TaxTMI 
TaxTMI 
1987 (4) TMI 1
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....s and in the circumstances of the case, the Tribunal was justified in holding that any profit could be deemed to accrue or arise in India to the six non-residents in the United Kingdom in respect of the goods sold by them to customers in India ? (3) Whether, on the facts and in the circumstances of the case, and on a proper construction of the agreement dated March 22, 1955, between the Indian company and Crane Packing Ltd. (company in Group-B), the Tribunal was right in holding that the non-resident company had business connection with the Indian company and, therefore, the Indian company was correctly treated as an agent of the said non-resident company under section 163 of the Income-tax Act, 1961 ? (4) If the answer to question No. 3 is in the affirmative, then, whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that any profit could be deemed to accrue or arise in India to the aforesaid non-resident company in respect of the goods sold by it to customers in India? (5) Whether, on the facts and in the circumstances of the case and on a proper construction of the agreement dated June 1, 1954, between the Indian company and B....
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....were connected with the Indian company through the export company. Appeals challenging the assessments were taken to the Appellate Assistant Commissioner. Before him, the assessee tried to establish the actual course of dealing between the Indian company and the ten non-residents and contended that no liability under the Act accrued. The appellate authority dismissed the contentions of the assessee by holding that " the assessee has produced no proof of its assertions and, on the contrary, has blocked the enquiry by me thereon ". Along with the grounds of appeal filed before the Tribunal, an affidavit dated December 27, 1965, of Carol Stuart Cameron was filed. Cameron stated in that affidavit that he was the secretary of the assessee and was in super-intendence of the proceedings relating to the assessments of the assessee as representative assessee of the ten non-residents. In that affidavit, he denied the fact that before the Appellate Assistant Commissioner any obstruction was offered to an attempted probe by the said appellate authority. On the other hand, the affidavit stated that several documents were made available before the appellate authority and were available and ac....
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....or gains arise or accrue to a non-resident must be determined upon the facts and circumstances of the case." " A relation to be a business connection must be real and intimate, and through or from which income must accrue or arise whether directly or indirectly to the non-resident. But it must in all cases be remembered that by section 42, income, profit or gain which accrues or arises to a non-resident outside the taxable territories is sought to be brought within the net of the income-tax law, and not income, profit or gain which accrues or arises or is deemed to accrue or arise within the taxable territories. Income received or deemed to be received, or accruing or arising or deemed to be accruing or arising within the taxable territories in the previous year is taxable by section 4(1)(a) and (c) of the Act, whether the person earning is a resident or non-resident. If the agent of a non-resident receives that income or is entitled to receive that income, it may be taxed in the hands of the agent by the machinery provision enacted in section 40(2). Income not taxable under section 4 of the Act of a non-resident becomes taxable under section 42(1) if there subsists a connection....
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....1965, and the appeals were dismissed by order dated September 17, 1965. This court's judgment in CIT v. R. D. Aggarwal & Co. [1965] 56 ITR 20 (SC), was pronounced on October 6, 1964. The order of the Appellate Assistant Commissioner makes casual reference to this judgment but the ratio thereof had not been put to use in any manner and the same does not appear to have had any perceptible effect on the decision of the Appellate Assistant Commissioner. Along with the memoranda of appeal filed before the Tribunal, the assessee filed the affidavit of Cameron. That affidavit is dated December 27, 1965. The Revenue had notice of it and the Tribunal in its decision has stated " along with the grounds of appeal before us, there is an affidavit by Shri Cameron setting out the course of dealing and alleging that several of these representatives files were inspected by the Appellate Assistant Commissioner at the time of hearing of the appeals ". The Tribunal, however, did not deal with the affidavit by saying : " For the purpose of a decision as to whether the Indian company could be appointed agent under section 163 by virtue of business connection with the non-resident companies, it....
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....on, therefore, is that in a case like this there can be no business connection unless the Indian assessee has the authority to accept offers or to enter into contracts on behalf of the non-residents. The Tribunal has found that in the case of one company only there was an express prohibition against acceptance of offers. But in the other contracts there was no such express prohibition. The Tribunal has granted relief in the case of express prohibition but has taken a different view with regard to those contracts in which there was no such prohibition. In our opinion, having regard to the facts stated by Cameron and the course of dealings between the parties, the absence of express prohibition, in the instant case, is immaterial. It is true that the Indian company was the sole agent of the Group-B companies. But it appears from the evidence on record that in spite of being the sole agent, the Indian company had no authority given to it by the Group-B companies to accept offers on their behalf. So far as Group-A companies are concerned, there was no privity of contract at all either of agency or of any other variety. In these premises, we cannot but hold that the Indian assessee h....