John Woodroffe, J.
1. In this case the applicant Company has been assessed to super tax as agent for six gentlemen mentioned in the reference. All these gentlemen are non-residents of British India. They are shareholders in the Company and the assessment has been made in regard to the dividends payable to them by the Company. The Company is an Indian Limited Company and the income, of which assessment was made, arose and accrued in British India. The question is whether the Company is an agent for there gentlemen as defined in the Indian Income Tax Act, VII of 1918. It is their contention that they are not such agents, and that they are not in receipt of any income of the persons whose agents they are alleged to be.
2. The Board has held that they were such agents and the matter has been referred to us upon the application of the Company. One substantial question is whether Sections 31 and 34 of the Indian Income Tax Act are to be read together or disjointly, in which latter case it would not be necessary in all cases that the agent should be in receipt of the income. On a consideration of this matter I am of opinion that Section 34 merely defines who may be included as an agent under Section 31. If so, the agent whether we look to Sections 31 or 34 must be in receipt of income within the terms of the former section.'
3. I do not think that the circumstances of this case show a receipt within the terms of the section. Though this is sufficient to determine the matter I may add that I am not satisfied that even if Sections 31 and 24 be read disjointly, the Company was under the circumstances of this case an agent within the terms of the Act. The answer, therefore, to the first question, namely, whether the Collector of income-tax is right in holding that the Company is an agent for these share-holders, is answered in the negative, The second question, namely, if so, whether the Company has rightly been assessed to super-tax on their account, does not arise. A copy of this judgment is directed to be given to the Revenue Authority.
4. I agree.
5. I regret very much that I am unable to concur in the judgment just pronounced. I think it necessary that I should state as clearly as I am able the reasons for which I have arrived at a different conclusion.
6. This is a reference made by the Chief Revenue Authority under Section 51(1) of the Income Tax Act, 1918 on the application of the Assessee, the Imperial Tobacco Company of India, Limited. Six persons who are all residing out of British India are share-holders in the Company. They were entitled to certain dividends for their shares in the Company, the profits of which accrued in British India and there is no question that the share holders are liable to pay super-tax on their income so derived. The profits due to those share-holders were sent to them by the Company to their residence outside British India. The Company was assessed for the super tax due on the income of those six share-holders as agent of the non-resident persons under the provisions of the Income Tax Act and the Company has raised the objections that it cannot be so assessed. The questions on which the decision of this Court is sought are, (1) whether the Collector of income-tax is right in holding that the Company is agent for these share-holders under Section 34, Act VII of 1918; and (2) if so, whether the Company has rightly been assessed to super-tax on their account.
7. A Company incorporated according to law is an artificial legal person having an existence separate from its corporators. There is, therefore, no legal impediment to a Company being agent for any of its share-holders. The relation, however, of share-holder and Company is not in itself the relation of principal and agent. Salomon v. Salomon & Co. (1897) A.C. 22 : 66 L.J. Ch. 35 : 75 L.T. 426 : 43 W.R. 193 : 4 Manson 89, Daimler Co. Ltd. v. Continental Tyre & Rubber Co. (1916)2 A.C. 307 at p. 356 : 85 L.J.K.B. 1333 114 L.T. 1019 : 60 S.J. 602 : 32 T.L.R. 624. Something more would be necessary in order to constitute a Company an agent for its share-holders. The contention on behalf of the Company in this case is that it cannot be held to be agent of the non-resident share-holders so as to be liable to be assessed for income-tax for those share-holders by the procedure taken by the Collector under Section 34 of the Income Tax Act. It is urged that Section 34 should be read along with Section 31, and unless a person receives income on behalf of another residing out of British India he cannot be deemed to be an agent under Section 34, and although the Company has the income of those persons it is not in receipt of such income. Assuming that the Company is not in receipt of the income, in order to see whether the Company may be treated as agent--the provisions of the Income Tax. Act commencing from Section 31 should be examined. Under Section 31 an agent of any person residing out of British India being the recipient on behalf of such non-resident person of any income chargeable under the Act is held liable for the tax. If he is actually an agent and in receipt of income on behalf of the principal nothing more is necessary in order to render him liable, but the tax is to be levied upon and recoverable from him under Section 31 irrespective of any other provision in any other