Marten, C.J:— This income-tax reference arises on assessments for the financial years 1925–1926 and 1926–1927 of the Bombay Trust Corporation, Ltd. (whom I will call “the Bombay Company”) as agent of the Hongkong Trust Corporation Limited (whom I will call call “the Hongkong Company”). Having regard to S. 3 and the definition of “previous year” in Section 2(11) of the Income-tax Act, 1922, the profits assessed are alleged profits for the years ending 31st March 1925, and 31st March 1926, respectively.

2. The Crown claims that the Bombay Company has a “business connexion” with the Hongkong Company and is accordingly the latter's agent within the meaning of Section 43 of the Act, and consequently be assessed in the name of that agent under S. 42. The Bombay Company disputes the alleged “business connexion” and says that in any event it is necessary, having regard to Section 40 of the Act, for the alleged agent to be in receipt on behalf of the Hongkong Company of any income chargeable under the Act, and that consequently the Bombay Company is not liable, as Ss. 40, 42 and 43 must be read together and not disjunctively. Alternatively, they say that the Hongkong Company itself may be directly liable under S. 4 of that. Act, and that consequently an assessment ought not to be made on the Bombay Company, more especially as the Bombay Company has no power of deduction under Section 18 of the Act and as S. 19 provides that in other cases the tax should be paid by the assesses direct. The material facts appear to be shortly as follows: The Bombay Company was incorporated in Bombay in September 1920. The Hongkong Company was incorporated in Hongkong in July 1921. The latter's Memorandum of Association Ex. A, shows that it was a financing company, as was also mainly the Bombay Comany, as shown by its Memorandum, Ex. B. As regards their respective financial operations we have to deal with very large figures. It appears from para. 3 of the case that the paid-up capital of the Hongkong Company was eight crores of rupees and that it had at its disposal about another seven to eight crores, thus making an aggregate sum of about fifteen to sixteen orores of rupees. The nominal capital of the Bombay Company was eight crores, and we are told by counsel that their paid-up capital was one crore. Then in the years 1924–1925 business took place between the two companies on an enormous scale. It took the form of the Honkong Company lending deposits to the Bombay Company at per cent fixed interest. Those deposits amounted to about fifteen to sixteen crores in each of the years 1924 and 1925. Translating these figures into English currency one finds that the Hongkong Company thus lent to the Bombay Company about ten millions sterling per year. This was about double the nominal capital of the Bombay Company and about 16 times its paid-up capital. Moreover, such yearly advances were double the paid-up capital of the Hongkong Company and they also absorbed its remaining available deposits. The interest on these deposits amounted to over Rs. 88 lacs in 1924, and to over Rs. 82 lacs in 1925, payable by the Bombay Company. So far as appears from the papers before us, no security was taken for these huge deposits. The tax now claimed for the two years amounts itself to over Rs. 18 lacs.

3. The general terms of business are exemplified by the extract, Ex. C. from the Minutes of the Hongkong Company dated 20th May, 1924, viz.:

The Secretary (Hongkong Company) was instructed to offer B.T.C deposit (s) for one year at 5¼ per cent interest accrued to be remitted to Hongkong through E.D.S & Co., Ltd.”

4. In this extract “B.T.C” stands for the Bombay Company and “E.D.S & Co. Ltd.” stands for, E.D Sassoon & Co., Ltd. whom I will call “Sassoons.” As to the modus operandi by which that interest is stated to have been remitted by the Bombay Company through Sassoons to the Hongkong Company I may refer to Ex. J for example. There is, first of all, a letter of instructions from the Bombay Company to Sassoons of Bombay directing them to remit to the Shanghai house of Sassoons a sum of Rs. 2,625 and to “debit the same to our account.” Secondly, the Bombay Company writes to the Shangai house of Sassoons advising them of that remittance and asking them “to place it to the credit of the Hongkong “Company at your end.” Thirdly, the Bombay Company write to the Hongkong Company, saying:

We have advised Messrs E.D Sassoon & Co., Ltd., Shanghai, to credit your account at their end with Rs. 2,625 being the interest on your deposit of Rs. 50,000 due today.

