Holding

A professional relationship between the Indian solicitors and the non‑resident barrister amounts to a business connection, making the solicitors liable as agents under section 163(1) of the Income‑Tax Act, 1961.

Summary

The appellants, partners of an Indian law firm, were engaged by a German corporation and, through London solicitors, allowed a UK barrister, Mr. Blanco White, to appear in three Calcutta High Court suits. Although the firm did not brief or pay the barrister, the Income Tax Officer treated them as agents under section 163(1) of the Income‑Tax Act, 1961, requiring deduction of tax at source on the barrister’s fees. The Supreme Court held that a real, continuous professional relationship between the Indian solicitors and the non‑resident counsel constituted a "business connection" within the meaning of section 9(1), and that the definition of "business" under the Act includes professions. Consequently, the appellants were liable as representative assessee and the appeal was dismissed.

Issues considered

The existence of a "business connection" between Indian solicitors and a non‑resident barrister for purposes of section 9(1) of the Income‑Tax Act, 1961.
Whether a professional relationship can be treated as a business connection attracting tax deduction under section 163(1).
Whether the appellants are liable as agents/representative assessee under sections 160, 161 and 163 of the Act.
The scope of the term "business" under the Act and its applicability to professions.

Legislation cited

Advocates Act, 1951s. 32
Income Tax Act, 1961s. 148, s. 160(1)(i), s. 161(1), s. 163(1), s. 163(1)(b), s. 163(1)(c), s. 195(2), s. 2(13), s. 2(36), s. 5(2), s. 9(1)
Indian Partnership Act, 1932s. 2(b)

Subjects

Income TaxSection 163(1)Business connectionProfessional connectionNon‑resident taxationTax deduction at sourceRepresentative assesseeAgencyAdvocates ActPartnership law

Judgment

387

A

BARENDRA PRASAD RAY & ORS.
v.
B
THE INCOME-TAX OFFICER 'A' WARD
FOREIGN SECTION AND ORS.
April 7, 1981

(R.S. PATHAK, A.P. SEN AND E.S. VENKATARAMJAH, JJ.]

In:ome Tax Act, 1961, Sections 2(13), 2(36), 9(1), 163(1} and 195(2). scope
c
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. D
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 E
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 F
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 G
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 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 busine's connection
between them and (c) income di:! either accrue or arise to Mr. Blanco White in H
India. However, the Division Bench granted certificate to the appellants under
Article 133 of the Constitution and hence the appeal.
388 SUPREME COURT REPORTS (1981] 3 S.C.R.

A Dismissing the appeal, the Court

HELD : I. From the facts and other material on 1ecord there was con-
nection between the appellants and Mr. Blanco White. The said connection
cannot also be termed as a casual one h1ving regard to the period over which it
had existed. It was real and intimate an<l Mr. Blanco White earned the fees for
arguing the case in India only through the said connection. From the year
B 1965 there was correspondence between the appellants and the London Solicitors
who in their turn had engaged Mr. Blanco White in connectbn 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 Co"Jrt granted
presumably under section 32 of the Advocates Act, 1951. Mr. Blan~o White
could appear only with the consent of the appellants who were the Solicitors
on record. [398 A-Fl
c Commissioner of Income-tax, P11niab 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) land section 163 are comprehensive enough to
include all heads of income mentioned in section 14 of the Act. [399 F DJ,
D
3. The expression "business" does not necessarily mean trade ~or manufac-
ture only it is being used as including within its scope professions, vo;ations, 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
E 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-BJ

Commissioner of income Tax, Bombay v. Currimbhoy Ebrahim and Sons
Ltrr., 3 I.T.R. 395; Christopher Barker and Sons v. Commissioner of Inland
Revenue, [1919] 2 K.B. 222 at page 228 and Commissioner of Inlan.i Revenue v.
F Marine Steam Turbine Comp:my Limited, [1920] l 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 connsel as of right either under the Advocates Act or
under the Calcutta High Co·.trt Origiml Side Rules, he could not be treated
as having any business connection with the appellants ; (b) since Mr.
G 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 b~fore the High Coc1rt, 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
London Solicitors to argue the case and willingly co-operated with him in doing
H so ; (dJ the app~llants 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
B. P. RAY v. INCOME TAX OFFICER (Venkataramiah, J.) 389

suit to recover the fees would not make any difference ; and (e) that it is seen A
from the correspondence that Mr. Blanco White has earned the fees amounting
to Pounds 2200 with refreshers at the !ate of Pounds 220 per d>y, for the work
done in rr..:;;.. 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]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1038
of 1973.
B

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 197 l.

