Barendra Prasad Ray & Ors Vs. The
Income Tax Officer 'A' Ward Foreign Section & Ors [1981] INSC 86 (7 April
1981)
VENKATARAMIAH, E.S. (J) VENKATARAMIAH, E.S.
(J) PATHAK, R.S.
SEN, A.P. (J)
CITATION: 1981 AIR 1047 1981 SCR (3) 387 1981
SCC (2) 693 1981 SCALE (1)949
ACT:
Income Tax Act, 1961, Sections 2(13), 2(36),
9(1), 163(1) and 195(2), scope of-Words and phrases-"Business" and
"having business connection"-explained-Presumpion of obligation of
the agent to deduct the tax payable under the Income Tax Act at source on
payment made to a non-resident.
HEADNOTE:
The appellants are partners of a firm of
Solicitors at Calcutta and they had been engaged by a German Corporation to act
on its behalf in three suits pending before the High Court at Calcutta. A firm
of Solicitors in London, namely M/s. Ashurst, Morris, Crisp & Co., which
was also acting on behalf of the German Corporation instructed the appellants
to retain Mr. Blanco White Q.C., a resident of the United Kingdom, who was a
barrister having considerable practice in the branch of patent law, to argue
the case in the aforesaid three suits. The appellants did not deliver any
briefs to him and also did not pay or undertake any obligation to pay any fees
for his services The briefs had been earlier delivered by the London
Solicitors. Mr. Blanco White left India on February 17, 1970 after arguing the
cases for 13 days commencing from January 27, 1970 to February 16, 1970,
without making any arrangement regarding the payment of the Income Tax on the
fees earned by him.
The Income Tax Officer informed the
appellants that he proposed to proceed against them under section 163(1) of the
Act treating them as the agents of Mr. Blanco White on the ground that the
income arising out of professional charges had arisen on account of the
business connection that existed between the appellants and Mr. Blanco White.
Thereafter the appellants challenged the said
order of the Income Tax Officer by filing a petition under Article 226 of the
Constitution before the High Court of Calcutta. The learned Single Judge
dismissed the petition on the ground that it was a premature one taking the
view that the question whether the case came within the purview of section
163(1) of the Act had to be determined after ascertainment of facts by the
Income tax officer. The appeal preferred by the appellants was dismissed by a
Division Bench holding (a) there was business connection (directly or
indirectly through correspondence) between the appellants' firm and their
non-resident British Counsel Mr. Blanco White and that an agency could very
well be said to have been established between them; (b) there was business
connection between them and (c) income did either accrue or arise to Mr. Blanco
White in India. However, the Division Bench granted certificate to the
appellants under Article 133 of the Constitution and hence the appeal.
388 Dismissing the appeal, the Court
HELD: 1. From the facts and other material on
record there was connection between the appellants and Mr. Blanco White. The
said connection cannot also be termed as a casual one having regard to the
period over which it had existed.
It was real and intimate and Mr. Blanco White
earned the fees for arguing the case in India only through the said connection.
From the year 1965 there was correspondence between the appellants and the
London Solicitors who in their turn had engaged Mr. Blanco White in connection
with the suits in question Mr. Blanco White appeared before the High Court
along with Indian counsel engaged by the appellants, though with the leave of
the Court granted presumably under section 37 of the Advocates Act, 1951. Mr. Blanco
White could appear only with the consent of the appellants who were the
Solicitors on record. [398 A-F] Commissioner of Income-tax, Punjab v. R.D.
Aggarwal and Co. and Anr., 56 I.T.R. 20, applied .
2 It is incorrect to suggest that it was the
intention of the Parliament to exclude non-residents engaged in learned
professions from the operation of section 9(1). The words in section 9(1) and section
163 are comprehensive enough to include all heads of income mentioned in
section 14 of the Act. [393 D].
3. The expression "business" does
not necessarily mean trade or manufacture only it is being used as including
within its scope professions, vocations, and callings from a fairly long time.
