shipped by the appellant by S.S. Rehmani were lost in July, 1943. It was further alleged that the fact that the goods were lost as a result of the sinking of S.S. Rehmani came to his know....
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....eptember, 1950, sworn by El. Saycd Mahomed El, Sayed El. Barhary, the eldest son of Haji Mahomed El. Sayed El. Barbary, has been produced. This affidavit is to the effect that Haji Mahomed El. Syed El. Barbary did not export or import goods only through Abdullah Abdul Kadar. We accept this affidavit. We accordingly hold that the resident was not the sole selling agent of the non-resident, Haji Mohammed Sayed El. Barbary. A copy of the affidavit sworn by El. Sayed Mohammed El. Sayed Barbary is annexure 'B' and forms part of the case. 4. In this connection, we should like to add a few words. In quite a number of cases disposed of by the Appellate Tribunal under Section 42 of the Indian Income-tax Act, it was held that the business connection between a non-resident principal and a resident agent was send goods to the non-resident acting as an agent. That being the past practice, to which no exception was taken, the parties, when the case was finalised, agreed that the facts in the case had been correctly stated and that there had been no omission of any material fact. 5. The High Court has also raised the following question: &....
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....s of S.S. Rehmani was intimated by the shipping company to the assessee. Four witnesses were examined before the Tribunal, The first witness was Vinayak Hari Singarpure. He refers to a circular letter dated 4th August, 1943, issued by Messrs. Turner Morrison & Co. He states that this circular letter was not posted to the assessee. He further stated that copies of this circular letter were handed over to Nemchand Jamnadas & Co., known as house brokers. The second witness examined was Devidas Mulchand, a clerk of Nemchand Jamnadas & Co. He states that the brokers informed people who came to ask about the safe arrival of the Habib, a partner of the assessee firm, came to make certain enquiries in December, 1947. The third witness examined was Mahomed Habib, a partner of the assessee firm. He states that he got intimation about the loss of S.S. Rehmani in the beginning of December, 1947. He further states that he had seen Devidas frequently before December, 1947, but had no talk with him about the safe arrival of the cargo shipped by S.S. Rehmani. He further states us follows: "I cannot say whether the non-resident wrote about the receipt of goods booked by other ships. He may have. It....
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....aw may be formulated as indicated by the High Court. The assessee also says that the substance of what the witnesses stated has not been properly brought about. The assessee, however, agrees that all the material facts have been properly mentioned. Sir Jamshedji Kanga with R. J. Kolah, for the assessee. C. K. Daphtary (The Solicitor-General) with G. N. Joshi, for the Commissioner. JUDGMENT. CHAGLA, C. J.- This reference was before us on the 22nd of March, 1950. On that day we directed the Tribunal to submit a supplementary statement of the case. That supplementary statement has now been submitted by the Tribunal ; and on this supplementary statement various questions arise which have got to be considered. The first question which has been argued by Sir Jamshedji on behalf of the assessee is that with regard to the assessment years 1943-44, 1944-45 and 1945-46 his client cannot be assessed as an agent under Section 43 in view of the death of the non-resident. Now, the facts with are necessary to be considered with regard to this contention 43 for the year 1942-43 on the 12th of March, 1945. The nonresident died on the 26th of March, 1947, and the orders appointing the....
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....n the taxable territories ? Now, before considering the question of law it is necessary to state the facts of this particular case. It has not been found by the Tribunal that the non-resident Haji Mahomed Sayed Alberbary had been exporting or importing goods only through the assessees. The Tribunal has also held that the assessee was not the sole selling agent of the non-resident. But it has also been found by the Tribunal that the assessee acted as a commission agent of the non-resident for several years and that the assessee entered into several transactions on behalf of the non-resident. The Income-tax Officer who has made an order under Section 43 found that the assessee had been regularly purchasing and selling goods on behalf of the non-resident and under his instructions. The assessee also transacted ready and forward business in cotton piece-goods and other articles on behalf of the non-resident and they were regularly purchasing and selling goods on behalf of the non-resident and under his instructions. These findings have been accepted by the Tribunal. The question is whether on these facts it can be stated that the assessee was rightly made a statutory agent of the no....
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....is very wide ; any business connection is not necessarily that business connection which is constituted by a permanent and exclusive agency. On the other hand a mere casual connection, a connection which has no continuity, would also not be a business connection as contemplated by the Legislature under Section 42. Therefore, in order that the agency which constitutes a connection between a non-resident and the assessee should be a business connection as contemplated by Section 42 there must be an element of continuity in the agency. An isolated transaction through an agent, or even a connection for a short period, would not necessarily constitute business connection. It is impossible to give an interpretation to this expression which would be a good interpretation for all the innumerable cases which may arise. It is only possible to interpret the expression negatively rather than positively. I can only point out what is excluded from the expression " business connection " but it is not possible to say what is included in it. In most cases it would depend upon the facts of the particular case as to whether the business connection has been established or not. Now applying this tes....
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....s taken by this Court in Commissioner of Income-tax, v. National Mutual Association of Australasia (1933) 57 Bom. 519 ; 1 I. T. R. 350), that the Rangoon view placed too narrow a construction on the words " business connection ". But what is emphasized by Sir Jamshedji is that at page 430 of the judgment in the Allahabad case the learned Judges point out that " the brokers were not, as far as we know, retained by the assessee. The assessee had no claim upon the goodwill of the brokers. " Sir Jamshedji says that these sentences make it clear that their Lordships of the Allahabad High Court were emphasizing the fact that the agent must be retained by the principal before he can be constituted a statutory agent under Section 43. In other words Sir Jamshedji says that there must be contractual obligation upon the agent to accept the work sent to him by the principal. According to Sir Jamshedji a distinction was drawn in this case between the freelance brokers, as the learned Judges called the brokers in Cawnpore who entered into the transaction on behalf of the constituents in British India with the mills, and an agent under an obligation to act as such. Now, in my opinion, that is not....
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.... applicant only in December, 1947, is not true. " Now S. S. Rehmani carried goods belonging to the non-resident from Bombay and was on her way to Port Sudan, but she was sunk by enemy action. The case of the assessee was that he came to know of the loss only in December, 1947, and, therefore, he claimed deduction in the assessment on the basis of the loss having occurred in December, 1947. Now on the statement submitted to us it is clear that we have not to review or re-assess the evidence led before the Tribunal or to consider its sufficiency. The only question of law that arises is whether there was any material on which the finding of the Tribunal that the loss of S. S. Rehmani was known to the applicant prior to December, 1947, was justified. Now materials may be direct evidence or they may be circumstances and probabilities on which a Tribunal may act. Inferences may be drawn from proved facts and the fact finding Tribunal may act on those inferences. The question of law will only arise when there is no material at all which would justify the finding of a particular fact. Now the assessee can only ask us to interfere with the finding of the Tribunal provided he satisf....