Full Judgment Text
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PETITIONER:
BARENDRA PRASAD RAY & ORS.
Vs.
RESPONDENT:
THE INCOME TAX OFFICER ’A’ WARD FOREIGN SECTION AND ORS.
DATE OF JUDGMENT07/04/1981
BENCH:
VENKATARAMIAH, E.S. (J)
BENCH:
VENKATARAMIAH, E.S. (J)
PATHAK, R.S.
SEN, A.P. (J)
CITATION:
1981 AIR 1047 1981 SCR (3) 387
1981 SCC (2) 693 1981 SCALE (1)949
ACT:
Income Tax Act, 1961, Sections 2(13), 2(36), 9(1),
163(1) and 195(2), scope of-Words and phrases-"Business" and
"having business connection"-explained-Presumpion of
obligation of the agent to deduct the tax payable under the
Income Tax Act at source on payment made to a non-resident.
HEADNOTE:
The appellants are partners of a firm of Solicitors at
Calcutta and they had been engaged by a German Corporation
to act on its behalf in three suits pending before the High
Court at Calcutta. A firm of Solicitors in London, namely
M/s. Ashurst, Morris, Crisp & Co., which was also acting on
behalf of the German Corporation instructed the appellants
to retain Mr. Blanco White Q.C., a resident of the United
Kingdom, who was a barrister having considerable practice in
the branch of patent law, to argue the case in the aforesaid
three suits. The appellants did not deliver any briefs to
him and also did not pay or undertake any obligation to pay
any fees for his services The briefs had been earlier
delivered by the London Solicitors. Mr. Blanco White left
India on February 17, 1970 after arguing the cases for 13
days commencing from January 27, 1970 to February 16, 1970,
without making any arrangement regarding the payment of the
Income Tax on the fees earned by him.
The Income Tax Officer informed the appellants that he
proposed to proceed against them under section 163(1) of the
Act treating them as the agents of Mr. Blanco White on the
ground that the income arising out of professional charges
had arisen on account of the business connection that
existed between the appellants and Mr. Blanco White.
Thereafter the appellants challenged the said order of the
Income Tax Officer by filing a petition under Article 226 of
the Constitution before the High Court of Calcutta. The
learned Single Judge dismissed the petition on the ground
that it was a premature one taking the view that the
question whether the case came within the purview of section
163(1) of the Act had to be determined after ascertainment
of facts by the Income tax officer. The appeal preferred by
the appellants was dismissed by a Division Bench holding (a)
there was business connection (directly or indirectly
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through correspondence) between the appellants’ firm and
their non-resident British Counsel Mr. Blanco White and that
an agency could very well be said to have been established
between them; (b) there was business connection between them
and (c) income did either accrue or arise to Mr. Blanco
White in India. However, the Division Bench granted
certificate to the appellants under Article 133 of the
Constitution and hence the appeal.
388
Dismissing the appeal, the Court
^
HELD: 1. From the facts and other material on record
there was connection between the appellants and Mr. Blanco
White. The said connection cannot also be termed as a casual
one having regard to the period over which it had existed.
It was real and intimate and Mr. Blanco White earned the
fees for arguing the case in India only through the said
connection. From the year 1965 there was correspondence
between the appellants and the London Solicitors who in
their turn had engaged Mr. Blanco White in connection with
the suits in question Mr. Blanco White appeared before the
High Court along with Indian counsel engaged by the
appellants, though with the leave of the Court granted
presumably under section 37 of the Advocates Act, 1951. Mr.
Blanco White could appear only with the consent of the
appellants who were the Solicitors on record. [398 A-F]
Commissioner of Income-tax, Punjab v. R.D. Aggarwal and
Co. and Anr., 56 I.T.R. 20, applied .
2 It is incorrect to suggest that it was the intention
of the Parliament to exclude non-residents engaged in
learned professions from the operation of section 9(1). The
words in section 9(1) and section 163 are comprehensive
enough to include all heads of income mentioned in section
14 of the Act. [393 D].
