WESTMERCURR HANDELMIJI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The Income-tax Appellate Tribunal has referred the case under section 66(1) on the following question namely :

(2.) The assessee, Messrs. Westmercurr Handelmiji (referred to as "Westam") was a non-resident firm of Dutch nationality. It acted as the sales agent in Europe of the Gudur Mica Produce Co., Gudur (referred to as "G.M.P.C."), which mines mica and exports it abroad. Under section 43 of the Income-tax Act, the G.M.P.C. appointed the assessee, Westam, as the selling agent on the basis of commission payable in accordance with the terms of the agreement (annexure "A to the statement of the case). Under clause 5(a) of the agreement, the G.M.P.C. will pay to Westam commission in respect of all orders from the continent of Europe placed with G.M.P.C. via Westam and as well placed direct by customers with G.M.P.C., and a certain percentage of commission has been stipulated therefor Sub-clause (d) provides that commission is due immediately after the G.M.P.C. has received 100 per cent. payment. Under sub-clause (f), the G.M.P.C. will apply for a licence after the receipt of the commission statement issued by Westam and provide the remittance without delay. According to the agreement, the G.M.P.C., on receipt of all the remittances, will calculated the commission and credit the assessee-company in their books with the commission. Immediately thereafter, it would apply for a licence to remit the amounts abroad and as soon as the licence is given, the amount would be remitted. The Income-tax Officer assessed Westam under section 4(1)(a) of the Act on the commission as if it was received by the non-resident company in India. The Appellate Assistant Commissioner as well as the Tribunal maintained this order.

(3.) The assessees contention is that since there is no agreement to retain the money here, the G.M.P.C. is merely a debtor and, consequently the amount cannot be said to have been received in India but, on the other hand, it should be deemed to have been received in Holland at the time when the amount in fact is remitted after obtaining the licence. This very contention was considered by a Bench of this court is commissioner of Income-tax v. P.V. Raghava Reddi, 1956 29 ITR 929.], which decision on appeal to the Supreme Court was affirmed in Raghava Reddi v. Commissioner of Income-tax, 1962 44 ITR 720. In the above cases the non-resident concern was a Japanese firm and the money was received in India by that firm as soon as its statutory agent credited the amount to its account in their books. Their Lordships of the Supreme Court held that, as soon as the assessee credited the amounts to the company in the assessees account, the relationship between the parties ceased to be that of debtor and creditor, and that when thiamines were credited in the accounts, they should be treated as moneys deposited by the Japanese company with the assessee. It was also held that the moneys were thus received by the Japanese company in India on the date when they were credited, and the assessee could be assessed as their statutory agent in respect of such moneys. Mr. Rama Rao, however, tries to distinguish that case on the ground that, under the agreement, the statutory agent had to credit the amount in the books and send the money only when the non-resident firm instructed him to do so, and that in fact the non-resident firm untilised the money for its own purposes in India from out of its own amounts held in credit with Raghava Reddi and Sons. But in this case, he says there is no such agreement. We cannot accept this contention which is seeking to make a distinction without a difference. In both the cases, the salient fact upon which the non-resident company was held to receive the money in India is the crediting of the amount of commission in the books of its statutory agent. The commission is first to be ascertained on the basis of the percentage on the amounts received from the sales of mica and then the amount so computed would be credited to the account of the company. Once that amount is credited in the agents account, the non-resident firm would be deemed to have received that amount. Though it may happen that both the seller as well as the statutory agent is the same person, that would make no difference to the application of the principle set out above. In Commissioner of Income-tax v. P.V. Raghava Reddi, 1956 29 ITR 929.], Subba Rao C.J., delivering the judgment of the Bench consisting of himself and Viswanatha Sastri J., dealing with this aspect of the matter at page 934 observed as follows :