Amberson Marten, Kt., C.J.
1. In this income-tax reference the Remington Typewriter Company (Bombay) Limited (whom I will call 'the Bombay Company '), have been assessed under Section 42(1) of the Indian Income-tax Act, 1922, as agents of the Remington Typewriter Company of New York (whom I will call 'the American Company'), for the years 1925-26 and 1926-27 in respect of profits alleged to have accrued or arisen to the American Company through their business connection with the Bombay Company, including alleged profits in connection with the Remington Typewriter Company (Madras) Limited (whom I will call 'the Madras Company'), and the Remington Typewriter Company (India) Limited (whom I will call 'the Calcutta Company.').
2. The case for the Crown before the Income-tax Officer and the Assistant Commissioner appears to have been based on the view that the Bombay Company and the American Company were separate entities in substance as well as in law, but that the former was an agent for the latter within the meaning of Section 43 by reason of the close business connection between these two companies. This will be found (inter alia) from the points of argument before the Assistant Commissioner and the latter's judgment (Exhibit E) following on the petition and grounds of appeal to the Assistant Commissioner of March 28, 1927, Exhibit D. This order of the Assistant Commissioner could not be and was not appealed against to the Commissioner having regard to the limited nature of the right of appeal given by Section 32 of the Act. And it is common ground that the Commissioner did not exercise his powers of review under Section 33, apart, it is said, from some slight correction made in certain figures.
3. It would appear then that up to the conclusion of the proceedings before the Assistant Commissioner, there was no suggestion that the Bombay Company was a mere alias for the American Company, or that in fact its business belonged to and was being carried on by the American Company. If there had been any such suggestion, then it would surely have occupied a prominent place in the grounds of appeal Exhibit D, and the points of argument annexture A, and the statement of Mr. Partridge, annexture B to the order of the Assistant Commissioner, Exhibit E. It would also have been dealt with in the latter's judgment.
4. Indeed it is on this basis, viz, that the two companies are separate in substance and in law, that the three questions of law submitted to us have been raised. Accordingly, in the first instance, I will proceed to deal with the case on that footing. That being so, we have to consider whether the Bombay Company has a business connection with the American Company and is consequently the agent of the American Company within the meaning of Section 43 of the Act? And if so, whether the Bombay Company can be assessed under Section 42 in respect of the 'profits or gains accruing or arising to the 'American Company' whether directly or indirectly through or from 'that' business connection'.
5. For the moment I will assume that the first point should be answered in the affirmative. Then the second point raises the same question of construction which we had to decide in the Hongkong Corporation case (1928) SC Bom. L. R 1172, which was argued immediately before the present case but in which we reserved judgment until we had heard the arguments in the present case. We have now delivered judgment in the Hongkong Corporation case, and have held that Sections 4 J, 42 and 43 of the Act must be read together; that Section 42 only explains or extends the meaning of profits or gains in Section 40, as doss Section 43 the meaning to be given to the word 'agent' in Section 40 and elsewhere in the Act, but that the necessity 192S imposed by Section 40 of the agent in question being 'in receipt on behalf of' the non-resident of the profits chargeable under the Act applies also to Section 42. Shortly stated, then, we have held that to make an agent chargeable under Section 42 he must be in receipt of the income in question on behalf of the non-resident. that decision applies of course to the present case, the material facts of which are briefly as follows :-
6. On December 19, 1921, the Bombay Company was incorporated in Bombay to take over the Bombay business of the American Company, Its memorandum and articles of association are Exhibit B. Then by an agreement of January 18, 1922, Exhibit A, the American Company agreed to sell to the Bombay Company its goodwill in a defined territory (which included Bombay and certain other areas) and also its interest in any land in that territory, and all plant, machinery, patents, licenses, stock and utensils and all book debts and the benefit of pending contracts, and all cash and other property to which the American Company was entitled in the said territory. The purchase price payable by the Bombay Company was Rs 60,00,000 payable in fully paid shares. The Bombay Company was also to pay all the debts of the American Company in the said territory and to indemnify the latter against the same. The purchase was to take effect as from November 30, 1921, and was to be completed not later than January 80, 1922.