3. The expression "business" does not necessarily mean
trade or manufacture only it is being used as including
within its scope professions, vocations, and callings from a
fairly long time. From section 2(b) of the Indian
Partnership Act, 1932, it is clear that the "business is one
of wide import and it means an activity carried on
continuously and systematically by a person by the
application of his labour or skill with a view to earning an
income. In the context in which the expression "business
connection" is used in section 9(1) of the Income Tax Act,
1961 there is no warrant for giving a restricted meaning to
it excluding "professional connection" from its scope.
[400 B-D, 401 A-B]
Commissioner of income Tax, Bombay v. Currimbhoy
Ebrahim and Sons Ltd., 3 I.T.R. 395; Christopher Barker and
Sons v. Commissioner of Inland Revenue, [1919] 7 K B. 222 at
page 228 and Commissioner of Inland Revenue v. Marine Steam
Turbine Company Limited, [1920] 1 K.B. 193, quoted with
approval .
4. In the instant case, (a) it cannot be said that
since Mr. Blanco White could not appear as counsel as of
right either under the Advocates Act or under the Calcutta
High Court Original Side Rules, he could not be treated as
having any business connection with the appellants; (b)
since Mr. Blanco White appeared along with the Indian
counsel engaged by the appellants and the appellants
continued to represent the German Corporation when Mr.
Blanco White argued the case before the High Court, it
cannot be said that Mr. White was a stranger to the
appellants; (c) the appellants may not have engaged him to
argue the case but, they allowed him at the request of the
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London Solicitors to argue the case and willingly co-
operated with him in doing so; (d) the appellants may not
have undertaken to pay Mr. White’s fees but he could not
have argued and earned the fees without associating himself
with the appellants. The fact that Mr. Blanco White being a
barrister could not file a
389
suit to recover the fees would not make any difference; and
(e) that it is seen from the correspondence that Mr. Blanco
White has earned the fees amounting to Pounds 2200 with
refreshers at the rate of Pounds 220 per day, for the work
done in India. Therefore. the appellants are liable to tax
agents of Mr. Blanco White under section 153(1) of the
Income Tax Act, 1961. [401 B-E]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1038 of
1973.
Appeal by certificate from the Judgment and Order dated
the 19th February 1973 of the Calcutta High Court in Appeal
from Original Order No. 200 of 1971.
S. Chowdhuri, P.P. Ginwala, T.A. Ramachandran and D.N.
Gupta for the Appellants.
V.S. Desai, Champt Rai and Miss A. Subhashini for
Respondents No. 1 & 2.
The Judgment of the Court was delivered by
VENKATARAMIAH, J. This appeal by certificate under
Article 133 of the Constitution arises out of a writ
petition filed by the appellants under Article 226 of the
Constitution of India before the High Court of Calcutta. The
appellants are partners of a firm of Solicitors known as
M/s. Orr Dignam & Co. having its office at Calcutta. The
appellants acted as the Solicitors of a German Corporation
known as Ferbwerke Hoechst Aktiengesellschaft Vormals Mester
Lucius & Bruning (a Corporation organised under the law of
Federal Republic of Germany) (hereinafter referred to as
’the German Corporation’ ) in two suits filed on the
Original Side of the Calcutta High Court-one Suit No. 511 of
1962 filed by the Bengal Chemical and Pharmaceutical Works
Ltd. against German Corporation and another Suit No. 1124 of
1962 filed by the German Corporation against the Bengal
Chemical and Pharmaceutical Works Ltd. on the alleged
infringement of a patent. The appellants were instructed by
a firm of Solicitors in London namely M/s. Ashurst, Morris,
Crisp & Co. (hereinafter referred to as ’the London
Solicitors’) who were also acting for the German Corporation
by a cable dated May 31, 1965 to retain in the said suits
Mr. Blanco White Q.C., a resident of the United Kingdom, who
was a barrister having considerable practice in the branch
of patent law. On his arrival in India, the appellants
accordingly retained Mr. Blanco White as the counsel to
argue the case of their clients-the German Corporation even
though they did not deliver any briefs to him and also did
not
390
pay or undertake any obligation to pay any fees for his
services. The briefs had been earlier delivered by the
London Solicitors. It is stated that they did not know as to