From section 2(b) of the Indian Partnership Act, 1932, it is clear that the
"business is one of wide import and it means an activity carried on
continuously and systematically by a person by the application of his labour or
skill with a view to earning an income. In the context in which the expression
"business connection" is used in section 9(1) of the Income Tax Act,
1961 there is no warrant for giving a restricted meaning to it excluding
"professional connection" from its scope.
[400 B-D, 401 A-B] Commissioner of income
Tax, Bombay v. Currimbhoy Ebrahim and Sons Ltd., 3 I.T.R. 395; Christopher
Barker and Sons v. Commissioner of Inland Revenue, [1919] 7 K B. 222 at page
228 and Commissioner of Inland Revenue v. Marine Steam Turbine Company Limited,
[1920] 1 K.B. 193, quoted with approval .
4. In the instant case, (a) it cannot be said
that since Mr. Blanco White could not appear as counsel as of right either
under the Advocates Act or under the Calcutta High Court Original Side Rules,
he could not be treated as having any business connection with the appellants;
(b) since Mr. Blanco White appeared along with the Indian counsel engaged by
the appellants and the appellants continued to represent the German Corporation
when Mr. Blanco White argued the case before the High Court, it cannot be said
that Mr. White was a stranger to the appellants; (c) the appellants may not
have engaged him to argue the case but, they allowed him at the request of the
London Solicitors to argue the case and willingly co- operated with him in
doing so; (d) the appellants may not have undertaken to pay Mr. White's fees
but he could not have argued and earned the fees without associating himself
with the appellants. The fact that Mr. Blanco White being a barrister could not
file a 389 suit to recover the fees would not make any difference; and (e) that
it is seen from the correspondence that Mr. Blanco White has earned the fees
amounting to Pounds 2200 with refreshers at the rate of Pounds 220 per day, for
the work done in India. Therefore. the appellants are liable to tax agents of
Mr. Blanco White under section 153(1) of the Income Tax Act, 1961. [401 B-E]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1038 of 1973.
Appeal by certificate from the Judgment and
Order dated the 19th February 1973 of the Calcutta High Court in Appeal from
Original Order No. 200 of 1971.
S. Chowdhuri, P.P. Ginwala, T.A. Ramachandran
and D.N. Gupta for the Appellants.
V.S. Desai, Champt Rai and Miss A. Subhashini
for Respondents No. 1 & 2.
The Judgment of the Court was delivered by
VENKATARAMIAH, J. This appeal by certificate under Article 133 of the
Constitution arises out of a writ petition filed by the appellants under
Article 226 of the Constitution of India before the High Court of Calcutta. The
appellants are partners of a firm of Solicitors known as M/s. Orr Dignam &
Co. having its office at Calcutta. The appellants acted as the Solicitors of a
German Corporation known as Ferbwerke Hoechst Aktiengesellschaft Vormals Mester
Lucius & Bruning (a Corporation organised under the law of Federal Republic
of Germany) (hereinafter referred to as 'the German Corporation' ) in two suits
filed on the Original Side of the Calcutta High Court-one Suit No. 511 of 1962
filed by the Bengal Chemical and Pharmaceutical Works Ltd. against German
Corporation and another Suit No. 1124 of 1962 filed by the German Corporation
against the Bengal Chemical and Pharmaceutical Works Ltd. on the alleged
infringement of a patent. The appellants were instructed by a firm of
Solicitors in London namely M/s. Ashurst, Morris, Crisp & Co. (hereinafter
referred to as 'the London Solicitors') who were also acting for the German
Corporation by a cable dated May 31, 1965 to retain in the said suits Mr.