5. These three letters are all dated 6th September, 1925.

6. We also had put in evidence a statement as to the reverse process, viz., a letter of 12th May, 1926, from the Secretary of the Hongkong Company to the Bombay Company with reference to an original advance of money. It ran as follows:

I am instructed to inquire whether or not you will agree to accept Rs. 1,25,00,000 (Rupees One Crore and twenty-five lacs) from us on call as from 1st June next at 5¼ per annum interest. If you are prepared to accept this sum on the above-mentioned terms, instructions have been given to our Bombay bankers—Messrs E.D Sassoon & Co., Limited, to pay you this amount, in exchange for which please send us your acknowledgment.

7. We were informed by counsel for the assessee that there was no written acceptance of this particular offer and that the acceptance was by conduct. There is, however, another letter of advice of the same date from the Hongkong Company to Sassoons of Shanghai in effect directing them to transfer one and a quarter crores of rupees from the current account of the Hongkong Company with them to the Bombay house of Sassoons, and adding:

Please advise your Bombay House that you hold this sum to their credit in rupees current account as on 1st June 1926.

8. As regards the composition of these three companies, it is not suggested that any one of them is a mere creature of the other. But, on the other hand, it is common ground that various members of the Sassoon family are interested in one or other of the three companies. Thus, Capt. E.D Sassoon is one of the signatories to the memorandum and one of the three first directors of the Bombay Company. Similarly, Mr. H.W Sassoon is one of the two signatories to the Memorandum of Association of the Hongkong Company. We were also told by counsel for the Bombay Company that the offices of the Bombay Company and of Sassoons are in the same building in Bombay.

9. Counsel for the Bombay Company submitted to us that in order to decide the five formal questions referred to us by the Commissioner, we ought to decide the following two questions, viz., (1): Is the non-resident Hongkong Company carrying on an assessable business within British India; (2) If so, can the present assessee, the Bombay Company, be sued in respect of such non-resident? I think these two questions really involve the main points we have to decide, and I will accordingly proceed to deal with them.

10. As regards the first question: in my judgment the Hongkong Company is carrying on an assessable business within British India. It is lending money regularly in British India from time to time, and is receiving interest in respect of such money-lending operation. It is to be noted that it sends its offers to Bombay which are accepted in Bombay. Its own moneys are paid in Bombay, and its interest thereon is earned in Bombay. Therefore, in my judgment, there is an income accruing or arising in British India within the meaning of S. 4 either from “the business carried on” there by the Hongkong Company within the meaning of S. 10, or else under another heading of S. 6, viz., sub-S. (vi) “other sources.”

11. The case then is very different from Greenwood v. F.L Smidth & Co.(1). There a Danish butter company was held not to carry on any trade in England, as all contracts and deliveries were made outside the United Kingdom. So, too, the present facts would seem to satisfy what Lord Herschell says in Grainger & Son v. Gough(2), p. 335:

Does he, then, exercise his trade within the United Kingdon? It has been sometimes said that it is a question of fact whether a person so exercises his trade. In a sense this is true; but, in order to determine the question in any particular case, it is essential to form an idea of the elements which constitute the exercise of a trade within the gleaning of the Act of Parliament. In the first place, I think there is a broad distinction between trading with a country and carrying on a trade within a country. Many merchants and manufacturers export their goods to all parts of the world, yet I do not suppose anyone would dream of saying that they exercise or carry on their trade in every country in which their goods find customers.

12. But that again was a case where at most the foreign merchant canvassed for orders through agents in the United Kingdom, but all contracts for sale and all deliveries were made abroad. In saying this I appreciate the distinction pointed out in Rogers Pyatt Shellac & Co. v. Secy. of State(3) in commenting on Board of Revenue v. Madras Export Co.(4), that the basis of this taxation is different in India from England. In India it is on income “accruing or arising or received in British India” or deemed so to be: see Board of Revenue, Madras v. Ramanadhan Chetty(5). In England it is mainly on a trade or business carried on there, supplemented inter alia by General Rules 5, 6 and 7 with reference to the agents of non-residents. But the first two cases I have cited are nevertheless useful on the limited point as to the meaning in S. 10 of carrying on business.

13. Whether on my above finding the Hongkong Company could be assessed directly under Ss. 3 and 4 it is unnecessary to decide. The assessees here are the Bombay Company and not the Hongkong Company. But I may note in passing that under the repent decision of the House of Lords in Whitney v. Commissioners of Inland Revenue(6) it has been held that a valid notice may be sent to a foreigner by registered post requiring him to make a return, and that on failure to do so he may be properly assessed by the Inland Revenue Commissioners under the English Income-tax Act. As to whether that decision would apply to our Indian Income-tax Act I say nothing.

