COMMISSIONER OF INCOME TAX, CALCUTTA versus T.I. & M. SALES LTD.

Citation: [1987] 2 S.C.R. 883 · Decided: 10-04-1987 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Dismissed

Judgment (excerpt)

COMMISSIONER OF INCOME TAX, CALCUTTA 
A 
v. 
t 
T.l. & M. SALES LTD. 
APRIL 10, 1987 
[R.S PATHAK C.J. AND RANGANATH MISRA, J.] 
B 
l 
Income Tax Act, 1961/Income Tax Act, 1922-Section 163(1)(b)I 
Section 43-'Business Connection'-What amounts to-Dependent 
upon a set of facts in a particular case. 
The assessee-respondent was assessed to income tax as a repre- c 
sentative assessee of ten non-resident companies. The companies were 
grouped under three heads-six in Group-A, three in Group-B and 
~ 
one in Group-C. In regard to the companies under Group-A, the 
assessee had no direct agreement but had dealings by virtue of its agree-
ment with the exporting company; as regards the three companies 
under Group-B, the assessee had no business connection with them; D 
and so far as the only company under Group-C was concerned, the 
assessee's stand was that it had an agreement dated December 16, 1948 
with the export company, but no liability accrued under the law in 
respect of the transactions. 
' 
-41' 
The Income-tax Officer referred specifically to the agreement of E 
1948 and refuted the stand of the company. He held that the agreement 
was a clear authority that the non-resident had employed the Indian 
Company for selling its goods in India on commission and that it brings 
into existence a business connection between the two companies. He also 
t 
held that the Group-A companies were connected with the Indian Com-
pany through the export company. 
F 
,.: 
Appeals were filed by the assessee challenging the assessments 
before the Appellate Assistant Commissioner. The assessee tried to 
establish the actual course of dealing between the Indian Company and 
the ten non-residents and contended that no liability under the Act 
accrued. The Appellate Authority dismissed the contentions of the G 
• 
assessee by holding that the assessee had produced no proof of its asser-
tions and on the contrary had blocked the inquiry. 
) 
Before the Tribunal, an appeal was f.iled by the assessee. Along 
with the grounds, an affidavit dated December 27, 1965 of the Secretary 
of the assessee was also filed and it was stated therein that there was no 
H 
883 
884 
SUPREME COURT REPORTS 
[1987] 2 S.C.R. 
A 
obstruction to the proceedings before the Appellate Assistant Commis-
sioner with regard to the attempted probe by the Appellate Anthority 
and that several docnments were made available. before the Appellate 
Authority and were actually placed before him, and in case the Appel-
late Authority wanted any information or fnrther docnments to be pro-
B 
dnced, the Secretary was prepared to do so. 
The Tribnnal did not deal with the aforesaid affidavit on the 
ground that it was not necessary for the purpose of determining 
whether the Indian Company could be appointed agent under Section 
163 of the Act. It upheld the assessments and referred to the High Court 
the questions whether the non-resident companies had business connec· 
C 
lion with the Indian Company and whether the Indian Company was 
correctly treated as an agent of the said non-resident companies under 
Section 163 of Income-tax Act, 1961. 
D 
The High Court held that the Indian assessee had no business 
connections with the non-resident companies within the meaning of 
Section 9 of the Act. 
Dismissing the appeals of the Revenue, this Court, 
HELD: 1. The High Court was right in holding that the Indian 
E · assessee had no business connections with the non-resident companies 
within the meaning of Section 9 of the 1961 Act. Unless the matter 
comes under Section 163(1)(a) of the Act, there will be. no liability for 
assessment. [893F] 
2. Whether a relationship would amount to "business connec· 
F 
tion'' as provided in Section 163(1)(b) of the Income-tax Act of 1961 for 
the purpose of giving rise to the liability under Section 9(1) of the Act 
would depend upon a set of facts arising in a particular case. [889F·G] 
G 
H 
3. The order of the Appellate Assistant Commissioner shows that 
the Secretary appeared before him at the hearing on September 3 and 4, 
1965 and the appeals were dismissed by order dated September 17, 
1965. [890F] 
4. Ordinarily, the High Court should have declined to use the 
assertions in the affidavit for the purpose of recording findings of fact 
and if, at all, in its opinion the affidavit was to be utilised, the matter should 
have gone before the Tribunal for a fresh disposal of the appeals. [892H] 
~· 
C.l.T. v. T.l.M. SALES [MISRA, J.] 
885

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