how much amount was payable to him by the London Solicitors
by way of fees. The hearing of one of the said two suits
lasted for thirteen days commencing from January 27, 1970
and was concluded on February 16, 1970. Mr Blanco White left
India on February 17, 1970 after the hearing was over
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without making any arrangement regarding the payment of
income tax on the fees earned by him by arguing the case of
the German Corporation. Thereafter on February 19, 1970, the
appellants received a notice from the Income-tax Officer,
’A’ Ward, Foreiga Section asking them to furnish information
about the fees earned in India by Mr. Blanco White as
counsel engaged by them to argue the case of their clients
i.e. the German Corporation and also drawing their attention
to the liability arising under section 195 (2) of the
Income-tax Act, 1961 (hereinafter referred to as ’the Act’)
which required them to deduct the tax payable under the Act
at source on payments made to a non-resident. The appellants
sent a reply to that letter on February 24, 1970 stating
that Mr. Blanco White had been engaged by the London
Solicitors of the German Corporation to appear before the
Calcutta High Court on behalf of the German Corporation and
that they had neither briefed him nor had they incurred any
liability to pay him any fees. They, therefore, denied their
liability under section 195(2) of the Act. Incidentally it
may be stated here that the appellants referred to one other
suit i. e. Suit No. 422 of 1963 on the file of the Calcutta
High Court filed by the German Corporation against Albert
David Ltd. in which also Mr. Blanco White had been engaged
for the German Corporation. Thereupon by a letter dated
February 27, 1970 the Income-tax Officer informed the
appellants that he proposed to proceed against them under
section 163 (1) of the Act treating them as the agents of
Mr. Blanco White on the ground that the income in question
had arisen on account of the business connection that
existed between the appellants and Mr. Blanco White. To
this, the appellants sent a long reply dated March 10/11,
1970 denying their liability to be proceeded against under
section 163 (1) of the Act. In the course of the said reply,
the appellants contended inter alia that they had not either
engaged or briefed Mr. Blanco White in the three suits on
the file of the Calcutta High Court; that they had not paid
or promised to pay any fees lo him and that, therefore, no
income had accrued to Mr. Blanco White on account of any
business connection that existed between them and Mr. Blanco
White. The appellants further contended that as Mr. Blanco
White was a
391
barrister who was not carrying on any business but had only,
rendered professional service in Calcutta, the connection if
any, could not be a business connection. They also
questioned the jurisdiction of the Income-tax Officer to
make any assessment treating them as the representative
assessees of Mr. Blanco White. The Income-tax Officer by his
letter dated March 25, 1970 rejected the plea of the
appellants and called upon them to appear before them on
April 18, 1970 to make any other submission that they had to
make. Thereafter the appellants filed a petition under
Article 226 of the Constitution before the High Court of
Calcutta and obtained a rule nisi on May 25,1970) calling
upon the Income-tax Officer, the Commissioner of Income-tax
West Bengal and the Union of India to show cause as to why
the proposal to initiate proceedings under the Act as stated
above should not be quashed and a writ in the nature of
mandamus prohibiting them from proceeding against the
appellants under section 163(1) of the Act should not be
issued. The petition was contested by the respondents. In
the Counter Affidavit filed by the Income-tax Officer, it
was asserted that the Department had received information
that Mr. Blanco White had charged Rs. 17,000/- per day by
way of fees for appearing in the Calcutta High Court in the
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suits referred to above; that Mr. Blanco White was not
domiciled in India; that inasmuch as his stay in India did
not exceed ninety days it was not necessary for him to
obtain a Tax Exemption Certificate for leaving India; that
the appellants had acted as instructing Solicitors to the
German Corporation in the three suits in which Mr. Blanco
White had argued as counsel; that he could not have,
according to the Calcutta High Court Rules (Original Side)
appeared before that court unless he was instructed by an