7. This agreement was duly carried out, and accordingly in substance the whole of the share capital of the Bombay Company was allotted to the American Company, or its nominees, and it is common ground that that share capital is now held by the American Company with the exception of one share held by Mr. Haque a Secretary, and one share held by Mr, F.J. Hull, and one share by Mr. C.H. Partridge, who are the two directors of the Bombay Company under Article 77 of the articles of association, Exhibit B.
8. The Bombay Company has ever since been carrying on business in the territory defined by the sale agreement. Its main business is the purchase and sale of the well-known Remington typewriters. Naturally for this purpose they purchase the machines from the manufacturers, the American Company : but some other goods required for their business such as typewriter paper they may purchase elsewhere. According to the evidence before the Assistant Commissioner and in particular the statement of Mr, Partridge, the Bombay Company purchases these Remington typewriters on the same terms on which they are sold to dealers in other parts of the world, viz., subject to a trade discount of forty per cent, off the catalogue price to the public. There is nothing sinister in a discount of this nature. It is a common incident of business with manufacturers. Before us counsel for the Bombay Company went one step further, and said that in fact the goods purchased are paid for in New York, and that delivery is effected there. I do not, however, find that expressly stated by Mr. Partridge. It is, however, stated in para 5 of the grounds of Appeal Exhibit D that the Bombay Company buys at the American Company's 'regular export price as fixed for all dealers throughout the world.... It pays in dollars in New York for goods supplied as invoiced and independently of profits or loss on resale in India.'
9. I will now say a word as to the alleged profits for which the Bombay Company has been assessed as agent The American Company has of course received the dividends on the shares it holds in the Bombay Company. Income-tax Las already been deducted on those dividends, and accordingly no question arises as regards the income-tax on those dividends. But what the Crown alleges is that, apart from its profit by way of dividends in the Bombay Company, a manufacturer's profit, which has been assessed at five per cent, has also been made by the American Company in respect of the goods sold by it from time to time to the Bombay Company, The Crown claims that the Bombay Company as agent is liable to be assessed under Section 42 in respect of this manufacturer's profit. The Crown further claims that the Bombay Company as such agent is liable for super-tax not merely on the dividends on the Bombay shares, but also in respect of the dividends payable to the American Company in respect of its holdings in the Madras and Calcutta Companies.
10. Taking first the manufacturer's profit of five per cent., the precise figure is not disputed. But as regards the liability of the Bombay Company to pay it, that is clearly concluded against the Crown by our decision in the Hongkong Corporation case. It was faintly suggested before us that the Bombay Company was in receipt of this manufacturer's profits. But in my judgment that is a hopeless contention. A particular purchase price may well include a profit to the vendor. But it is the vendor who receives that profit and not the purchaser. Consequently, I would hold that in the present case the Bombay Company was not in receipt on behalf of the American Company of this manufacturer's profit of five per cent, and consequently cannot be assessed under Section 42 of the Act.