S. Chowdhuri, P.P. Ginwa!a, T.A. Ramachandran and D.N. Gupta c
for the Appellants.

V.S. Desai, Clwmp:it Miss A. Subhashini for
Respondents No. l & 2.

The Judgment of the Court was delivered by D
VENKATARAMJAH, 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 p:irtners of a firm of Solicitors
known as M/s. Orr Dignam & Co. having its office at Calcutta. The
E
appellants acted as the S::ilicitors of a Ger.nan Corpor!ltion known as
Ferbwerke Hoec:1st Aktie,1g~>elL;(iaft Vormals Meister· 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. 5 l l of l 962 filed by the Bengal Chemical F
and Pharmaceutical Works Ltd. against German Corp)ration and
another Suit No. l J24 of 1962 filed by the German Corporation
against the Bengal Chemical and Pharmaceutical Works Ltd. on
the alleged infringemellt of a patent. The appella'lts were instructed
by a firm of SJlicitors in London namely M/s. Ashurst, Morris,
Crisp & Co. (hereinafter referred to as 'the London Solicitors') G
~·-
who were also acting for the German Corp::iration by a cable dated
May 31, J965 to retain in the said suits Mr. Blarico 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 accordiagly retained Mr. Blanco White as the H
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 SUPREME COURT REPORTS [1981) 3 S.C.R.

A 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
B
commencing from January 27, 1970 and was concluded on February
16, 1970. Mr Blanco White left India on February 17, 197J after
the hearing was over 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,

c the appellants received a notice from the Income-tax officer, 'A'
Ward, Foreign Section asking them to furnish information about the
fees earned in India by Mr. Blanco White as wunsel engaged by
them to argue the case of their clients i.e. th~ 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 deducl the tax payable under the Act at
D
source on payments made to a non-resident. The appellants sent a
reply to that Jetter on February 24, I 970 stating that Mr. Blanco
White had been engaged by the London Solicitors of the German
Corporation to appear before the Calcutta High Courr on behalf of
the German Corporation and that they had netither briefed him
nor had they incurred any liability to pay him any fees. They,
E
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 engag~d for the
German Corporation. Thereupon by a letter dated February 27,1970
F
the Income-Jax Officer informed the appellants that he proposed to
proceed against t!-:em under section 163 (l) 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 JO/ I I, 1970 denying their
G liability to be proceeded against under section 163 (I) 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 to him and that, therefore, no
H 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
B. P. RAY v. INCOME TAX OFFICER (Venkataramiah, J) 391

barrister who was not carrying on any busit1ess but had only;rendered A
professional service in Calcutta, the connection if any, could
not be a business connecti n. They also questioned the jurisdiction
of the Income·tax Officer to make any assessment treating them as
the representative assessees of Mr. Blanc0 White. The Inc0me-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 B
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 25,197J calli11g upo11 the Income-tax Officer, )he
Commissioner of focome-tax West Bengal [and the Union of India
to show cause as to why the proposal to initiate proceedings under c
the Act as stated above should not be quashed a11d a writ in the
nature of mandamus prohibiting them from proceeding against the
appellants under section 163(1) of the Act should rtot be issued.
The petition was contested by the respondents. In the Counter
Affidavit filed by the [ncome-tax O'.ficer, it was asserted that the
Department had received inform1tion that Mr. Blanco White had D
charged Rs. 17,000/- per day by way of fees for appearing in the
Calcutta High Court in the 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 E
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 w:10 i:i th~ instant case happened to
be the appellants and that, therefore, there existed a business
connection which brought the appellants within the scope of section
F
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 ~he purview of section 163(1) had to
G
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. According11y he dismissed
it without expressing any opinion on the merits of the case.
Aggrieved by the decision of the Single Judge, the appellants H
preferred an appeal before the Division Bench of the Calcutta
High Court. The Division Bench dismissed the appeal holding, inter
392 SUPREME COURT REPORTS [1981] 3 S.C.R.