Attorney of that Court was in the instant case happened to
be the appellants and that, therefore. there existed a
business connection which brought the appellants within the
scope of section 163(1) of the Act. It was also contended by
the respondents that the petition was premature as the
matter had still to be decided in accordance with the
procedure prescribed by the Act. The learned Single Judge
who heard the petition was of the view that the question
whether the case came within the purview of section 163(1)
had to be determined after ascertainment of facts by the
Income-tax Officer and that therefore, the petition was
liable to be dismissed on the ground that it was a premature
one. Accordingly he dismissed it without expressing any
opinion on the merits of the case. Aggrieved by the decision
of the Single Judge, the appellants preferred an appeal
before the Division Bench of the Calcutta High Court. The
Division Bench dismissed the appeal holding, inter
392
alia, that from the facts disclosed before the Court it
appeared that from May 31, 1965 upto February 16, 1970 there
was business connection (directly of indirectly through
correspondence) between the appellants firm and the non-
resident British counsel, Mr. Blanco White, that it could
not be said that there was no element of continuity and that
the transaction was a solicitory and isolated one and that
taking into account the surrounding circumstances and
particularly the relationship between the Solicitors and a
counsel, an agency could very well be said to have been
established between the appellants’ firm and the non-
resident British counsel, Mr. Blanco White. The Division
Bench further held that there was business connection
between them and that it was not possible to accept the
contentions of appellants that no income either accrued or
arose to Mr. Blanco White in India. The appeal was
accordingly dismissed. On a certificate granted by the
Division Bench under Article 133 of the Constitution, the
appellants have come up in appeal to this Court against the
judgment of the Division Bench of the High Court.
It should be stated here that alongwith the petition
for a certificate under Article 133 of the Constitution, the
appellants filed an application before the High Court for
stay of further proceedings before the Department. On that
application, the High Court passed an order on March 12,
1973 stating that the order of stay already granted would
continue subject to the following modification.
"(1) The respondents will be at liberty to decide
after giving the petitioners a hearing whether the
petitioners firm should be treated as agent of Mr.
Blanco White under section 163 of the Income-tax Act.
1961:
(2) If they so decide the respondents will be at
liberty to issue a notice under section 148 of the Act
but will not take any further steps thereafter until
the disposal of the application;
(3) The petitioners will also be at liberty to
appeal from any order made under section 163 without
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prejudice to their contentions in the proposed appeal
to the Supreme Court".
We are informed that pursuant to the liberty given by
the said order, the Income-tax Officer made an order on
March 23, 1977 treating the appellants’ firm as the agent of
Mr. Blanco White under section 163(1) of the Act and also on
the same date issued a notice
393
under section 148 of the Act to the appellants to file a
return of the income of Mr. Blanco White. It is also stated
that the appellants preferred an appeal against that order
before the Appellate Assistant Commissioner without
prejudice to the appellants’ contentions in their appeal to
this Court. Ultimately on November 30, 1973 this Court made
an order that the appellants might apply to the Appellate
Assistant Commissioner for an order of stay in respect of
the question whether they were agents of Mr. Blanco White
and that at any rate even if the Income-tax Officer were to
proceed with the case, he would make the assessment but
would not make a final demand till the disposal of the
appeal. It is further stated that pursuant to the notice
under section 148 of the Act, the appellants filed a ’nil’
return. Thereafter we are informed that the Income-tax
Officer intimated the appellants on September 17, 1977 that
he had completed the assessment of Mr. Blanco White for the
assessment year 1970-71 treating the appellants’ firm as the
agent and that copies of the assessment order, demand notice
and challan would be forwarded to them after disposal of
this appeal.
