1. The assessee were appointed agents of S. & D. Rivet Co. by an agreement dated 3rd March, 1952, and under this agreement the principal company was to pay to the assessees a commission of 5 per cent. calculated on the net amount of case received by the company in payment of all orders accepted by the company and delivered to the agency territory. It is not disputed that the agency territory comprised India, Burma and Ceylon. The Income-tax Department held the assessees to be the statutory agents of the principal company, and in respect of the sales of the company affected in India they allocated a portion of the profits as arising here, brought those profits to tax, and called upon the statutory agents to pay the tax, and it is with regard to this claim of the Department that three questions arise on this reference.
2. The first question is : Whether there was material on the record on the basis of which the Tribunal could have come to the conclusion that the non-resident company had a business connection in the taxable territories in the years of account relevant for the assessment years 1950-51 and 1951-52 On the facts before us, nothing could be clearer than that was a definite business connection in the taxable territories. The profit earned by the company was the result of the business connection in this country and the assessees embodied, if one might so put it, that business connection by acting as the sole selling agents of the company and helping the company to earn profits. The first question really has not been seriously pressed by Mr. Palkhivala.
3. The second question is : Whether in computing the deemed income of the non-resident company under section 42 of the Act, are the profits of the non-resident company relatable to the sales effected in Burma and Ceylon to be excluded This question can only be decided on the consideration of the aspect of the matter which relates to the business connection with India. It is true that if there was no business connection with regard to the earning of the profits in Ceylon and Burma, then the non-resident company would not be liable, but if there was a business connection in this country then wherever the profits might have accrued, so long as the statutory agent was in India against whom the Taxing Department could go, then the non-resident company would be liable to pay for the profits earned in countries outside India through its statutory agent. Again, the record makes it quite clear that the company succeeded in earning profits out of its business in Ceylon and Burma through the work done by the assessees in India. The assessees used to sent their representatives to Burma and to Ceylon and copies of acknowledgment letters by S. & D. Rivet Co. were being sent to the assessees. The assessees also advised the company with regard to the credit-worthiness of the parties concerned and whether goods could be supplied to them on a letter of credit basis. The assessees were also asked by the company to contact the parties concerned and get the relevant information regarding prices, etc. Therefore, with regard to this aspect of the work the assessees acted precisely in the same manner, whether the orders were from India or from Burma or from Ceylon. Therefore, in our opinion, a clear business connection is established with regard to the orders placed from Burma and Ceylon and the non-Burma resident company is liable with regard to the income earned in and Ceylon.
4. The third question is with regard to certain orders which were placed directly or through shipping agents. The record shows that the orders placed with the company fees into three classes : orders which were placed through the assessees as the agents of the company, orders which were placed directly with the company, and orders which were placed through shipping agents; and Mr. Palkhivala's contention is that the non-resident company is liable to pay tax through the assessees only in respect of orders placed through them and not in respect of orders falling under the other two categories. Now, the overriding fact in this case is that the assessees received 5 per cent. commission with regard to all orders, in which ever category they fell, and obviously the assessees were interested in seeing that a large number of orders were placed with the company so that their commission should aggregate to a large amount. Therefore, as far as the interest of the assessees was concerned, it made no difference whether the orders were through them or through the shipping agents or direct, and the record also shows that the assessees carried out important obligations with regard to customers who placed their orders direct or through the shipping agents. Even where indents were placed through shipping agents by parties in India, copies of invoices were sent to the assessees for record purposes and the assessees were always apprised of the sales effected directly or through shipping agents and the assessees were also consulted regarding the credit-worthiness of the parties concerned and were also asked to contact the parties concerned. When we have, as we do have here, a single agency where no distinction is made with regard to earning of the commission by the agent, with regard to the nature of the orders placed, then it is difficult, if not impossible, to say that the agent did less work or more work with regard to one class of orders than with regard to another. Therefore, in our opinion, the position in law is the same, whether the orders were placed through shipping agents or were placed direct.
5. In the result we answer question (1) in the affirmative, question (2) in the negative, and question (3) in the affirmative.
6. The assessee to pay the costs.
7. Questions answered accordingly.