14. I now turn to the second question, and this is the one which involves the real difficulty in the case. As to this, there are at least two competing views arising on the true operation of Ss. 40, 42 and 43. Are they to be read together, as was held with reference to the sections in the 1918 Act corresponding to Ss. 40 and 43 in the 1922 Act by the majority of Judges in the Imperial Tolacco Co. of India, Ltd. v. Secy. of State(7) or are they to be read disjunctively as was held in the dissenting judgment of Ghose, J.? The practical difficulty is this: all three sections deal with the agents of non-residents, but S. 40, the primary section, necessitates the agent in question “being in receipt on, behalf of” the non-resident of the income sought to be charged. S. 42, however, makes no express reference to the agent being in receipt of the income.

15. We have heard full arguments on this point, and in the result I respectfully agree with the judgments of Woodroffe & Greaves, JJ., so far as they are applicable, and would hold that these sections should be read jointly and not disjunctively. I will assume for the moment that any person who is deemed to be an agent within the meaning of S. 43 is also an agent for the purposes of S. 40. Stopping there, it is, I think, clear that such agent, so far as S. 40 is concerned, must be in receipt on behalf of the non-resident of the income in question. Then, in the view which I take S. 42 is directed to extending or explaining the profits of a non-resident mentioned in S. 40, so as to make it clear that they include all profits or gains accruing or arising to ‘the non-resident’ whether directly or indirectly through or from any business connexion or property in British India.

16. So, too, S. 42(2) contains certain provisions for assessing the profits of a non-resident foreign subject on a true basis where the Commissioner has reason to believe that owing to the course of business arranged between the resident and the non-resident,

the business done by the resident in pursuance of his connexions with the non-resident produces to the resident either no profits or less than the ordinary profits which might be expected to arise in that business.

17. Next, if one turns to R. 43 there the word “agent” in S. 40 is in effect extended to include any person employed by or on behalf of a person residing out of British India, or having any business connexion with such person, or through whom such person is in the receipt of any income, profits or gains,

provided the Income-tax Officer has served on the resident a notice to that effect, and the resident has been given an opportunity of being heard as to his alleged liability. I may here notice that if these conditions are fulfilled, then the resident is to be deemed to be the agent of the non-resident “for all the purposes of this Act.” Accordingly I think it clear that the word “agent” in S. 40 will include what I may call this statutory agent in S. 43.

18. My interpretation of the three sections will accordingly involve this: that while in S. 40 the term “agent” is extended by S. 43, and “income, profits or gains” are extended by S. 42, yet the condition that such agent should be “in receipt on behalf of” the non-resident of the income in question still remains. If, on the other hand, a contrary construction be adopted, then one gets this result that am ordinary and undisputed business agent cannot be made liable under S. 40 unless he is in the receipt of income; but that, on the other hand, a statutory agent under S. 43 is to be made liable under S. 42 as an assessee, although he may not have any income on behalf of the non-resident.

19. This seems to me to be a startling conclusion to arrive at. It is one thing to make a man liable for a non-resident, if he is in the receipt of income on behalf of such non-resident. But it is quite another thing to make him liable if he has no such income out of which to pay the tax in question. In this connexion I may draw attention to Section 18 of the Act as regards deductions. The loans in the present case do not fall within that section. Consequently, there is no power of deduction in the Bombay Company when it pays the interest due on the loans. On the contrary S. 19 provides that in all cases other than those mentioned in S. 18 “the tax shall be payable by the assessee direct.”