It is necessary to refer at this stage to certain
relevant facts of the case. The appellants were acting as
the Solicitors of the German Corporation in India in the
cases referred to above and the London. Solicitors were
acting as its Solicitors in London. Suits Nos. 511 and 1124
had been instituted in 1962 and suit No. 422 in 1963. On May
31, 1965, the London Solicitors sent a cable to the
appellants which read as follows:-
" Dignior Calcutta
We act for Farewerke Hoechst this country and
understand that you act India stop in connection acting
infringement Indian Tolbutamide patent have been
instructed to retain Blanco White as counsel to attend
hearings Calcutta and Bombay stop Imperative to know
dates of respective actions since counsel can only
accept subject to other Commitments stop Please cable
hearing dates if known or date when Information
available stop our Ref Lcc.
Ashursts London
Col Blanco White REF: LCC."
The above cable shows that the London Solicitors had
sought information about the suits in Calcutta to enable
them to engage Mr. Blanco White to plead on behalf of the
German Corporation in the said suits. On December 23, 1969,
the London Solicitors
394
wrote a letter to the appellants in which it was stated that
the copies of certain documents sent by the appellants had
been handed over to Mr. Blanco White in addition to copies
of certain other documents which they themselves had handed
over to him. A part of the aforesaid letter which is
relevant for the purpose of the present case, is reproduced
below:-
".... We are asking Mr. Divecha of Hoechst
Pharmaceuticals Limited, Bombay, to arrange for copies
of the evidence in the Bombay case to be sent to you.
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The formulation of the evidence can then be discussed
between you and your Counsel and Mr. Blanco White when
he arrives in Calcutta. The remaining documents which
we are sending you are three bound volumes of pleadings
which you sent to us in the early stages but which will
no doubt be of use to you at the trial, Mr. Blanco
White of course has copies of all the pleadings in the
three cases.
There are a number of points which Mr. Blanco
White has asked us to put to you for consideration and
these are as follows:-
1. It is not entirely clear from the pleadings
that Indian Patent No. 66049 is a document in the
Albert David case. Will you please consider whether
this specification may have to be strictly proved ?
2. In the infringement action by Hoechst against
Bengal Chemicals, the defendants have objected there is
no claim against the second and third dependants, that
is the inventors named in the Patent. Mr. Blanco White
sees no reason to pursue this point and, subject to
your views, would suggest that it is abandoned.
3. In the threats action by Bengal Chemicals,
again subject to your views, Mr. Blanco White would not
propose to argue that Hoechst did not in fact threaten
proceedings.
4. Also in the threats action, there is a point
which we would mention here on which we are asking
Hoechst Pharmaceuticals Limited of Bombay for
information. Bengal Chemicals have said in their
affidavits filed in the interlocutory proceedings in
April 1962 that they stopped production of Tolbutamide
because of the threats made by Hoechst.
395
At the same time it appears that they published
advertisements in the Punjab Medical Journal and the
Indian Medical Journal of Ist May of that year. We are
asking Hoechst Pharmaceuticals if they can say when
these advertisements would have had to have been sent
to those Journals for publication on that date.
Mr. Blanco White will be flying in Calcutta on
BOAC Flight No. 914 leaving London on Tuesday, 20th
January 1970 and arriving at 6.40 a.m. local time on
Wednesday, 21st January. He would like to have
preliminary discussion with you and counsel on matters
of procedure, etc. On Thursday morning and possibly
Wednesday afternoon. We believe that the gentlemen from
Hoechst, Frankfurt plan to arrive in Calcutta on
Thursday, 22nd January, so as to be available for more
detailed talks starting on Friday. We are asking
Hoechst, Bombay to arrange for hotel accommodation for
Mr. Blanco White."
Then there is the letter dated January 8, 1970 written
by the London Solicitors to the appellants enclosing copies
of the briefs which had been delivered by the London
Solicitors to Mr. Blanco White. The said suits came up for
hearing on January 27, 1970. The appellants had engaged Mr.
P.P. Ginwala, Mr. A.K. Basu and Mr. Sankar Ghose to appear
on behalf of the German Corporation in the said suits. In
paragraph 6 of the writ petition filed before the High Court
out of which this appeal arises, the appellants have stated
as follows:
"On 27th January 1970 the said suits were called
on before his Lordship the Hon’ble Mr. Justice K.L.