11. As regards the alleged liability of the Bombay Company to super-tax in respect of the dividends on the shares of the Madras and Calcutta Companies, the case for the assessee is, if possible, even stronger. The Bombay Company has had nothing whatever to do directly or indirectly with any dividends on the shares of the Madras Company or the Calcutta Company. There fore, they have never been in receipt of them within the meaning of Section 40. But the present case shows the length to which it is sought by the Crown to push the alleged liabilities of a statutory agent under Sections 43 and 42. Further, as regards super-tax on dividends, it may be pointed out that under the amended Sections 57 and 58, the proper course is for the appropriate amount to be deducted by the principal officer of each Company concerned. This observation applies also to the dividends of the Bombay Company. It is true that the American Company is not a company as defined by Section 2(6), and consequently must be assessed at an ad valorem rate and not at the flat rate of one anna payable by British companies. But under the amended Sections 57 and 58 the Income-tax Officer can call on the principal officer of the company to deduct at the appropriate rate. So the exact rate should cause no difficulty. On the other hand, the Bombay Company itself cannot be assessed for this deduction. Its principal officer is the person liable under as. 57 and 58. Nor in my judgment can the Bombay Company be made liable under Sections 40 and 42, as I do not consider that it is in receipt of its dividends 'on behalf of' its shareholders. Its duty is to pay these dividends, and not to receive them : and here I would respectfully follow the decision of Mr. Justice Woodroffe and Mr. Justice Greaves in Imperial Tobacco Company of India, Id. v. The Secretary of State for India I.L.R (1922) Cal 721, which I have already dealt with in my judgment in the Hongkong Corporation case. As regards the actual assessments in the present case we have had them put in evidence by consent as Exhibits F and G together with the final notice of assessment of March 11, 1927, Exhibit H, which contains tabular statements clarifying the demands made upon the assessee.
12. On the basis then of the case before the Assistant Commissioner, I would hold that the questions submitted to us should in substance be answered in favour of the assessee and against the contentions of the Crown. Indeed, apart from the questions pf construction of Sections 40, 42 and 43, dealt with in the Hongkong Corporation case, counsel for the Crown was prepared to concede that the assessments could not be supported except on a totally different ground which I will now deal with. This was that the Bombay Company was a sham company, and a mere alias for tho American Company, and that amongst other things the sale effected by the agreement Exhibit A was a fictitious transaction, and that in reality the American Company was carrying on its own business in the name of the Bombay Company, and that the Bombay Company was really a trustee of all its assets for the American Company. Counsel further claimed that these were findings of fact by the Commissioner, which were binding on us, and that on those findings the points of law submitted to us really did not arise or at any rate must be answered in favour of the Crown.
13. Turning to the case submitted to us, it will be found that para. 2 is headed 'Facts of the case', and then follow certain statements in paras. 2, 3, 4 and 5. Para. 6 purports to state the findings of the Income-tax: Officer, and para. 7 the findings of the Assistant Commissioner on appeal to him. Para. 9 states the questions of law which the assessee wants to be decided, and then follows in para Section 11 to 25 the opinion of the Commissioner as required by Section 66(2) of the Act.
14 Now undoubtedly in the opinion expressed by the Commissioner in paras. 11 to 25, there are many statements made which, if accurate, would tend to bear out the contentions of counsel for the Crown. But whether those statements can be supported in law having regard to the warning given by Lord Justice Younger in Inland Revenue Commissioners v. Sansom  2 K.B. 492 and to the general propositions of law which we referred to in In re Sir Dinshaw Petit (1926) 29 Bom. L.R. 447. I very much doubt. But the opinion of the Commissioner, however useful to us, is not binding on us, It is the statement of facts in paras. 2 to 8 with which we are more directly concerned, Now it would have been preferable if the Commissioner had stated specifically what facts were admitted or proved, as is usually done in cases stated by the Income-tax Commissioners in England. We have already objected in other cases to mere quotations of the submissions made by one side or the other. Any one party may submit anything. We want to have a detinite finding whether that submission is correct having regard to the contentions of the other party.
15. Accordingly, I would take exception to the manner in which para. 4 is stated. This Court does not want allegations. And in any event it is no allegation of the assesses that 'goods' are 'sent to it for sale.' This might imply that the goods were forwarded to it for sale as a commission agent whereas the case for the assessee is that it buys outright in New York like other dealers, and that thereafter the American Company is not con-Remington corned in any way with the goods.
16. So too, the statement in para. 7 that the Assistant Commissioner was of opinion that 'as a matter of fact the two (companies) were identically the 'same' is inaccurate. The nearest approach to that statement is the following finding by the Assistant Commissioner, viz., 'It is hardly conceivable that there could be really a closer business connection than this between a non-resident and a resident. In fact they are hardly divisible, and the assessing officer as he has himself remarked could equally well have framed his assessment under Section 42(2)'. The Assistant Commissioner was here discussing the applicability of Section 43, and not whether the sale Exhibit A was fictitious.
