S.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was no income to the non-resident which could fall within the categories enumerated in s. 9 (1)(i) of the Act and, as such, the question of bringing any such income to tax in the hands of the agent would not arise ?

Supreme Court Of India

Additional Commissioner Of Income Tax vs. New Consolidated Gold Fields Ltd.

S.P. Bharucha & N. Santosh Hegde, JJ.

Civil Appeal No. 5901 of 1994

24th February, 1999

Counsel Appeared

K.N. Shukla with C.V.S. Rao & B.K. Prasad,, for the Apellant : None, for the Respondent

ORDER

By the Court :

The assessment year involved in this appeal against the judgment and order of a Division Bench of the High Court at Patna is 1960-61. The question which the High Court answered in the affirmative and against the Revenue read thus : “Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was no income to the non-resident which could fall within the categories enumerated in s. 9 (1)(i) of the Act and, as such, the question of bringing any such income to tax in the hands of the agent would not arise ?”

Briefly stated, the facts are these. The assessee is an English company. It entered into an agreement with an Indian company, Indian Copper Corporation Ltd. Thereunder the assessee was appointed technical adviser to the Indian company in regard to its exploration, mining and mineral dressing operations. It was required to undertake through its staff the duties normally undertaken by technical advisers to a mining operation with regard to technical advice and to provide once in every year a member of its staff to visit the property of the Indian company. The assessee was also required to send out to the Indian company’s property, at its request, a member of its technical staff for a visit additional to the requisite annual visit. The assessee was entitled to recover therefore, the retaining fee of

£7,000 per annum, the same being payable in sterling in London.

For the asst. yr. 1960-61, the ITO held that the Indian company was an agent of the assessee within the meaning of s. 163 of the IT Act and that the annual remuneration of £7,000 was income accruing to the assessee which was taxable in the hands of the Indian company. The AAC concluded that even if the Indian company was held to be an agent within the meaning of s. 163, no business connection within the meaning of s. 9(1) had been established with the Indian company so as to make income accruing to the non-resident assessee liable to tax through its agent. This finding was approved by the Tribunal. The High Court, on a reference, held that the assessee received in London £ 7,000 for technical advice given to the Indian company from London. The income of such a non-resident assessee, in the facts and circumstances of the present case, could not be co-related with activity within the territory of India so as to make it income under s. 9(1) of the Act.

4. Section 9(1), so far as it is relevant, reads thus : “9. (1) The following incomes shall be deemed to accrue or arise in India— (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in Idia, or through the transfer of a capital asset situate in India. Explanation—For the purposes of this clause— (a) in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India.”

5. We will assume that the assessee had a business connection in India. Having regard, however, to the provisions of Expln. (a) quoted above, only that part of the income of £7,000 could be brought to tax in India as was reasonably attributable to the operations that were carried out in India. It is clear that the operations under the agreement between the assessee and the Indian company were carried out both in England and in India. No attempt has been made to assess the extent of the activity carried on in India as compared to that carried on in England. There is, therefore, no means now of ascertaining what part of the income of £ 7,000 could be said to be income which accrued or arose to the assessee in India. Certainly, after the lapse of almost 40 years, it would be impossible to determine this.

In the circumstances, the appeal is dismissed. No order as to costs.

[Citation : 257 ITR 770]

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