Roy. It was decided to take up Suit No. 1124 of 1962
first. In the said suit Mr. Blanco White, Q.C. appeared
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with Mr. P.P. Ginwala, Mr. A.K. Basu and Mr. Sankar
Ghose. The said suit No. 1124 of 1962 was heard on
27th, 28th, 29th, 30th January 1970, 2nd, 3rd, 4th,
5th, 6th. 9th, 12th, 13th and 16th February 1970 and
judgment was reserved. The other suits were adjourned
until after the judgment."
In his letter dated March 21, 1973 written to the
London Solicitors marked as Annexure ’E’ to the writ
petition, Mr. Blanco White while attempting to make out a
case supporting the appellants admitted that he was not
disputing that when he was actually in
396
Court in Calcutta, he was, formally, there on instructions
from the appellants as attorneys. The relevant part of that
letter reads:
"Dear Mr. Gane,
Farbwerke Hoechst v. Bengal Chemical.
Certainly I can confirm that, when I appeared before
the Calcutta High Court in January and February 1970. I
was briefed by your firm and not by Orr. Dignam & Co.
Accordingly, whilst I would not dispute that when I was
actually in Court in Calcutta I was, formally, there on
instructions from Orr. Dignam as attorneys of record,
all arrangements relating to my fees were made with you
(as the English Solicitors of Hoechst in Germany) and
Orr. Dignam were at no time concerned with these
arrangements."
Mr. Blanco White left India on February 17, 1970
without making any arrangement for the settlement of his
liability under the Act. When the Income-tax Officer issued
the notice dated February 19, 1970 to the appellants drawing
their attention to the provisions contained in section
195(2) of the Act and requesting them to furnish information
regarding the income earned by Mr. Blanco White by arguing
the case before the Calcutta High Court on behalf of the
German Corporation, the appellants replied on February 24,
1970 stating that the London Solicitors had engaged Mr.
Blanco White to appear on behalf of the German Corporation
before the Calcutta High Court; that the appellants had not
briefed him nor did they know on what fees, if any, he had
been engaged. In their letter dated March 10/11, 1970 to the
notice dated February 17, 1970 issued by the Income-tax
Officer to the appellants under section 163(1) of the Act,
the appellants again stated that they had not engaged or
delivered any brief to Mr. Blanco White and that they had no
business connection with him. It was urged before the High
Court by the appellants that there was no sort of connection
between the appellants and Mr. Blanco White and even if
there was any connection, it was just a casual one and could
in no case be termed as business connection: that they had
not undertaken to pay any fees to him for appearing in the
suits and that, therefore, the appellants were not liable to
be assessed. The Division Bench of the High Court which
heard the appeal came to the conclusion that there was
business connection between the appellants and Mr. Blanco
White; that it could not be said that there was no element
of continuity and the transaction was a stray or an isolated
one and that the appellants were not entitled to the issue
of the writ prayed for on the facts and in the circumstances
of the case.
397
For proper appreciation of the contentions advanced by
the parties before us, it is necessary to refer to some of
the provisions of the Act. Section 160(1)(i) of the Act
provides that in respect of the income of a non-resident
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specified in sub-section (1) of section 9 of the Act, the
agent of the non-resident, including a person who is treated
as an agent under section 163 is a representative assessee.