17. Turning next to para. 6, the Commissioner does not annex the original findings and order of the Income-tax Officer but says the latter found 'that' the whole of the Indian business in reality belonged to the New York Company', and that that officer 'took it that the purchase price at which the local companies were made to purchase the Remington goods from the New York Company was fictitious and not the actual cost to it'. As the Commissioner has referred to this alleged finding of the Income-tax Officer, we thought it proper to call for it. This was objected to by the Crown but it was eventually produced by our directions, and on production the document in question showed that the Income-tax Officer arrived at no such finding. On the contrary he found that 'these transactions appear perfectly straight-forward'.
18. Indeed if the case for the Crown before the Income-tax Officer had been that the Bombay Company was a fictitious company, and that the sales were all fictitious, that would surely have found a place in the appeal to the Assistant Commissioner. Further, it would seem certain that the Bombay Company would have raised a point of law for our decision as to whether there was evidence which would entitle the income-tax authorities in law to arrive at the conclusion that the agreement and transfers effected by Exhibit A were fictitious, and that the Bombay Company was a mere dummy.
19. As to how the Commissioner has been led into making these erroneous statements as to the findings of the Income-tax Officer and the Assistant Commissioner I do not know. But one difficulty they have caused me is in considering whether we ought under Section 66(4) to send the case back for re-statement. In considering this 1 have also to consider the statement made by the Commissioner in para. 5, viz.
All these purchase and salo agreements in reality appear to be mere paper transactions, the purchaser and stiller being one and the same party, viz., the New York Company which always was and continued to be the sole owner of the total Indian business whether under the style of the original Remington Typewriter Company (England) Limited or the all-India Company or the three Companies in all in existence.
20. Now the case submitted to us has to be taken along with its exhibits and annextures, and doing that I am unable to say under Section 68(4) that the statements in the case as a whole are insufficient to enable the Court to determine the questions submitted to it. The only real difficulty is caused by the Commissioner's allegations as to the Bombay Company being a fictitious company. If once those allegations are put on one side, then though in certain particulars the facts might have been better stated they are sufficiently stated for us to dispose of the specific questions asked.
21. This leads one to the consideration of what is the position of the Commissioner when he states a case under Section 66(2). In the first instance it was urged strongly by counsel for the Crown that the facts of the case which are binding on this Court are those found by the Assistant Commissioner; that the Commissioner has no power to alter them apart from his power of review under h, 33 which was not exercised in the present case : that the Commissioner was not hearing any appeal, and that consequently his functions were confined to stating a case as required by the assessee under Section 66(2), and therefore neither he nor the Court had any power to interfere with the findings of, fact already arrived at by the Assistant Commissioner.
22 Thereupon counsel for the assesaee pointed out that the findings of the Assistant Commissioner to which I have already alluded were all in favour of the assessee on this particular point and not against him. Finding on reference to Exhibit E that this was the fact, counsel for the Crown then proceeded to shift his position entirely, and to argue exactly the contrary to what he had previously urged as being the true construction of the Act and the true procedure. This further argument was to the effect that the Commissioner could state what he liked, and that whatever he stated we must accept as being the fact irrespective of the truth. Alternatively, counsel asked that the case should go back to the Commissioner, under Section 66(4) and that the Commissioner might be at liberty to review the case under Section 53, and thereby raise the point as to whether the Bombay Company was a fictitious company.
23. I will say nothing as to the propriety of counsel for the Crown thus advancing two quite inconsistent arguments on the construction of a taxing Act and the proper procedure thereunder according as it might suit the exigencies of the particular case before the Court. But dealing with the alternative argument advanced, 1 think in law the Commissioner has no power to misstate a case as was the effect of the argument presented to us. His power and his duty is to state a case, and that means that he must state the relevant facts which have been proved or admitted before the Assistant Commissioner, apart from any limited right of appeal under Section 32, or any review by the Commissioner himself under Section 33, or to any rectification of a mistake under Section 35.