Blanco White Q.C., a resident of the United Kingdom, who was a barrister having
considerable practice in the branch of patent law. On his arrival in India, the
appellants accordingly retained Mr. Blanco White as the counsel to argue the
case of their clients-the German Corporation even though they did not deliver
any briefs to him and also did not 390 pay or undertake any obligation to pay
any fees for his services. The briefs had been earlier delivered by the London
Solicitors. It is stated that they did not know as to how much amount was
payable to him by the London Solicitors by way of fees. The hearing of one of
the said two suits lasted for thirteen days commencing from January 27, 1970
and was concluded on February 16, 1970. Mr Blanco White left India on February
17, 1970 after the hearing was over without making any arrangement regarding
the payment of income tax on the fees earned by him by arguing the case of the
German Corporation. Thereafter on February 19, 1970, the appellants received a
notice from the Income-tax Officer, 'A' Ward, Foreiga Section asking them to
furnish information about the fees earned in India by Mr. Blanco White as
counsel engaged by them to argue the case of their clients i.e. the German
Corporation and also drawing their attention to the liability arising under
section 195 (2) of the Income-tax Act, 1961 (hereinafter referred to as 'the
Act') which required them to deduct the tax payable under the Act at source on
payments made to a non-resident. The appellants sent a reply to that letter on
February 24, 1970 stating that Mr. Blanco White had been engaged by the London
Solicitors of the German Corporation to appear before the Calcutta High Court
on behalf of the German Corporation and that they had neither briefed him nor
had they incurred any liability to pay him any fees. They, therefore, denied
their liability under section 195(2) of the Act. Incidentally it may be stated
here that the appellants referred to one other suit i. e. Suit No. 422 of 1963
on the file of the Calcutta High Court filed by the German Corporation against
Albert David Ltd. in which also Mr. Blanco White had been engaged for the
German Corporation. Thereupon by a letter dated February 27, 1970 the
Income-tax Officer informed the appellants that he proposed to proceed against
them under section 163 (1) of the Act treating them as the agents of Mr. Blanco
White on the ground that the income in question had arisen on account of the
business connection that existed between the appellants and Mr. Blanco White.
To this, the appellants sent a long reply dated March 10/11, 1970 denying their
liability to be proceeded against under section 163 (1) of the Act. In the
course of the said reply, the appellants contended inter alia that they had not
either engaged or briefed Mr. Blanco White in the three suits on the file of
the Calcutta High Court; that they had not paid or promised to pay any fees lo
him and that, therefore, no income had accrued to Mr. Blanco White on account
of any business connection that existed between them and Mr. Blanco White. The
appellants further contended that as Mr. Blanco White was a 391 barrister who
was not carrying on any business but had only, rendered professional service in
Calcutta, the connection if any, could not be a business connection. They also
questioned the jurisdiction of the Income-tax Officer to make any assessment
treating them as the representative assessees of Mr. Blanco White. The
Income-tax Officer by his letter dated March 25, 1970 rejected the plea of the
appellants and called upon them to appear before them on April 18, 1970 to make
any other submission that they had to make. Thereafter the appellants filed a
petition under Article 226 of the Constitution before the High Court of
Calcutta and obtained a rule nisi on May 25,1970) calling upon the Income-tax
Officer, the Commissioner of Income-tax West Bengal and the Union of India to
show cause as to why the proposal to initiate proceedings under the Act as
stated above should not be quashed and a writ in the nature of mandamus
prohibiting them from proceeding against the appellants under section 163(1) of
the Act should not be issued. The petition was contested by the respondents. In
the Counter Affidavit filed by the Income-tax Officer, it was asserted that the
Department had received information that Mr. Blanco White had charged Rs.
