ANGLO-FRENCH TEXTILE CO. LTD. versus COMMISSIONER OF INCOME-TAX, MADRAS

Citation: [1953] 1 S.C.R. 454 · Decided: 22-12-1952 · Supreme Court of India · Bench: MEHR CHAND MAHAJAN · Disposal: Dismissed

Judgment (excerpt)

454 
SUPREME COURT REPORTS 
[1953] 
1952 
is not entitled to reopen the whole proceedings as the 
, 
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1 further proceedings are limited to assessing that 
ang o- rtnc I 
• 
f th • 
h' h h 
d 
Textile co.' Ltd. port10n o 
e mcome w 1c 
as escape assessment. 
v. ' 
We need not express any opinion on this; 
The 
Commissioner of question we have to answer is confined to the facts 
Income-tax, 
and circumstances of this case and those circum-
Madras. 
stances are (1)-that no return was filed at any stage 
Bose J. 
of the case disclosing any income, profits or gains at 
all, (2) that proceedings were later taken under sec-
tion 34, and (3) in the course of these proceedings 
the assessee claimed that a certain loss should be 
determined and recorded. 
Our answer is that that 
cannot be done for the reasons we have given and 
that c9nsequently the question referred was rightly 
answered in the negative by the High Court. 
1952 
Dec. 22. 
The appeal fails and is dismissed with costs. 
Appeal dismissed. 
Agent for the appellant:_ P. K. Mukherji. 
Agent for the respondent : G. H. Rajadhyaksha. 
ANGLO-FRENCH TEXTILE CO. LTD. 
, v. 
COMMISSIONER OF INCOME-TAX, 
MADRAS. 
(MEHR CHAND MAHAJAN, DAS, VIVIAN BOSE 
and BHAGWATI JJ.] 
Indian Income-tax Act (XI of 1922), ss. 42(1),42(3)-Nvn-
resident-Purchase of materials in India by established agency-
Whether an." operation ''-Profits attributable to purchase, whether 
assessable in India-"!Jusiness connection," meaning of. 
Though a few isolated transactions of purchase of raw mate-
. rials in India by a ·manufacturer carrying on business outside 
India may not amount, to the carrying on of an " operation" in 
India within the meaning of s. 42 (3) of the Indian Income-tax 
Act, where raw materials are purchased systematically and 
habitually in India through an established agency having special 
skill and competency in selecting the goods, such an activity wiil 
be an "operation" within s, 42 (3), and the portion of the profits 
• 
S.C.R. 
SUPREME COURT REPORTS 
455 
attributable to the purchases in India can be assessed to income-
1952 
tax under s. 4'!(1) and (3) of the Indian Income-tax Act. 
I • 
. 
Bangalore Woollen, Cotton ct Silk Mills Co. Ltd. v. Cwimis- T Anglo-French 
sioner of Income-tax, Madras [1950] (18 I.T.R. 423), Coimnisstt:Jner ext.le Co., Ltd. 
of Income-tax, Bombay v. Ahmedbhai Umarbhai ct Co. ([1950] S.C.R. 
. v'. 
335), Commissioners of Taxation v. Kirk ([1900] A.O. 
588), 007n'1SSWnel' of 
Rogers Pyatt Shellac Co. v. Secretary of State for India ([1925] 
nco~e-tax, 
I.L.R. 52 Cal. 1) and Webb Sons ct Co. v. Commissioner of Incame-
Ma ras. 
tax, East Punjab ([1950] 18 LT .R. 33) relied on. 
An isolated transaction between a non-resident and a resident 
in India without any course of dealings such as might fairly be 
described as a business connection does not attract the application 
of s. 42, but when there is a continuity of business relationship 
between the person in India who helps to make the profits and the 
person outside India who receives or realises the profits, such 
relationship constitutes a business connection. 
CIVIL APPELLATE JURISDICTION: Civil Appeal 
No. 12 of 1952. Appeal from the Judgment and 
Order dated the 18th January, 1950, of the High 
Court of Judicature at Madras (Satyanarayana Rao 
and Viswanatha Sastri JJ.) in Case Referred No. 27 
of 1947. 
0. T. G. Nambiar (S. N. Mukherjee, with him) for 
the appellant. 
M. 0. Setalvad, Attorney-General for India, and O. K. 
Daphtary, Solicitor-General for India (G. N. Joshi and 
P.A. Mehta, with them) for the respondent. 
1952. December 22. The Judgment of the Court 
was delivered by 
MAHAJAN J. -This is an appeal from the judgment 
of the High Court of Judicature at Madras dated 18th 
January, 1950, delivered on a reference by the Income-
tax Appellate Tribunal under section 66(1) of the 
Indian Income-tax Act, whereby the High Court 
answered the two questions referred in the affirmative. 
The appellant is a public limited company incorpo-
rated in the United Kingdom and owns a spinning 
and weaving mill located at Pondicherry in French 
lnd.ia. The year of account of the appellant is the 
calendar year. In the year 1939 no sales of yarn or 
cloth manufactured by the company were effected in 
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456 
SUPREME COURT REPORTS 
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1952 
British India, though in the previous year snch sales 
AllgZo-French were effec_ted. 
All the p_urch~s.es of co_tton \equired 
Textile 00 , Ltd. for the m

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