24. Applying then that principle, I think that the Commissioner had no power to make the mis-statements which in the view I hold he did make. The Bombay Company was not charged before the Assistant Commissioner with being a fictitious company and the transfer to it a sham. In the events which happened the case for both parties was closed at the termination of the proceedings before the Assistant Commissioner and it would be most unfair to allow the Commissioner to start an entirely new case against the Bombay Company without even giving it an opportunity of being heard on that point. Indeed even if he had exercised his powers of review--which in face he did not do-it would have been obligatory on him under Section 33 to give the assessee a reasonable opportunity of being heard. Apparently from para, 13 of the reference the Commissioner was prepared to review the assessed quantum of manufacturer's profits, viz., five per cent., but he did not do so as this figure was not disputed by the Bombay Company. But he says nothing about reviewing the Assistant Commissioner's other findings, and admittedly there was no such review.
25. In the present case, therefore, I think we can see clearly what was the true position before the Assistant Commissioner, and that we can accordingly reject the additional and erroneous materials which the Commissioner has stated, and that there is no real necessity to send the case back to him for formal correction in this respect, I should have arrived at this conclusion irrespective of the judgment of the Income-tax Officer, Exhibit XX, which we admitted in evidence, for, quite apart from Exhibit XX, I should clearly infer from the proceedings before the Assistant Commissioner that no such point could have been raised before the latter's subordinate officer. But out of abundant caution it seemed to me that we were entitled to look at this document seeing that the Commissioner himself had referred to it, and if one does look at it, then the inference I should otherwise have drawn is abundantly justified.
26. On the view then which I take of the case it is unneces sary to decide whether the Bombay Company was the agent of the American Company within the meaning of Section 43 of the Act. But as the point has been argued before us, I would hold that it was such an agent. J need not repeat what was said by this Court in the Hongkong Corporation case as to the meaning to be attributed to the words 'business connection' in Section 43. But I am satisfied that in the present case the Bombay Company did have a business connection with the American Company within the meaning of that section. The American Company was its vendor and promoter, and held substantially all its share capital. The Bombay Company traded in the machines of the American Company, and bought them from the American Company, and enjoyed the use of the trade name 'Remington'. Moreover, the purchase of the goodwill would prevent the American Company from canvassing the old customers within the area in question.
27. Accordingly, I need not consider the precise meaning of the words in Section 43 'through whom such person is in the receipt of profits'. Here the American Company as shareholder was in receipt of the dividends paid by the Bombay Company, and the case, therefore, is somewhat stronger for the Crown than the Hongkong Corporation case where the relations between the parties were those of mere debtor and creditor.
28. As regards the request which is now made by counsel for the Crown that the Commissioner should be given an opportunity of exercising his powers of review under Section 53, our powers under this Act are limited, and holding, as we do, that we are in a position to decide the questions submitted to us without referring the case back under Section 66(4) we propose to answer them accordingly.
29. Turning to those questions, Nos. 1 and 2 seem to me to be too widely expressed for the necessities of the present case. I would, accordingly, answer them in a more limited way, as follows viz., 'Questions 1 and 2. The Bom. bay Company, though an agent of the American Company within the meaning of Section 43 of the Act, cannot be assessed to income-tux or super-tax under Section 42(1) of the Act or otherwise in respect of any profits made by the American Company on the sale of its goods to the Bombay Company inasmuch as the. Bombay Company was not in receipt on behalf of the American Company of the profits in question, as is requisite under Section 40. For similar reasons the Bombay Company is not liable to be assessed to super-tax upon dividends paid to the American Company by the Calcutta Company or Madras Company : nor upon dividends on its own shares paid by it to the American Company. Super-tax upon dividends in the Bombay Company can be recovered by deduction by the principal officer of the Bombay Company under Sections 67 and 58 of the Act.