17,000/- per day by way of fees for appearing in the Calcutta High Court in the
suits referred to above; that Mr. Blanco White was not domiciled in India; that
inasmuch as his stay in India did not exceed ninety days it was not necessary
for him to obtain a Tax Exemption Certificate for leaving India; that the
appellants had acted as instructing Solicitors to the German Corporation in the
three suits in which Mr. Blanco White had argued as counsel; that he could not
have, according to the Calcutta High Court Rules (Original Side) appeared before
that court unless he was instructed by an Attorney of that Court was in the
instant case happened to be the appellants and that, therefore. There existed a
business connection which brought the appellants within the scope of section
163(1) of the Act. It was also contended by the respondents that the petition
was premature as the matter had still to be decided in accordance with the
procedure prescribed by the Act. The learned Single Judge who heard the
petition was of the view that the question whether the case came within the
purview of section 163(1) had to be determined after ascertainment of facts by
the Income-tax Officer and that therefore, the petition was liable to be
dismissed on the ground that it was a premature one. Accordingly he dismissed it
without expressing any opinion on the merits of the case. Aggrieved by the
decision of the Single Judge, the appellants preferred an appeal before the
Division Bench of the Calcutta High Court. The Division Bench dismissed the
appeal holding, inter 392 alia, that from the facts disclosed before the Court
it appeared that from May 31, 1965 upto February 16, 1970 there was business
connection (directly of indirectly through correspondence) between the
appellants firm and the non- resident British counsel, Mr. Blanco White, that
it could not be said that there was no element of continuity and that the
transaction was a solicitory and isolated one and that taking into account the
surrounding circumstances and particularly the relationship between the Solicitors
and a counsel, an agency could very well be said to have been established
between the appellants' firm and the non- resident British counsel, Mr. Blanco
White. The Division Bench further held that there was business connection
between them and that it was not possible to accept the contentions of
appellants that no income either accrued or arose to Mr. Blanco White in India.
The appeal was accordingly dismissed. On a certificate granted by the Division
Bench under Article 133 of the Constitution, the appellants have come up in
appeal to this Court against the judgment of the Division Bench of the High
Court.
It should be stated here that along with the
petition for a certificate under Article 133 of the Constitution, the
appellants filed an application before the High Court for stay of further
proceedings before the Department. On that application, the High Court passed
an order on March 12, 1973 stating that the order of stay already granted would
continue subject to the following modification.
"(1) The respondents will be at liberty
to decide after giving the petitioners a hearing whether the petitioners firm
should be treated as agent of Mr. Blanco White under section 163 of the
Income-tax Act.
(2) If they so decide the respondents will
be at liberty to issue a notice under section 148 of the Act but will not take
any further steps thereafter until the disposal of the application;
(3) The petitioners will also be at liberty
to appeal from any order made under section 163 without prejudice to their
contentions in the proposed appeal to the Supreme Court".
We are informed that pursuant to the liberty
given by the said order, the Income-tax Officer made an order on March 23, 1977
treating the appellants' firm as the agent of Mr. Blanco White under section
163(1) of the Act and also on the same date issued a notice 393 under section
148 of the Act to the appellants to file a return of the income of Mr. Blanco
White. It is also stated that the appellants preferred an appeal against that
order before the Appellate Assistant Commissioner without prejudice to the
appellants' contentions in their appeal to this Court. Ultimately on November
30, 1973 this Court made an order that the appellants might apply to the
Appellate Assistant Commissioner for an order of stay in respect of the
question whether they were agents of Mr. Blanco White and that at any rate even
if the Income-tax Officer were to proceed with the case, he would make the
assessment but would not make a final demand till the disposal of the appeal.
It is further stated that pursuant to the notice under section 148 of the Act,
the appellants filed a 'nil' return. Thereafter we are informed that the
Income-tax Officer intimated the appellants on September 17, 1977 that he had
completed the assessment of Mr. Blanco White for the assessment year 1970-71
treating the appellants' firm as the agent and that copies of the assessment
order, demand notice and challan would be forwarded to them after disposal of
this appeal.
It is necessary to refer at this stage to
certain relevant facts of the case. The appellants were acting as the
Solicitors of the German Corporation in India in the cases referred to above
and the London. Solicitors were acting as its Solicitors in London. Suits Nos.