Section 161 (1) of the Act stipulates that every
representative assessee, as regards the income in respect of
which he is a representative assessee, shall be subject to
the same duties, responsibilities and liabilities as if the
income were income received by or accruing to or in favour
of him beneficially, and shall be liable to assessment in
his own name in respect of that income; but any such
assessment shall be deemed to be made upon him in his
representative capacity only, and the tax shall, subject to
the other provisions contained in Chapter XV of the Act be
levied upon and recovered from him in like manner and to the
same extent as it would be leviable upon and recoverable
from the person represented by him. Section 163 (1)(b) and
(c) of the Act provides that for purposes of the Act any
person in India who has any business connection with the
non-resident or from or through whom the non-resident is in
receipt of any income whether directly or indirectly can be
treated as an agent of such nonresident. Section 5(2) of the
Act inter alia provides that subject to the provisions of
the Act, the total income of any previous year of a person
who is a non-resident includes all income from whatever
source derived which accrues or arises or is deemed to
accrue or arise to him in India during such year. The
relevant part of section 9(1) of the Act reads:
"(1) The following incomes shall be deemed to
accrue or arise in India-
(i) all income accruing or arising, whether
directly or indirectly, through or from any
business connection in India, or through or from
any property in India, or through of from any
asset or source of income in India or through the
transfer of a capital asset situate in India;
Explanation-For the purposes of this clause-(a) in
case of a business of which all the operations are not
carried out in India, the income of the business deemed
under this clause to accrue or arise in India shall be
only such part of the income as is reasonably
attributable to the operations carried out in India
398
From the facts stated above it is seen that from the
year 1965 there was correspondence between the appellants
and the London Solicitors who in their turn had engaged Mr.
Blanco White in connection with the suits in question. It
shows that there was a connection between the appellants and
Mr. Blanco White though it was an indirect one. After his
arrival in India, it must be assumed that the appellants had
done all that was suggested in the letter of the London
Solicitors dated December 23, 1969. It is admitted that Mr.
Blanco White appeared with the Indian counsel engaged by the
appellants and argued the case on behalf of the client of
the appellants in the suit in which they were acting as
solicitors. Even though the appellants did not hand over
ally briefs directly to Mr. Blanco White, it is seen that
part of the records handed over to Mr. Blanco White by the
London Solicitors consisted of the copies of records sent by
the appellants to the London Solicitors. It is further seen
that Mr. Blanco White appeared before the High Court
alongwith the Indian counsel engaged by the appellants,
though with the leave of the Court granted presumably under
section 32 of the Advocates Act 1961. We are also of the
view that there must have been discussion between the
appellants and Mr. Blanco White before the case was argued
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by him. Moreover, Mr. Blanco White could appear only with
the consent of the appellants who were the Solicitors on
record. In the circumstances, it cannot be said that the
High Court was wrong in holding that there was connection
between the appellants and Mr. Blanco White. The said
connection cannot also be termed as a casual one having
regard to the period over which it had existed. It was real
and intimate and Mr. Blanco White earned the fees for
arguing the case in India only through the said connection.
The case satisfies the test laid down by this Court in
Commissioner of Income-tax, Punjab v. R.D. Aggarwal and Co.
and Anr. for holding that there was connection between the
appellants and Mr. Blanco White. The finding of the High
Court on the above question also appears to be well founded
The only remaining question which needs examination is
whether the said connection was a business connection. The
contention of the appellants is that a professional
connection cannot amount to a business connection attracting
section 9(1) of the Act. In support of this contention the
appellants depend upon the definitions of the expressions
’business’ and ’profession’ found in
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section 2 (13) and section 2(36) of the Act. Section 2(13)
of the Act reads:
"business" includes any trade, commerce, or
manufacture or any adventure or concern in the nature
of trade, commerce or manufacture".
Section 2(36) of the Act provides:
""Profession" includes vocation ".
Section 14 of the Act which enumerates the heads of
income which give rise to a liability to tax under the Act
treats the income from profits and gains of business and
profession as a single head. Sections 28 to 44B of the Act
constitute the fascicule of provisions dealing generally
with the computation of income from business and profession
although not all those provisions are applicable to income
from a profession.
The definition of the expression ’business’ given in
the Act is an inclusive one. The expression ’business
connection’ however is not defined in the Act. It is
manifest that the words in section 9(1) and section 163 are
comprehensive enough to include all heads of income
mentioned in section 14 of the Act. It is no doubt true that
there is specific reference to ’business’ in section 9(1)
and there is no reference to ’profession’. But no tenable
reason is discernible from the statute for excluding income
arising out of profession from its scope. In this connection
two submissions are made on behalf of the appellants - (1)
that it was the intention of the Parliament to exclude non-
residents engaged in learned professions from the operation
of section 9(1) and that even if the intention of the
Parliament was not to exclude such persons from section 9(1)
since there is an omission to refer to them expressly the
lacuna should not be made good by giving a wide
interpretation to the expression ’business connection’. We
do not find that there is any substance in the first
submission. There could be no good reason for the Parliament
for excluding non-resident professional men from the purview
of section 9(1) of the Act. There is no material on which we
can reach that conclusion. In so far as the second
submission is concerned, we have to examine whether it would
really amount to filling up a lacuna in the section if the
expression ’business connection’ is interpreted as including
within its scope ’Professional Connection’ also.
