Case: Additional Commissioner of Income Tax Vs. New Consolidated Gold Fields Limited

Briefly stated, the facts are these. The assessee is an English company. It entered into an agreement with an Indian company, Indian Copper Corporation Limited. Thereunder the assessee was appointed technical adviser to the Indian company in regard to its exploration, mining and mineral dressing operations. It was required to undertake through its staff the duties normally undertaken by technical advisers to a mining operation with regard to technical advice and to provide once in every year a member of its staff to visit the property of the Indian company. The assessee was also required to send out to the Indian companys property, at its request, a member of its technical staff for a visit additional to the requisite annual visit. The assessee was entitled to recover therefore, the retaining fee of Pounds 7, 000 per annum, the same being payable in sterling in London.For the assessment yearax Officer held that the Indian company was an agent of the assessee within the meaning of section 163 of theAct and that the annual remuneration of Pounds 7, 000 was income accruing to the assessee which was taxable in the hands of the Indian company. The Appellate Assistant Commissioner concluded that even if the Indian company was held to be an agent within the meaning of section 163 , no business connection within the meaning of section 9(1) had been established with the Indian company so as to make income accruing to theassessee liable to tax through its agent. This finding was approved by the Tribunal. The High Court, on a reference, held that the assessee received in London Pounds 7, 000 for technical advice given to the Indian company from London.

Court's reasoning:
We will assume that the assessee had a business connection in India. Having regard, however, to the provisions of Explanation (a) quoted above, only that part of the income of Pounds 7, 000 could be brought to tax in India as was reasonably attributable to the operations that were carried out in India. It is clear that the operations under the agreement between the assessee and the Indian company were carried out both in England and in India. No attempt has been made to assess the extent of the activity carried on in India as compared to that carried on in England. There is, therefore, no means now of ascertaining what part of the income of Pounds 7, 000 could be said to be income which accrued or arose to the assessee in India. Certainly, after the lapse of almost 40 years, it would be impossible to determine this.