511 and 1124 had been instituted in 1962 and suit No. 422 in 1963. On May 31,
1965, the London Solicitors sent a cable to the appellants which read as
follows:- " Dignior Calcutta We act for Farewerke Hoechst this country and
understand that you act India stop in connection acting infringement Indian
Tolbutamide patent have been instructed to retain Blanco White as counsel to
attend hearings Calcutta and Bombay stop Imperative to know dates of respective
actions since counsel can only accept subject to other Commitments stop Please
cable hearing dates if known or date when Information available stop our Ref
Lcc.
Ashursts London Col Blanco White REF:
LCC." The above cable shows that the London Solicitors had sought
information about the suits in Calcutta to enable them to engage Mr. Blanco
White to plead on behalf of the German Corporation in the said suits. On
December 23, 1969, the London Solicitors 394 wrote a letter to the appellants
in which it was stated that the copies of certain documents sent by the
appellants had been handed over to Mr. Blanco White in addition to copies of
certain other documents which they themselves had handed over to him. A part of
the aforesaid letter which is relevant for the purpose of the present case, is
reproduced below:- ".... We are asking Mr. Divecha of Hoechst
Pharmaceuticals Limited, Bombay, to arrange for copies of the evidence in the
Bombay case to be sent to you.
The formulation of the evidence can then be
discussed between you and your Counsel and Mr. Blanco White when he arrives in Calcutta.
The remaining documents which we are sending you are three bound volumes of
pleadings which you sent to us in the early stages but which will no doubt be
of use to you at the trial, Mr. Blanco White of course has copies of all the
pleadings in the three cases.
There are a number of points which Mr. Blanco
White has asked us to put to you for consideration and these are as follows:-
1. It is not entirely clear from the
pleadings that Indian Patent No. 66049 is a document in the Albert David case.
Will you please consider whether this specification may have to be strictly
proved ?
2. In the infringement action by Hoechst
against Bengal Chemicals, the defendants have objected there is no claim
against the second and third dependants, that is the inventors named in the
Patent. Mr. Blanco White sees no reason to pursue this point and, subject to
your views, would suggest that it is abandoned.
3. In the threats action by Bengal Chemicals,
again subject to your views, Mr. Blanco White would not propose to argue that
Hoechst did not in fact threaten proceedings.
4. Also in the threats action, there is a
point which we would mention here on which we are asking Hoechst
Pharmaceuticals Limited of Bombay for information. Bengal Chemicals have said
in their affidavits filed in the interlocutory proceedings in April 1962 that
they stopped production of Tolbutamide because of the threats made by Hoechst.
395 At the same time it appears that they
published advertisements in the Punjab Medical Journal and the Indian Medical
Journal of 1st May of that year. We are asking Hoechst Pharmaceuticals if they
can say when these advertisements would have had to have been sent to those
Journals for publication on that date.
Mr. Blanco White will be flying in Calcutta
on BOAC Flight No. 914 leaving London on Tuesday, 20th January 1970 and
arriving at 6.40 a.m. local time on Wednesday, 21st January. He would like to
have preliminary discussion with you and counsel on matters of procedure, etc.
On Thursday morning and possibly Wednesday afternoon. We believe that the
gentlemen from Hoechst, Frankfurt plan to arrive in Calcutta on Thursday, 22nd
January, so as to be available for more detailed talks starting on Friday. We
are asking Hoechst, Bombay to arrange for hotel accommodation for Mr. Blanco
White." Then there is the letter dated January 8, 1970 written by the
London Solicitors to the appellants enclosing copies of the briefs which had
been delivered by the London Solicitors to Mr. Blanco White. The said suits
came up for hearing on January 27, 1970. The appellants had engaged Mr. P.P.
