SOHO HOUSE Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee were appointed agents of S. and D. Rivet Co. by an agreement dated 3rd March, 1952, and under this agreement the principal company was to pay to the assessees a commission of 5 per cent. calculated on the net amount of case received by the company in payment of all orders accepted by the company and delivered to the agency territory. It is not disputed that the agency territory comprised India, Burma and Ceylon. The Income -tax Department held the assessees to be the statutory agents of the principal company, and in respect of the sales of the company affected in India they allocated a portion of the profits as arising here, brought those profits to tax, and called upon the statutory agents to pay the tax, and it is with regard to this claim of the Department that three questions arise on this reference.

(2.) THE first question is : Whether there was material on the record on the basis of which the Tribunal could have come to the conclusion that the non -resident company had a business connection in the taxable territories in the years of account relevant for the assessment years 1950 -51 and 1951 -52 ? On the facts before us, nothing could be clearer than that was a definite business connection in the taxable territories. The profit earned by the company was the result of the business connection in this country and the assessees embodied, if one might so put it, that business connection by acting as the sole selling agents of the company and helping the company to earn profits. The first question really has not been seriously pressed by Mr. Palkhivala.

(3.) THE third question is with regard to certain orders which were placed directly or through shipping agents. The record shows that the orders placed with the company fees into three classes : orders which were placed through the assessees as the agents of the company, orders which were placed directly with the company, and orders which were placed through shipping agents; and Mr. Palkhivala's contention is that the non -resident company is liable to pay tax through the assessees only in respect of orders placed through them and not in respect of orders falling under the other two categories. Now, the overriding fact in this case is that the assessees received 5 per cent. commission with regard to all orders, in which ever category they fell, and obviously the assessees were interested in seeing that a large number of orders were placed with the company so that their commission should aggregate to a large amount. Therefore, as far as the interest of the assessees was concerned, it made no difference whether the orders were through them or through the shipping agents or direct, and the record also shows that the assessees carried out important obligations with regard to customers who placed their orders direct or through the shipping agents. Even where indents were placed through shipping agents by parties in India, copies of invoices were sent to the assessees for record purposes and the assessees were always apprised of the sales effected directly or through shipping agents and the assessees were also consulted regarding the credit -worthiness of the parties concerned and were also asked to contact the parties concerned. When we have, as we do have here, a single agency where no distinction is made with regard to earning of the commission by the agent, with regard to the nature of the orders placed, then it is difficult, if not impossible, to say that the agent did less work or more work with regard to one class of orders than with regard to another. Therefore, in our opinion, the position in law is the same, whether the orders were placed through shipping agents or were placed direct.