TaxTMI 
TaxTMI 
1939 (5) TMI 12
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.... from time to time out of the cloth and yarn manufactured at the said Company's mills supply the said shop with so much cloth and yarn as there shall be a demand for. The said firm shall, with the assistance of the directors, have the general management of the said shop and of the business transacted therein and the engagement and discharge of all clerks and servants required in the said shop. The salaries of such clerks and servants shall be paid by the said Company." By way of remuneration it was agreed that Nandlal Bhandari & Sons should have a fixed allowance and should also be entitled to commission @ 16% per cent. of the net profits of the Company and to commission @ ₹ 1-9/-% of the gross sale proceeds. The commission was to be paid annually when the accounts of the Company were made up. The instrument was in fact a contract of managing agency. In accordance with the powers which were conferred upon them, Nandlal Bhandari & Sons opened a branch of the Company at Cawnpore, known as Nandlal Bhandari Mills Ltd., Cawnpore and for the years 1934-35 and 1935-36, the Income-tax Officer served a notice on the Cawnpore branch to show cause why it should not be treated....
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....opportunity of being heard by the Income-tax Officer as to his liability." Sir Tej Bahadur Sapru on behalf of the Company contends that the branch at Cawnpore cannot be regarded as agents of Nandlal Bhandari & Sons for the reason that the latter are the duly appointed agents of the company at Indore, of which the firm Nandlal Bhandari Mills, Ltd., Cawnpore, is a branch. He also pleads that there is no business connection between the Company through its branch at Cawnpore-and Nandlal Bhandari & Sons as required by Sections 42 and 43 of the Act. He contends that the term "business connection" signifies dealings of a commercial nature between the parties concerned and necessitates the buying and selling of commodities and the relationship of creditor and debtor. The decision of the question referred to us will depend on the interpretation to be placed on Sections 42 and 43 of the Act. It is manifest from the language of Section 43 that a person may be fictionally deemed to be an agent for the purposes of the Act who might not be an agent as that term is ordinarily understood at law; and the fact that Nandlal Bhandari & Sons are the duly constituted agents of the Compa....
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.... exception of one from Bombay which, if not identical, is very nearly so, as we shall presently show. The first of these authorities is the English case of Greenwood v. F.L. Smidth & Co, In that case the respondents were a Danish firm resident in Cophenhagen manufacturing and dealing in cement-making and other similar machinery, which they exported all over the world. They had an office in London in charge of a qualified engineer, who was their whole-time servant. He received inquiries for machinery such as the respondents could supply, sent to Denmark particulars of the work which the machinery was required to do, including samples of materials to be dealt with, and when the machinery was supplied, be was available to give the English purchaser the benefit of his experience in erecting it. The contracts between the respondents and their customers were made in Copenhagen and the goods were shipped f.o.b. Copenhagen. The respondents were assessed to income-tax in respect of the profits derived from dealings in machinery with purchasers in the United Kingdom, but it was held by the House of Lords that they did not exercise a trade within the United Kingdom within the meaning of Sche....
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....the contention, unless we find it justified by the legal maxim enunciated. by Lord Sterndale, M.R. in Smidth & Co. v. Greenwood, that the well known canon of construction of taxing Acts is that no one is to be taxed except by the express words". At page 369 this learned Judge says:- "The condition precedent to assessability is business in British India and not merely a business connection in British India, and it is not laid down in that Act that the two phrases are identical in meaning. The test, I take it is:-Is the non-resident firm by its agency out here in British India, making profits in British India which pass to it through the hands of its agent? If it is, then Section 33(1) applies. If not, not. I am, therefore, unable to hold, in the absence of more clear and express words, that Section 33(1) was intended in any way to enlarge the scope of Section 5 or to bring into the net any income accruing outside British India, but not derived from business within British India, merely because that income was received through or from a business connection in British India. Section 33(1) then is governed and controlled by Section 5 and really applies and was intended t....
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....ed that in neither of the above two cases was there any sale of goods in British India; all that the "agents" in British India did was to purchase raw materials in British India and to export them to the non-resident firm. In the Full Bench case of Jiwan Das v. Income-tax Commissioner, Lahore, a person residing and carrying on business in British India purchased goods in British India and sent them for sale to his shop in Kashmir, and it was held by a Bench of five learned Judges of the Lahore High Court that such a person was not liable to be assessed to income-tax on any part of the profits derived by sale in a foreign country of the goods purchased by him in British India, when the profits had neither been received in, nor brought into, British India. The view expressed by the Madras High Court in The Secretary, Board of Revenue v. The Madras Export Co., was approved and relied upon. In the case of Commissioner of Income-tax, Bombay Presidency v. Bombay Trust Corporation Ltd., a company incorporated and carrying on business at Hongkong lent large sums on deposit to a Bombay company at 5?% interest and the company at Bombay remitted the interest to the Hongkong compan....
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....th at that shop. Clause 16 was more or less similar in its terms to clause 12 of the agreement in the case with which we are now dealing; but in clause 7 of the agreement in the present case it is provided that the commission shall become due and shall be paid to Nandlal Bhandari & Sons annually as soon as the accounts of the company have been made up. Whether any such provision found place in the agreement in the Bombay case we do not know. Section 4(1) of the Act is discussed in the separate judgment of Beaumont, C.J. and Barlee, J., but there is no discussion of Sections 42 and 43. The last authority which need be mentioned is Commissioner of Income-tax v. Remington Typewriter Co., Ltd. A company incorporated in the United States of America carried on business in New York and there manufactured and sold typewriter machines. The respondent company had been incorporated under the Indian Companies Act, 1913, and had purchased from the American Company for shares the goodwill of that company in the Bombay Presidency and adjoining territory; the American Company held all the shares except three issued to that company's nominees. Two other companies had been incorporated in India....