Ginwala, Mr. A.K. Basu and Mr. Sankar Ghose to appear on behalf of the German
Corporation in the said suits. In paragraph 6 of the writ petition filed before
the High Court out of which this appeal arises, the appellants have stated as
follows:
"On 27th January 1970 the said suits
were called on before his Lordship the Hon'ble Mr. Justice K.L. Roy. It was
decided to take up Suit No. 1124 of 1962 first. In the said suit Mr. Blanco
White, Q.C. appeared with Mr. P.P. Ginwala, Mr. A.K. Basu and Mr. Sankar Ghose.
The said suit No. 1124 of 1962 was heard on 27th, 28th, 29th, 30th January
1970, 2nd, 3rd, 4th, 5th, 6th. 9th, 12th, 13th and 16th February 1970 and
judgment was reserved. The other suits were adjourned until after the
judgment." In his letter dated March 21, 1973 written to the London
Solicitors marked as Annexure 'E' to the writ petition, Mr. Blanco White while
attempting to make out a case supporting the appellants admitted that he was
not disputing that when he was actually in 396 Court in Calcutta, he was,
formally, there on instructions from the appellants as attorneys. The relevant
part of that letter reads:
"Dear Mr. Gane, Farbwerke Hoechst v.
Bengal Chemical.
Certainly I can confirm that, when I appeared
before the Calcutta High Court in January and February 1970. I was briefed by
your firm and not by Orr. Dignam & Co. Accordingly, whilst I would not
dispute that when I was actually in Court in Calcutta I was, formally, there on
instructions from Orr. Dignam as attorneys of record, all arrangements relating
to my fees were made with you (as the English Solicitors of Hoechst in Germany)
and Orr. Dignam were at no time concerned with these arrangements." Mr.
Blanco White left India on February 17, 1970 without making any arrangement for
the settlement of his liability under the Act. When the Income-tax Officer
issued the notice dated February 19, 1970 to the appellants drawing their
attention to the provisions contained in section 195(2) of the Act and
requesting them to furnish information regarding the income earned by Mr.
Blanco White by arguing the case before the Calcutta High Court on behalf of
the German Corporation, the appellants replied on February 24, 1970 stating
that the London Solicitors had engaged Mr. Blanco White to appear on behalf of
the German Corporation before the Calcutta High Court; that the appellants had
not briefed him nor did they know on what fees, if any, he had been engaged. In
their letter dated March 10/11, 1970 to the notice dated February 17, 1970
issued by the Income-tax Officer to the appellants under section 163(1) of the
Act, the appellants again stated that they had not engaged or delivered any
brief to Mr. Blanco White and that they had no business connection with him. It
was urged before the High Court by the appellants that there was no sort of
connection between the appellants and Mr. Blanco White and even if there was
any connection, it was just a casual one and could in no case be termed as
business connection: that they had not undertaken to pay any fees to him for
appearing in the suits and that, therefore, the appellants were not liable to
be assessed. The Division Bench of the High Court which heard the appeal came
to the conclusion that there was business connection between the appellants and
Mr. Blanco White; that it could not be said that there was no element of
continuity and the transaction was a stray or an isolated one and that the
appellants were not entitled to the issue of the writ prayed for on the facts
and in the circumstances of the case.
397 For proper appreciation of the
contentions advanced by the parties before us, it is necessary to refer to some
of the provisions of the Act. Section 160(1)(i) of the Act provides that in
respect of the income of a non-resident specified in sub-section (1) of section
9 of the Act, the agent of the non-resident, including a person who is treated
as an agent under section 163 is a representative assessee.
Section 161 (1) of the Act stipulates that
every representative assessee, as regards the income in respect of which he is
a representative assessee, shall be subject to the same duties,
responsibilities and liabilities as if the income were income received by or
accruing to or in favour of him beneficially, and shall be liable to assessment
in his own name in respect of that income; but any such assessment shall be
deemed to be made upon him in his representative capacity only, and the tax
shall, subject to the other provisions contained in Chapter XV of the Act be
levied upon and recovered from him in like manner and to the same extent as it
would be leviable upon and recoverable from the person represented by him.