Question 3. Yea.
30. As regards costs, I would direct that the costs of the Bombay Company be paid by the Commissioner to be taxed by the Taxing Officer, Original Side, as on the Original Side scale.
This is a reference under Section 66(2) of the Indian Income-tax Act XI of 1922 at the instance of the Remington Typewriter Company (Bombay) Limited, whom I shall call Remington (Bombay). The Commissioner regarded the facts as involving the interpretation of Sections 42(1) and 43 of the Act. The reference arises out of the assessment to tax and super-tax of Remington (Bombay) for the years 1925-26 and 1926-27 as agent of the Remington Typewriter Company of New York, whom I shall hereafter call the New York Company or Remington (New York).
It appears that the original Remington Typewriter Company was an English company which sold its Indian business to the Remington Typewriter Company (India) Limited, a company registered under the Indian Companies Act, 1913, and having its registered office at Calcutta. In his reference the Commissioner states that the Remington Typewriter Company (India) Limited came into existence in 1914 and allotted, as the purchase price to the English company, 9,996 out of its 10,000 shares of Rs. 10 each to the New York company as nominee of the English company. The Indian company carried on its buisness in India until December 12, 1921, when it sold its Bombay and Madras businesses to the New York Company which in its turn on January 18, 1922, sold the Bombay and Madras businesses to the Remington Typewriter Company (Bombay) Limited and the Remington Typewriter Company (Madras) Limited respectively. It thus appears that the Bombay business was done by Remington (Bombay), the Madras business by Remington (Madras) and the business for the rest of India by Remington (India).
The reference relates to the assessment of the New York com pany through its alleged agents Remington (Bombay) to tax and supar-tax in respect of the dividends received by it through the three subsidiary Indian companies and in respect of profits assessed at five per cent, on the sales of Remington typewriters by the Now York company to the subsidiary companies I refer to Remington (Bombay), Remington (Madras) and Remington (India) as the subsidiary companies. Taking the agreement with Remington (Bombay) as typical of the agreement with Remington (Madras) whilst it appears that the goodwill of the New York company in these Presidencies was sold to the respective subsidiary companies, there was, according to the assessee, no obligation on the New York company not to supply Remington typewriters to other purchasres in those Presidencies. But however this may be the practice was for Remington (Bombay) to purchase the typewriters from the New York company at the usual wholesale price which was forty per cent, below the catalogue price, Remington (Bombay) retaining any profit from sales within the territory within which it traded, It is only necessary to add that of the 60,000 shares of Rs. 10 each constituting the capital of Remington (Bombay) the Now York company under the agreement with it holds all the shares except three. One of these three shareholders is the managing director of all the three subsidiary companies, another is alleged to be his secretary and the third is the local manager. Similarly, with regard to the other subsidiary companies the same three persons hold three shares only, the remaining shares in those companies being held by the New York company.
Remington (Bombay) has been taxed on all the dividends received by the New York company and at five per cent, fixed by the Income-tax; Officer as the profit on sales to the subsidiary companies by the New York company and not included in the profits shown by the three subsidiary companies. Remington (Bombay) appealed against the assessment to the Assistant Commissioner contending that there was no 'business connection' between it and the Now York company and that it was not the New York company's agent and it could not be taxed as such, The Assistant Commissioner dismissed the appeal. Remington (Bombay) then applied to the Commissioner under Section 66(2) to state a ease for the opinion of the High Court. The Commissioner appears to have been of opinion on the facts that the New York company and Remington (Bombay) were identical This was not the conclusion adopted by the Assistant Commissioner or the Income-tax Officer in proceeding under Sections 42(1) and 43 of the Act. They obviously treated the case as one in which Remington (Bombay) was the agent of the New York company. Apparently it was not present to the mind of the Commissioner that if Remington (Bombay) and the New York company were identical the case would not be one under Sections 42(1) and Section 43, and in that view the questions submitted for our opinion would be merely a matter of academic interest and not questions arising on the facts as found by the Assistant Commissioner, But by accepting the position adopted by the Assistant Commissioner and referring questions under Sections 42(1) and 43 for our opinion, I take it that the Commissioner endorsed the Assistant Commissioner's view that the case was one which should be dealt with on the assumption that Remington (Bombay) was the agent of the New York company and not the New York company itself.