A alia, that from the facts disclosed before the Court it appeared that
from May 31, 1965 upto Febuary 16, 1970 there was business con-
nection (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
B 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
contenions 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 tl~e Division Bench under Article J 33 of the
Constitution, the appellants ha\'e come up in appeal to this Court
against the jud~ment of the Division Bench of the High Court.

D Jt should be stated here that alongwith the petition for a
cc:rtificate 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:
E
" ( J) 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 J961;

F (2) If they so decide the respondents will be at liberty
to issue a notice unde.r section 148 of the Act but will not
take any futher steps thereafter until. the disposal of the
application;

(3) The petitioners will also be at liberty to appeal
G from any order made under section 163 without 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
H
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
B. P. RAY v. INCOME TAX OFFICER (Venkataramiah, J.) 393

under section J 48 of the Act to the appellants to file a return of the A
income of Mr. Blanco White. It is also stated that the appellants
preferred an appeal against that order before the Appellate Assis-
tant 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 B
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 i 48 of the Act, the appellants
filed a 'nil' return. Thereafter we are informed that the Income- c
tax Officer intimated the appellants on September 17, 1977 that he
had completed the assessment of Mr. Blanco White for the assess-
ment year 1970-7 l 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.
D
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
l 124 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 E
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 F
Blanco White as cou11sel to attend hearings Calcutta and
Bombay stop Imperative to know. dates of respective
actions since counsel can only accept subject to other Com-
mitments stop Please cable hearing dates if known or
date when Information available stop Our Ref Lee.
Ashursts London G
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 H
Mr. Blanco White to plead on behalf of the German Corporation
in the said suits. On December 23, 1969, the London Solicitars
394 SUPREME COURT REPORTS [ 198 l] 3 S.C.R.

A 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 certaii1 other docu-
ments which they themselves had handed over to him. A part of
the aforesaid letter which is relevaut for the purpose of the present
case, is reproduced below :-
B
" ......... We are asking Mr. Divecha of Hoechst Phar-
maceuticals Limited, Bombay, to arrange for copies of the
evidence in tbe Bombay case to be sent to you. The for-
mulation of the evidence can then be discussed between you
and your Counsel and Mr. Blanco White when he arrives
c in Calcutta. The remaining documents which we are send-
ing 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.

D There are a number of points which Mr. Blanco White
has asked us to put to you for consideration and these are
as follows :-

l. It is not entirely clear from the pleadings that
Indian Patent No. 66049 is a document in the Albert David
E 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 defendants, that is the
F 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
G 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
H Chemicals have said in their affidavits filed in the interlocu-
tory proceedings in April 1962 that they stopped production
of Tolbutamide because of the threats made by Hoechst.
B. P. RAY v. INCOME TAX OFFICER (Venkatarnmiah, J.) 395

At the same time it appears that they published advertise- A
ments in the Punjab Medical Journal and the Indian Medi-
cal Journal of !st 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.
B
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 c
) believe that the gentlemen from Hoechst, Frankfurt plan to
)· arrive in Calcutta on Thursday, 22nd January, so as to be
available for m0re -detailed talks starting on Friday. We
are asking Hoechst, Bombay to arrange for hotel accom-
modation for Mr. Blanco White."
D
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 E
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
F
was decided to take up Suit No. I 124 of 1962 first. In the
said suit Mr. Blanco White, Q.C. appeared 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, ! 2th, 13th and -G
16th February 1970 and judgment was reserved. The other
suits were adjourned until after the judgment."

In his letter dated March 21, I 973 written to the London
Solicitors marked as Annexure 'E' to the writ petition, Mr. Blanco H
White while attempting to make out a case supporting the appellants
admitted that he was not disputing that when he was actually in
•'

396 SUPREME COURT REPORTS [198 J] 3 S.C.R.

A Court in Calcutta, he was, formally, there on instructions from the
appellan!s as attorneys. The relevant part of that letter reads :

"Dear Mr. Gane,
Parbwerke Hoechst v. Bengal Chemical.
Certainly I can confirm that, when I appeared before the Cal-
B cutta High Court in January and February 1970. I was brie-
fed 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, formal!y, 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
c Hoechst in Germany) and Orr. Dignam were at no time
concerned with these arrangements."