Section 163 (1)(b) and (c) of the Act provides that for purposes of the Act any
person in India who has any business connection with the non-resident or from
or through whom the non-resident is in receipt of any income whether directly
or indirectly can be treated as an agent of such nonresident. Section 5(2) of
the Act inter alia provides that subject to the provisions of the Act, the
total income of any previous year of a person who is a non-resident includes
all income from whatever source derived which accrues or arises or is deemed to
accrue or arise to him in India during such year. The relevant part of section
9(1) of the Act reads:
"(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 off from any asset or source of
income in India or through the transfer of a capital asset situate in India;
Explanation-For the purposes of this
clause-(a) in 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 398 From the facts stated
above it is seen that from the year 1965 there was correspondence between the
appellants and the London Solicitors who in their turn had engaged Mr. Blanco
White in connection with the suits in question. It shows that there was a
connection between the appellants and Mr. Blanco White though it was an
indirect one. After his arrival in India, it must be assumed that the
appellants had done all that was suggested in the letter of the London
Solicitors dated December 23, 1969. It is admitted that Mr. Blanco White
appeared with the Indian counsel engaged by the appellants and argued the case
on behalf of the client of the appellants in the suit in which they were acting
as solicitors. Even though the appellants did not hand over ally briefs
directly to Mr. Blanco White, it is seen that part of the records handed over
to Mr. Blanco White by the London Solicitors consisted of the copies of records
sent by the appellants to the London Solicitors. It is further seen that Mr.
Blanco White appeared before the High Court along with the Indian counsel
engaged by the appellants, though with the leave of the Court granted
presumably under section 32 of the Advocates Act 1961. We are also of the view
that there must have been discussion between the appellants and Mr. Blanco
White before the case was argued by him. Moreover, Mr. Blanco White could
appear only with the consent of the appellants who were the Solicitors on
record. In the circumstances, it cannot be said that the High Court was wrong
in holding that there was connection between the appellants and Mr. Blanco
White. The said connection cannot also be termed as a casual one having regard
to the period over which it had existed. It was real and intimate and Mr. Blanco
White earned the fees for arguing the case in India only through the said
connection.
The case satisfies the test laid down by this
Court in Commissioner of Income-tax, Punjab v. R.D. Aggarwal and Co. and Anr.
for holding that there was connection between the appellants and Mr. Blanco
White. The finding of the High Court on the above question also appears to be
well founded The only remaining question which needs examination is whether the
said connection was a business connection. The contention of the appellants is
that a professional connection cannot amount to a business connection
attracting section 9(1) of the Act. In support of this contention the
appellants depend upon the definitions of the expressions 'business' and
'profession' found in 399 section 2 (13) and section 2(36) of the Act. Section
2(13) of the Act reads:
"business" includes any trade,
commerce, or manufacture or any adventure or concern in the nature of trade,
commerce or manufacture".
Section 2(36) of the Act provides:
""Profession" includes
vocation ".
Section 14 of the Act which enumerates the
heads of income which give rise to a liability to tax under the Act treats the
income from profits and gains of business and profession as a single head.
Sections 28 to 44B of the Act constitute the fascicule of provisions dealing
generally with the computation of income from business and profession although
not all those provisions are applicable to income from a profession.
The definition of the expression 'business'
given in the Act is an inclusive one. The expression 'business connection'
however is not defined in the Act. It is manifest that the words in section
9(1) and section 163 are comprehensive enough to include all heads of income
mentioned in section 14 of the Act. It is no doubt true that there is specific
reference to 'business' in section 9(1) and there is no reference to
'profession'. But no tenable reason is discernible from the statute for
excluding income arising out of profession from its scope. In this connection two
submissions are made on behalf of the appellants - (1) that it was the
intention of the Parliament to exclude non- residents engaged in learned
professions from the operation of section 9(1) and that even if the intention
of the Parliament was not to exclude such persons from section 9(1) since there
is an omission to refer to them expressly the lacuna should not be made good by
giving a wide interpretation to the expression 'business connection'. We do not
find that there is any substance in the first submission. There could be no
good reason for the Parliament for excluding non-resident professional men from
the purview of section 9(1) of the Act. There is no material on which we can
reach that conclusion. In so far as the second submission is concerned, we have
to examine whether it would really amount to filling up a lacuna in the section
if the expression 'business connection' is interpreted as including within its
scope 'Professional Connection' also.
