The main legal point established in the judgment is that any person who comes within the terms of s. 43 of the Indian Income-tax Act, 1922 is put artificially into the position of agent and assessee under s. 42, sub-s. 1.

Judgement

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Appeal (No. 42 of 1929) from an order of the High Court (March 20, 1928) upon a reference under s. 66, sub-s. 2, of the Indian Limitation Act, 1922.

The effect of the order appealed from was to set aside assessments to income-tax and super-tax for the years 1924-5 and 1925-6 made upon the respondent company as agent for the Remington Typewriter Co. of New York.

The learned judges (Marten C.J. and Kemp J.) were of opinion that there was a business connection within the meaning of ss. 42 and 43 of the Act between the respondent company and the New York company, but they held (following their decision reversed by the Privy Council in Income-tax Commissioner v. Bombay Trust Corporation (I)) that having regard to s. 40 of the Act the respondent company could not be assessed, as it had not received the income in question. This matter is reported at 52 Bom. 726.

The material facts and provisions of the Act appear from the judgment.

1930. Nov. 20. Dunne K.C. and Reginald Hills for the appellant. The decision of the High Court was based entirely upon the view that s. 40 of the Act must be read with ss. 42 and 43, and that therefore a person is not to be deemed an agent for a non-resident person under s. 43 and assessable under s. 42, sub-s. 2, unless he has received the profits taxed. In Income-tax Commissioner v. Bombay Trust Corporation (1) the Board held that that view was wrong. The High Court found that the New York company had a business connection with the respondents. There being no appeal from that finding the respondents cannot now contend to the contrary. In any case the Board held in the above appeal that a " business connection " existed, and here the facts are stronger.

Sir Patrick Hastings K.C. and Stamp for the respondents.

There was no " business connection" between the New York company and the respondents within the meaning of ss. 42 and 43. Such a connection resulted neither from the fact of the shareholding nor the fact that the respondents were regular customers of the New York company, nor from both these facts. The respondents can raise this point in support of the decision in their favour without a cross-appeal. The point was taken without objection in the Bombay Trust case (( 1929) L. R. 57 I. A. 49.), although there was no cross-appeal. That decision does not affect the assessments of 5 per cent, on purchases.

Those assessments were in respect of a trade profit made not in British India but in America. Even if there was a " business connection " the profit was not made " through " it. The words in s. 42, sub-s. 1, should be read " through any business connection or from property." The word " through " connotes cases in which the resident person, by payment of dividends or otherwise, is a conduit pipe for a profit made in British India. This part of the assessments could be made only under

s. 42, sub-s. 2, and upon proof of " substantial control exercised by the non-resident person." To apply

s. 42, sub-s. 1, to an alleged profit made out of British India would be to give the provision a startlingly wide effect, and would render s. 42, sub-s. 2, useless. Dunne K.C. replied.

Dec. 16. The judgment of their Lordships was delivered by

LORD RUSSELL OF KILLOWEN. The dispute in this appeal has, by reason of a recent decision of their Lordships Board, been reduced to small compass. A statement of the relevant facts is, however, necessary.

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Assessments, in respect of the two financial years 1924- 1925 and 1925- 1926, were made under the Indian Income-tax Act, 1922 (hereinafter referred to as " the Act "), upon the Remington Typewriter Co. (Bombay), Ld., as agent for the Remington Typewriter Co. of New York. This last mentioned company is a company incorporated in the United States of America and carries on the business