BARENDRA PRASAD RAY & ORS. vs. THE INCOME-TAX OFFICER 'A' WARD FOREIGN SECTION AND ORS.

CIVIL APPEAL No. 1038/1973Supreme Court[1981] 3 S.C.R. 38707 April 1981Bench: 3 JudgesAuthor: R.S. PATHAK, A.P. SEN, E.S. VENKATARAMIAH BARENDRA PRASAD RAY15 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court held that there was a real and intimate connection between the appellants and Mr. Blanco White, which was not casual, and that Mr. White earned his fees in India through this connection. The Court found that Mr. White appeared with the appellants' consent and cooperation, and that the appellants continued to represent the German Corporation while Mr. White argued the case. The Court rejected the argument that Parliament intended to exclude non-residents in learned professions from Section 9(1), stating the words 'business connection' are comprehensive enough to include professions. The Court reasoned that 'business' has a wide import and includes professions, vocations, and callings, citing dictionary definitions and judicial pronouncements. Therefore, a 'professional connection' is not excluded from the scope of 'business connection'. The fact that Mr. White could not sue for fees was deemed irrelevant as he had earned fees amounting to £2200 plus refreshers. The Court affirmed that the appellants were liable as agents of Mr. White under Section 163(1).

What were the facts?

The appellants, partners of a Calcutta firm of solicitors, were engaged by a German Corporation to represent it in three suits before the Calcutta High Court. They were instructed by London solicitors to retain Mr. Blanco White Q.C., a UK resident barrister specializing in patent law, to argue these cases. The appellants did not deliver briefs to or pay Mr. White, whose briefs were delivered by the London solicitors. Mr. White argued the cases for 13 days in India and left without making tax arrangements. The Income Tax Officer proposed to treat the appellants as agents of Mr. White under Section 163(1) due to a business connection. The appellants' writ petition was dismissed as premature by a Single Judge, and a Division Bench upheld this, finding a business connection and that income accrued to Mr. White in India. The appellants appealed to the Supreme Court.

What were the issues?

1. Whether there was a business connection between the appellants (Indian solicitors) and Mr. Blanco White (non-resident barrister) within the meaning of Section 9(1) of the Income Tax Act, 1961, for the purpose of deeming income to accrue or arise in India. Assessee's arguments: - The appellants argued that there was no business connection as they did not engage Mr. White, deliver briefs, or undertake to pay his fees. They contended that Mr. White's appearance was with the leave of the court and that the connection was not systematic or continuous. - They also submitted that Parliament did not intend to exclude non-residents engaged in learned professions from Section 9(1) and that any omission to expressly mention professions should not be rectified by a wide interpretation of 'business connection'. Revenue's arguments: - The revenue contended that a business connection existed due to the appellants facilitating Mr. White's appearance and co-operating with him, leading to him earning fees in India. They argued that 'business' in Section 9(1) includes professions.

Which sections of the Income-tax Act were involved?

Section 2(13),Section 2(36),Section 9(1),Section 163(1),Section 195(2)

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} BARENDRA PRASAD RAY & ORS. v. THE INCOME-TAX OFFICER 'A' WARD FOREIGN SECTION AND ORS.

April 7, 1981 (R.S. PATHAK, A.P. SEN AND E.S. VENKATARAMJAH, JJ.] 387 In:ome 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-Presumption of obligation of the agent to deduct the tax payable under the Income Tax Act at source on paym!nt m1de to a n?n-resident.

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 Sol

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