400 In Commissioner of Income Tax, Bombay v.
Currimbhoy Ebrahim & Sons Ltd., Sir George Rankin speaking for the Judicial
Committee of the Privy Council while construing the expression 'business
connection ' in section 42(1) of the Indian Income Tax Act 1922 observed:
"The phrase " business connection
" is different from, though doubtless not unrelated to, the word
"business" of which there is a definition in the Act ".
The expression 'business' does not
necessarily mean trade or manufacture only. It is being used as including
within its scope professions, vocations and callings from a fairly long time.
The Shorter oxford English Dictionary defines 'business' as 'stated occupation,
profession or trade' and ' a man of business' is defined as meaning 'an
attorney' also. In view of the above dictionary meaning of the word 'business'
it cannot be said that the definition of business given in section 45 of the
Partnership Act, 1890 (53 & 54 Vict. c. 39) was an extended definition
intended for the purpose of that Act only. Section 45 of that Act says:
"The expression "business includes
every trade, occupation, or profession".
Section 2(b) of the Indian Partnership Act,
1932 also defines " business" thus:
" "business" includes every
trade, occupation and profession".
The observation of Rowlatt, J. in Christopher
Barker & Sons v. Commissioner of Inland Revenue. "All professions are
business, but all businesses are not professions,.. " also supports the
view that professions are generally regarded as businesses. The same learned
Judge in another case Commissioner of Inland Revenue v. Marine Steam Turbine
Company Limited held:
The word 'business' however is also used in
another and a very different sense, as meaning an active occupation or profession
continuously carried on and it is in this sense the word is used in the Act
with which we are here concerned." 401 The word business is one of wide
import and it means an A activity carried on continuously and systematically by
a person by the application of his labour or skill with a view to earning an
income. We are of the view that in the context in which the expression business
connection is used in section 9 (1) of the Act there is no warrant for giving a
restricted meaning to it excluding professional connections from its scope.
There is very little substance in the
submission made on behalf of the appellants that since Mr. Blanco White could
not appear as counsel as of right either under the Advocates Act or under the
Calcutta High Court original Side Rules he could not be treated as having any
business connection with the appellants. As noticed earlier Mr. Blanco White
appeared alongwith the Indian counsel engaged by the appellants and the
appellants continued to represent the German Corporation when Mr. Blanco White
argued the case before the High Court. It is difficult to hold that he was a
stranger to the appellants. The appellants may not have engaged him to argue
the case but they allowed him at the request of the London Solicitors to argue
the case and willingly cooperated with him in doing so. That it was their case
that Mr. Blanco White argued cannot be denied. The appellants may not have
undertaken to pay his fees but he could not have argued and earned the fees
without associating himself with the appellants. The fact that Mr. Blanco White
being a barrister could not file a suit to recover the fees would not make any
difference in this case as in the letter dated August 19 1980 written by the
London Solicitors to the appellants which is produced before us it is stated
that the fees of Mr. Blanco White amounted to 2200 with refreshers at the rate
of 220 per day. We need not go into the correctness of these figures but the
fact remains that Mr. Blanco White has earned income for the work done in
India. We do not propose to go into question as to what would happen if no fees
have been realised by him at all.
In view of the foregoing we are of the view
that the judgment of the Division Bench of the High Court which is under appeal
does not call for interference.
In the result the appeal is dismissed. I he
parties shall however bear their costs.
V.D. K . Appeal dismissed.
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