Mr. Blanco White left India on February 17, l 970 without
making any arrangment for the settlement of his liability under the
Act. When the Income-tax Officer issued the notice dated February
D 19, 1970 to the appellants drawing their attention to the provisions
contained in section l 9.3(2) of the Act and requesting them to fur-
nish 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
E 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 l 0/ i I, 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 enga-
F ged or delivered any brief to Mr. Blanco White and that tliey 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 bad not unde1iaken to pay any
G fees to him for appearing in the suits and that, therefore, the appel-
lants 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 ·
H 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.
B. P. RAY . INCOME TAX OFFICER (Venkataramiah, J.) 397

For proper appreciation of the contentions advanced by ·the A
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 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 asses- B
see, 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 bis representative capacity only, c
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 (l)(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 D
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 non-
resident. 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
E
to him in India during such year. The relevant part of section 9(1)
of the Act reads :

"(!) The following incomes shall be deemed to accrue
or arise in India-
F
(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 or from any asset or source of income in India
or through the transfer of a capital· asset situate in
India; G
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 H
such part of the income as is reasonably attributable to the
operations carried out in [ndia ......... "
398 SUPREME COURT REPORTS (!981] 3 S.C.R

A From the facts stated above it is seen that from the year I 965
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 Iridia, it must be assumed
B that the appellants had done all that was suggested in the letter
of ~he. London Solicito,rs datec;I December 23, 1969. It is
adm1ttedthat 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
c hand over any 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 presu-
D mably 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 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
E
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
F
laid down by this Court in Commissioner of Tncome-tax, Punjab v.
R.D. Aggarwal and Co. and Anr.(1) 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.
G
The only remammg 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
H definitions of the expressions 'business' and 'profession' found in

(I) 56 l.T.R. 20
-B. P. RAY v. INCOME TAX OFFICER (Venkataramiah, J.) 399

section 2 (13) and section 2(36) of the Act. Section 2(13) of the
A
Act reads:

"business" includes any trade, commerce, or manu-
facture or any adventure or concern in the nature of trade,
commerce or manufacture". B
Section 2(36) of the Act provides:

" "Profession" includes vocation ".

Section 14 of the Act which enumerates the heads of income
whicb give rise to a liability to tax under the Act treats the income
from profits and gains of bcisiness and profession as a sic1gle head. c
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.

D
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 I 4 of the Act. It is no doubt true
that there is specific reference to 'business' in section 9(1) and there
E
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 ~he intention of the Parliament to
exclude non-residents engaged in learned professions from the opera-
tion of section 9(1) and that even if the intention of the Parliament
F
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
r submission. There could be no good reason for the Parliame11t for
excluding non-resident professional men from the purview of section
G
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 H
interpreted as including within its scope 'Professsional Connection'
also.
400 SUPREME COURT REPORTS [1981) 3 S.C.R.

A In Commissioner of Income Tax. Bombay v. Currimbhoy
Ebrahim & Sons Ltd.,(1) 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 :

B "The phrase " business connection " is different from,
though doubtless not unreleated 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
c 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 m~aning '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
D Viet. 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
E " business" thus :

" "business" includes every trade, cccupation and
profession".

The observation of Rowlatt, J. in Christuphu Barker & Sons
F v. Commissioner of Inland Revenu<(') "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 Limittd( 3) held:
G 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. '·
H
(!) 3 I.T.R. 395
(2) (1919] 2 K.B. 222 at page 228
(3) (1920] I K.B. 193
B. P. RAY v. INCOME-TAX OFFICER (Venkataramiah, J.) 401

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
mcome. We are of the view that in the context in which the
expression 'business connection' is used in section 9 (!)of the Act,
there is no warrant for giving a restricted meaning to it excluding'
professional connections' from its scope.
B

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 c
earlier, Mr. Blanco White appeared alongwith the Indian counsel
.~· engaged by the appellants and the appellants continued to represent
the German Corporation when I\fr. 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 in: the request of the London Solicitors to D
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. Blanco White being a barrister could not
file a suit to recover the fees would not make any difference in this · ·E
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 F
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
nor call for interference. G

In the result, the appeal is dismissed. The parties shall,
however, bear their costs.
H
V.D.K. Appeal dismissed.