COMMISSIONER OF INCOME TAX Vs. TATA CHEMICALS LIMITED

JUDGEMENT

(1.) A rule nisi has been served upon the assessee calling upon it to show cause why the three questions referred to therein should not be made a subject -matter of the reference and why the rule nisi should not be made absolute. Mr. Palkhivala, who appears on behalf of the assessee, with a view to oppose the making of the rule nisi absolute, has asked me to proceed on the assumption without accepting the said position that for the purpose of this rule nisi there is a business connection between a German concern by name M/s. Linchema G. m. b. H. and the assessee -company and further it should be assumed that the assessee should be treated as the agent of the German concern.

(2.) IN that view of the matter the only question that survives for consideration is question No. 1 in respect of which the rule nisi is issued. Under this question the revenue wants to assess the assessee on the income which arose to Messrs. Lichema. Now, such income can only be assessed in the return of the assessee having regard to the provisions of section 9(1)(i) of the Act. This section contains a deeming provision as regards the income deemed to accrue or arise in India. Under sub -section (1)(i) 'all income accruing or arising, whether directly or indirectly, through or from any business connection in India... shall be deemed to accrue or arise in India'. If the matter had rested there, then as it is admitted for the purposes of argument that the business connection existed, it will be deemed to accrue or arise in India. However, there is an Explanation to this sub -section and we are concerned with clause (a) of the Explanation to this sub -section which says :

(3.) IN our opinion, that finding is not correct and the Tribunal on the material on record clearly came to the conclusion that is has not been established in this case that any of the operations are carried out in India, the income in respect of which is sought to be assessed. In view of such a finding of fact, question No. 1 cannot survive. Accordingly, we discharge the rule with costs.