20. The case then for the Crown, even when put at its highest, is I think, one where in effect it is sought to impose a new liability on residents which did not previously exist, namely, as statutory agents under Ss. 43 and 42 as opposed, to agents in the ordinary meaning of that term, and that there is a serious doubt as to whether S. 42 is intended to impose a personal liability on any alleged agent who is not in the receipt of income on behalf of the non-resident. Indeed, as I have already stated, the majority of the learned Judges in Imperial Tobacco Co. of India, Ltd. v. Secy. of State have already held expressly that Ss. 31 and 34 in the 1918 Act, corresponding to sections 40 and 43 in the present act, must be read jointly and consequently that receipt of income is necessary by a statutory agent under S. 34. I should also infer that those learned Judges considered that the old S. 33, corresponding to the present S. 42, put the Crown in no better position. I appreciate that since the 1918 Act the words “or property” have been added to S. 33 and the definition of agent” in S. 34 has been somewhat extended. But that does not, I thinks affect the main ground of the decision which was that the agent in question must be in the receipt of income on behalf of the non-resident. I also appreciate that the specific questions then submitted to the Court had reference: (i) to S. 34; and (ii) to the propriety of the assessment generally: see p. 722. On the-other hand in his dissenting judgment Ghose, J., says at p. 726:

Than comes S. 33, sub-S. (1) of which has am important bearing on the present question.

21. So it is clear that the effect of S. 33 was fully before the Court. Indeed Ghose, J., held that S. 34 ought to be read with S. 33 rather than with S. 31 and that as the receipt of income was not mentioned in S. 33, the assessee was-liable.

22. Under the above circumstances I am of opinion that the general principles referred to by Lord Bucktmster in Greenwood v. F.L Smidth & Co. may fairly be called in aid. He says (p. 423):

It is, I think, important to remember the rule, which the Courts ought to obey, that, where it is desired to impose a new burden by way of taxation, it is essential that this intention should be stated in plain terms. The Courts cannot assent to the view that if a section in a taxing statute is of doubtful and ambiguous meaning, it is possible out of that ambiguity to extract a new and added obligation not-formerly cast upon the taxpayer. Sub-S. 2 here is at the best a sub-section of an extremely doubtful character.

23. And if in the present case it be said that the construction which I would adopt would lead to some redundancy, the observations of Lord Sterndale in the same case in the Court of appeal reported in [1921] 3 K.B 583 at pp. 591-2 would seem to be in point. He says (pp. 591-92):

…and it would be very strange if another sub-section of the same section impose an entirely new charge not within the schedule at all. I agree with Rowlatt, J., that such a thing, if intended, should be carried out with the greatest clearness, and that if a reasonable meaning can be given to the sub-section without producing that effect such a meaning should be given. “…Redundancy, however, is not unknown in legislation. I think it is better to impute such redundancy than to hold that such an important alteration has been made in the basis of taxation as the abolition of the condition of exercise of trade within the United Kingdom before a person not there resident can be taxed. To take the latter course would, I think, be to violate the well-known canon of construction of Taxing Acts, that no one is to be taxed except by express words.

24. That, then, being my view of the construction of the Act, was the Bombay Company “in receipt on behalf of” the Hongkong Company of any income, profits or gains chargeable under the Act? In my opinion they were not. It is not suggested that they were agents in the ordinary sense of that word for the Hongkong Company. At most they were agents within the extended meaning given to that word by S. 43. But in my judgment they never were in receipt of any interest on the loans on behalf of the Hongkong Company. On the contrary, it was their duty to pay that interest and not in any way to receive it. On the facts before us they had indeed no power to give a receipt, nor were they in any sense the trustees of the interest which was due from them.

25. So far then as I can see, the relations between them were that of a debtor and creditor. As regards payment, for instance, the course of business as exemplified in Ex. J., shows that the debtor in Bombay instructed his bankers in Bombay to debit his Bombay account and credit his Shanghai account with the amount requisite to pay the interest, and that then there followed a direction to the Shanghai branch of his Bombay bankers to credit that money in Shanghai to the Hongkong Company. This is mere payment of interest and nothing else. There is no receipt by the Bombay Company.

26. In his dissenting judgment in Imperial Tobacco Company of India, Ltd. v. Secretary of State. Ghose, J., states (p. 727 of 49 Cal.) that, it

would be to support an anomaly that a person receiving his income through an agent in this country would be assessed, but if he asks his debtor to remit the income direct to him he would escape liability to pay the tax, a thing which this section was intended to remove.

27. With all respect there seems to me a vast difference between the relations of mere debtor and creditor, and those of principal and agent. Nor am I prepared to concede that the Hongkong Company would necessarily escape assessment on my construction of the Act. On the contrary, as I have already pointed out, it may be that they could be assessed directly under Ss. 3 and 4 after notice served on them by registered post.