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In Commissioner of Income Tax, Bombay v. Currimbhoy
Ebrahim & Sons Ltd., Sir George Rankin speaking for the
Judicial Committee of the Privy Council while construing the
expression ’business connection ’ in section 42(1) of the
Indian Income Tax Act 1922 observed:
"The phrase " business connection " is different
from, though doubtless not unrelated to, the word
"business" of which there is a definition in the Act ".
The expression ’business’ does not necessarily mean
trade or manufacture only. It is being used as including
within its scope professions, vocations and callings from a
fairly long time. The Shorter oxford English Dictionary
defines ’business’ as ’stated occupation, profession or
trade’ and ’ a man of business’ is defined as meaning ’an
attorney’ also. In view of the above dictionary meaning of
the word ’business’ it cannot be said that the definition of
business given in section 45 of the Partnership Act, 1890
(53 & 54 Vict. c. 39) was an extended definition intended
for the purpose of that Act only. Section 45 of that Act
says:
"The expression "business includes every trade,
occupation, or profession".
Section 2(b) of the Indian Partnership Act, 1932 also
defines " business" thus:
" "business" includes every trade, occupation and
profession".
The observation of Rowlatt, J. in Christopher Barker &
Sons v. Commissioner of Inland Revenue. "All professions are
business, but all businesses are not professions,.. " also
supports the view that professions are generally regarded as
businesses. The same learned Judge in another case
Commissioner of Inland Revenue v. Marine Steam Turbine
Company Limited held:
The word ’business’ however is also used in
another and a very different sense, as meaning an
active occupation or profession continuously carried on
and it is in this sense the word is used in the Act
with which we are here concerned."
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The word business is one of wide import and it means an
A activity carried on continuously and systematically by a
person by the application of his labour or skill with a view
to earning an income. We are of the view that in the context
in which the expression business connection is used in
section 9 (1) of the Act there is no warrant for giving a
restricted meaning to it excluding professional connections
from its scope.
There is very little substance in the submission made
on behalf of the appellants that since Mr. Blanco White
could not appear as counsel as of right either under the
Advocates Act or under the Calcutta High Court original Side
Rules he could not be treated as having any business
connection with the appellants. As noticed earlier Mr.
Blanco White appeared alongwith the Indian counsel engaged
by the appellants and the appellants continued to represent
the German Corporation when Mr. Blanco White argued the case
before the High Court. It is difficult to hold that he was a
stranger to the appellants. The appellants may not have
engaged him to argue the case but they allowed him at the
request of the London Solicitors to argue the case and
willingly cooperated with him in doing so. That it was their
case that Mr. Blanco White argued cannot be denied. The
appellants may not have undertaken to pay his fees but he
could not have argued and earned the fees without
associating himself with the appellants. The fact that Mr.
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Blanco White being a barrister could not file a suit to
recover the fees would not make any difference in this case
as in the letter dated August 19 1980 written by the London
Solicitors to the appellants which is produced before us it
is stated that the fees of Mr. Blanco White amounted to
2200 with refreshers at the rate of 220 per day. We need
not go into the correctness of these figures but the fact
remains that Mr. Blanco White has earned income for the work
done in India. We do not propose to go into question as to
what would happen if no fees have been realised by him at
all.
In view of the foregoing we are of the view that the
judgment of the Division Bench of the High Court which is
under appeal does not call for interference.
In the result the appeal is dismissed. I he parties
shall however bear their costs.
V.D. K . Appeal dismissed.
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