section of the Act. If is not necessary in such a case for the Collector to give the agent so liable any notice under Section 34 of his intention of treating him as agent of the non-resident person, because he is in fact the agent. Section 32 refers to the case where the income chargeable is received by the Court of Wards and certain other persons. This section has no direct beating on the present question but it is noticeable that the income chargeable be received by the Court of Wards or other persons in order that the tax may be levied upon them. Then comes Section 33, Sub-section (1) of which has an important bearing on the present question. Under this section any person residing out of British India whose income accrues or arises within British India 'shall be chargeable to income-tax in the name of the agent of any such person and such agent shall be deemed to be for all the purposes of the Act the assessee in respect of such income-tax.' As I read this section the agent of such non-resident person need not be in receipt of the income on behalf of such person there being no Such provision in it as in the preceding sections. The mere fact of agency in sufficient to make him liable to be assessed in respect of the income of the principal. Coming to Section 34 it seems to me that it gives merely an extension of the meaning of the term 'agent' as including persons who are treated as such and who may be assessed under Section 33(1) although such persons are not really agents; Section 34 should be read in connection with the proceeding section rather than with Section 31. Section 34 refers to cases where the non-resident person has no agent in British India appointed by himself and therefore, it, becomes necessary to find a person who should be 'deemed to be an agent' only for the purpose of the Income Tax Act and that cannot be done by the Collector acting in accordance with the provisions of this section. Section 34, in my opinion, was enacted for the purpose of assessing the incomes of persons residing outside British India who are chargeable with income-tax here but who have not appointed any agents residing in British India who might be assessed under Section 33(1). To hold otherwise, it seams to me, would be to support an anomaly that a person receiving his income through an agent in this country would be assessed, but if he asks his debtor to remit the income direct to him he would escape liability to pay the tax, a thing which this section was intended to remove. It is only necessary that the person on whom the collector has served a notice under Section 34 is a 'person employed by or on behalf of a person residing oat of British India or having any business connection with such person' and if that condition is satisfied the person on whom such notice has been served shall, for the purposes of the Income Tax Act be deemed to be the agent of such person. Too question whether the Company is a person coming within the description of Section 34 presents to my mind very little difficulty.
8. The Company remits the incomes of the persons resident outside British India and should be held to have been employed to do so by or on behalf of the non-resident persons. The Company again has without doubt 'connection' with the share holders and what can that connection be but business connection? The Company itself states in its letter to the Collector that on the declaration of a dividend the Company is in the position of debtor to the share holders. Therefore the Company also comes within the description of 'having any business connection' with a non-resident person. To say that such person should also be in receipt of income on behalf of the non-resident person would be to make the enactment of the section unnecessary, because a person in receipt of income it little to be assessed under Section 31; also it would not be necessary to give him notice of the Collector's intention to treat him as agent for a person receiving income, for another would be an agent under the general law. It was urged on behalf of the Company that to make one person liable to income-tax for another resident abroad, although he might not receive any income on behalf of such a person might, in some cases, cause great hardship. The answer to this is two-fold; (1) If is a well-established rule that Courts ought not to be influenced by any notion of hardship in exceptional or individual cases in interpreting a Statute, and (2) in order to prevent any case of hardship the proviso to Section 34 has been enacted and the Collector may be trusted to give effect to any reasonable objection before treating a person as agent under this section. In the present case, however, there can be no such question of hardship. It may be observed that under Section 21 of the repealed Income Tax Act (II of 1886) the tax was chargeable in the name of the agent where the income was received through the agent, and there was no provision corresponding to Section 34 of the present Act. The alterations in the present Act were, in my opinion, made to remove an anomaly as I have already indicated.
9. I would, therefore, answer the first question in the affirmative. The answer to the second question depends upon the first and no argument was addressed on it. Therefore, the answer to it should also be in the affirmative.