28. I may here mention one further argument by counsel for the Bombay Company. He said that on the hypothesis that the Hongkong Company were carrying on business within British India and earning profits there on that business, they would be directly liable under S. 4, and consequently it would be unnecessary to invoke S. 42, for the income thereby earned would be the income actually arising and not income “deemed to arise” within British India. Consequently he argued that if once you found the principal directly liable, you could not also fix an alleged agent with the same liability. It is unnecessary to decide that point because, as I have already indicated, my decision on the true construction of Ss. 40 and 42 is in his favour. But, as at present advised, I am disposed to think that in the case of a non-resident the Crown may pursue whichever remedy they prefer. I would, accordingly, respectfully agree with the decision of Sir John Wallis to that effect in Chief Commissioner of Income-tax v. Bhanjee Ramjee & Co.(8) which was cited to us in the Remington Typewriter case: The Commissioner of Income tax v. Remington Typewriter Company(9) heard next after this one. I of course appreciate that Ss. 3 and 4 are the main charging sections. On the other hand to determine what income is to be charged in certain cases one has to turn to Ss. 40 to 43.

29. So, too, my above finding on the true construction of Ss. 40 and 42 renders it unnecessary for me to determine whether there was a “business connexion” between the Hongkong Company and the Bombay Company within the meaning of S. 43. Or whether within the meaning of that section the Bombay Company was a person “through whom” the Hongkong Company was in receipt of the income. For the purposes of my main decision, I have been content to assume that the Bombay Company is to be deemed to be an agent within the meaning of S. 43. But as full arguments were addressed to us on the point I may state that on the facts of the present case I would hold that the Bombay Company had a business connexion with the Hongkong Company. I do not propose to define the words “business connexion” as used in Ss. 42 and 43. For the purposes of the present case it is unnecessary to do so. On the other hand. I am not prepared to accede to the argument presented to us by counsel for the Bombay Company to the effect that you must confine the expression “business connexion” to a connexion in the business of a resident person which gives rise to a pecuniary interest in the assets of that business, as, e.g, a share in the profits. But the facts here are most exceptional. We are dealing in enormous figures, and substantially the Bombay Company was being financed to the extent of 15 or 16 times its paid-up capital by a fairy godmother in the shape of the Hongkong Company who was prepared to lend them almost unlimited sums at five and a quarter per cent interest without security, and in its turn the Hongkong Company was risking double the amount of its paid-up capital and all its available deposits.

30. Under those circumstances it seems to me that there was a strong business connexion between the two Companies. The business interests of the Hongkong Company were practically entirely wound up in the business welfare of the Bombay Company. The failure of the latter would have involved the ruin of the former. Consequently I need say nothing as to the fact that behind these strong financial ties there was the family house of E.D Sassoon & Company, Limited, as the banker intermediary. Nor need I in any way lay stress on such family connexions as there might be between the various shareholders or directors of the three Companies. The case can be decided quite apart from that, and I have dealt with if on that basis.

31. As regards the further question as to whether in any event the Bombay Company was a person through whom the Hongkong Company was in the receipt of, income, I am inclined to think that the word “through” should not be construed as meaning “from.” In other words, I do not think that section was intended to include any person who might have to transmit moneys to a non-resident, whether or no he knew that such moneys represented the income, profits or gains of the non-resident.

32. I may add that as regards the decision in Imperial Tobacco Company's case to the effect that the agent charged must be in receipt of income, there has been no subsequent alteration made in Ss. 40 to 43 on that point, apart from the addition of the words “or property” in S. 42 and the alteration I have already referred to in S. 43, But, on the other hand, Ss. 57 and 58 have been amended so as to necessitate the deduction of super-tax as well as income-tax on dividends. That, however is another point. Up to now the legislature has not altered the general construction which the majority of the Judges in Imperial Tobacco Company's case placed on Ss. 31 and 34 of the 1918 Act. It has met the finding in that case that the Company was not in receipt of its dividends on behalf of its shareholders, and consequently not within S. 31, by extending the section for compulsory deduction of tax from such dividends.

33. As regards the meaning of the word “property” in S. 42, I think there is much force in the contention of counsel for the Bombay Company that it must be confined to the heading “property” in Ss. 6(iii) and 9, and would, therefore, be limited to immovable property. But this point also it is unnecessary to decide in the present case.