Now as 1 read Section 40 of the Act, an agent in receipt of income on behalf of the non-resident can only be assessed in respect of such income as he receives on behalf of his principal. Therefore, in no case could Remington (Bombay) be treated under Section 40 as assessee for the dividends received by the New York company from the two other subsidiary companies. Furthermore, in any event, although credit has been given in the assessments to super-tax for Rs. 50,000 on all the dividends received from the three subsidiary companies, Remington (Bombay) claims-and I think rightly-that if it is to be assessed for all the dividends of the three subsidiary companies credit should be given for Rs. 50,000 in respect of the dividends from each of the three subsidiary companies. The super-tax is on a sliding scale because by Section 2(6) of the Act the New York company is a foreign company which has not obtained an order from the Central Board of Revenue under that clause. The flat rate of super-tax does not, therefore, apply to it.
But the relation between a company and its shareholder is not a business connection under Section 42(I) or 43 of the Act. Provision is made in the Act for deducting tax on dividends at the source. Furthermore, it was held by the majority of the Court in the case of Imperial Tobacco Company of India, Ltd. v. The Secretary of State of India (1922) L.L.R. 49 Cal. 721. that the company in that case could not be considered as an agent in receipt of dividends on behalf of one of its shareholders and with this opinion I respectfully agree. If the addition of the words 'or through whom such persons... or gains' in Section 43 was intended to indicate the statutory agent as the source of the income to the non-resident that should have been clearly indicated. As to the dividends, therefore, I fail to see how Remington (Bombay) can be assessed under Sections 42(1) and 43 of the Act.
So far as Sections 42(1) and 43 are concerned it is necessary to decide first of all whether there is a 'business connection' between the New York company and Remington (Bombay). I am of opinion that in the ordinary meaning to be given to those words there is such a connection in this case. The New York company owns all the shares in Remington (Bombay) except three and those are held by the managing director of all the three subsidiary companies, his secretary and the local manager of Remington (Bombay), The position of the New York company with regard to the other subsidiary companies is similar. There is thus one control through one person as the managing director of all the subsidiary companies. The New York company own practically all the shares in the subsidiary companies and the course of business has been for the New York company to supply the typewriters at wholesale prices to the subsidiary companies, i. e., they have provided a market, by the creation of subsidiary companies for the sale of their typewriters. Such profits as the subsidiary companies make on selling these typewriters locally come back to the New York company in the form of dividends. The agreement between the New York company and Remington (Bombay) is signed for both the vendors and the purchasers by the managing director Mr. Hull. 1 have no doubt in ray mind that the circumstances here show a 'business connection' between the New York company and Remington (Bombay).
What then is the liability to tax of the assessed in respect of the income accruing due to the New York company in British India? Under Section 42(1) profits or gains accruing to a non-resident from a business connection in British India are income arising in British India and the section goes on to state that in respect of them the 'agent' is assessable. The argument turns round the question whether the agent here means an agent in receipt of the income on behalf of the non-resident as in Section 40. It seems difficult to believe that whilst the Legislature intended that income accruing to a non-resident in British India should under Section 40 render his agent in receipt of it on his behalf liable to be assessed in respect of it, it should at the same time provide another aasessee who is the agent but not in receipt of the non- resident's income on his behalf where such income consisted of the Profit or gains through a business connection of the non-resident in British India. In both cases the income accrues in British India and it is difficult to see why the fact of a business connection should require a wider definition of agent, Mr. Taraporewala contends that there may be agents who are not in receipt of the income on behalf of the non-resident, e. g., where the income from the business connection is remitted direct and the intention of the Legislature was to assess such an agent under Section 42(1) on behalf of a non-resident in respect of the profits or gains accruing through the business connection in India. Further that Section 43 extends the meaning of such agents. In the alternative he suggests that if this be not so, but Sections 40 and 43 must be read together, then Section 43 may not refer to the agent in Section 42 (1) but to the agent in Section 40 who is in receipt of income on the non-resident's behalf and, in any case, therefore, the agent mentioned in Section 42(1) need not be in receipt of the profits or gains on behalf of the non-resident. In other words, Sections 42(1) and 43 should be read together but if Sections 40 and 43 are to be read together, then Section 42(1) should be read by itself. The opinion of the majority of the learned Judges in Imperial Tobacco Company of India Ld v. The Secretary of State for India was to the effect that Sections 40 and 43 should be read together.
I am of opinion that the agent mentioned in Section 42(1) must be intended to be the agent in receipt of income on behalf of the non-resident arising from the business connection. Such agent would be the person whom the Legislature would naturally regard as the assessee as the income would come to him on behalf of his principal. To hold otherwise would work an injustice because if he were an agent in the business connection on behalf of the non resident and by the terms of his agency were not to receive the profits or gains arising from the business connection but they were to be received by somebody else, he would have no control whatever over the destination of such profits or gains and the proper person seems to be the person who is in the proper legal possession aa agent of such- profits or gains. It seems to be the only way in which these three sections can be it ad consistently, Section 43, if covering the case of an agent who in not in receipt of the income on behalf of the non-resident, would enable the Commissioner to treat as agent of the non-resident any subordinate employee of the non-resident who might have no control whatever over the income arising in British India. Before I am prepared to place such an interpretation on that section I wish to be satisfied in clear and unmistakable terms that such was the intention of the Legislature and in my opinion such a clear indication of its intention is not to be collected from the wording of those sections. Section 40 merely says income in British India of which the agent is in receipt on the non-resident's behalf renders the agent liable to assessment. Section 42(1) states that profits and gains from the business connection are income accruing in British India. Therefore, if an agent of the non-resident is in receipt of it on his behalf such an agent is under Section 40 assessable to tax in respect of it. Section 43 merely extends the meaning of the word 'agent' without dispensing with the necessity of such statutory agent being in receipt of the income on the non-resident's behalf. Mr. Taraporewala for the Crown considers that every case referred to in Section 43 is a case of a real agent. That may or may not be so. But it is noticeable that the section intends to designate as agents persons who might be such in law but would not in common parlance be known as such, as, for example, employees in the office. I am of opinion that Sections 40 and 43 must be read together and that Section 43 especially referring to the business connection mentioned in Section 42(1) inferentially gives to the meaning of 'agent' in Section 42(1) an agent in receipt of income on behalf of the non-resident.
Whether the typewriters purchased by Remington (Bombay) are deliverable f. o. b. New York or not, I think that having regard to the business connection subsisting between the New York company and Remington (Bombay) the profits and gains to the New York company arise from this business connection. But I do not see how Remington (Bombay) could be regarded as the agent in receipt of profits and gains accruing from the business connection between the Now York company and the subsidiary companies other than Remington (Bombay), It would be absurd to hold that the non-resident's agent in one business connection should be for that reason assessed as his agent in another business connection. The view that the agent must be in receipt of income on behalf of the non-resident from the business connection seems to me to receive support from the words 'or through whom such person is in the receipt of any income, profits or gains' added in Section 43 of the present Act. These words cover the case of an agent in Section 42(1) and cannot be read to create an inconsistency with the agent mentioned in that section.
It may be argued that the words in Section 43 'through whom such person is in the receipt of any income, profits or gains cover the case of profits received from the purchaser of the goods who pays the price at New York, but, if this be so, I think the Legislature should say so in clear terms and in my opinion the wording is very far from clear, and should not, therefore, be so construed as to render a person not otherwise liable to be assessed subject to such a liability.
I agree, with respect, with the answers given by the learned Chief Justice to the questions submitted.