34. In the result, then, I would answer the questions submitted to us as follows:

1. Yes, from a business connexion. But it also arises directly under S. 4(1) and S. 6(iv) or (vi).

2. Yes.

3 and 4. No because the Bombay Company is not in receipt of any such interest on behalf of the Hongkong Company as required by S. 40.

5. The relation between the two companies was that of borrower and lender but; having regard to S. 43, the Bombay Company, though deemed to be an agent of the Hongkong Company for the purpose of Ss. 40 and 42, should not be assessed as they were not in receipt of income: see answer to questions 3 and 4.

35. As regards costs, I would direct the costs of the Bombay Company to be paid by the Commissioner, such costs to be taxed by the Taxing Master, Original Side, as on the original side scale.

36. Kemp, J.:— The main question for our consideration in this reference is whether a corporation called the Bombay Trust Corporation carrying on business in Bombay is properly assessed under Sections 42(1) and 43 of the Income-tax Act (11 of 1922), as the agent of another corporation called the Hongkong Trust Corporation carrying on business in Hongkong in respect of the income alleged to accrue to the latter in Bombay. The facts giving rise to this reference are as follows: The Bombay Trust Corporation was registered in Bombay on 8th September, 1920; the Hongkong Trust Corporation was registered at Hongkong on 6th July, 1921. The paid-up capital of the Hongkong Trust Corporation amounted to eight crores of rupees and it had at its disposal about seven or eight crores more of cash deposits received from all sources. It was formed as a limited company and by its Memorandum of Association it was empowered to carry on the business of bankers and financiers, advancing, depositing or lending money and doing this business at Hongkong or in any part of the world. In fact its activities were confined to Bombay and to lending money to the Bombay Trust Corporation. The Bombay Trust Corporation was a private limited company and by its Memorandum and Articles of Association its objects are stated, inter alia, to be to carry on business as capitalists and financiers, lending money and executing all kinds of financial operations. There was undoubtedly an intimate connexion between the Bombay Trust Corporation and the Hongkong Trust Corporation. The Hongkong Trust Corporation, as I have said, practically confined all its activities to its money-lending business with the Bombay Trust Corporation in Bombay and lent the whole of the fifteen or sixteen crores constituting its paid-up capital and cash deposits to the Bombay Trust Corporation from time to time at five, and a quarter per cent, interest. The interest accruing due was remitted by the Bombay Trust Corporation through its bankers, Messrs E.D Sansoon & Company, Bombay, to the Shanghai branch of the same bankers which kept an account of the Hongkong Trust Corporation. On the profits and income accruing to the Hongkong Trust Corporation from this money-lending business for the years ending 31st March 1925 and 31st March 1926, the Commissioner has assessed the Bombay Trust Corporation under Sections 42(1) and 43 of the Income-tax Act 11 of 1922 as agents of the Hongkong Trust Corporation to income-tax and super-tax for the financial years 1925–1926 and 1926–1927.

37. The amount involved is large, the income-tax for 1925–1926 amounting to Rs. 4,92,821 and super-tax Rs. 3,92,096; and for 1926–1927 income-tax, Rs. 5,38,510 and super-tax Rs. 3,55,882. The total, therefore, for the two years amounts to Rs. 18,79,321. At the request of the assessee the Commissioner referred contain questions for our opinion under Section 66(2) of the Income-tax Act 11 of 1922. These questions are stated in para. 7 of the Commissioner's reference. He was of opinion that the interest received by the Hongkong Trust Corporation were profits or gains accruing through a business connexion or property in British India under Section 42(1) of the Act and he was further of opinion that the Bombay Trust Corporation could be treated as the agent of the Hongkong Trust Corporation under Ss. 42(1) and 43 in respect of such interest.

38. The first point for consideration is whether the income or profit accruing to the Hongkong Trust Corporation arose from a business carried on by it in Bombay and it seems to me clear that it did. The correspondence shows that the procedure adopted in lending these moneys to make an offer from Hongkong to the Bombay Trust Corporation was for the Hongkong Trust Corporation in Bombay to lend a sum of money. The Bombay Trust Corporation accepted the offer in Bombay and the contract, therefore, was made in Bombay. The business between the two companies formed a series of contracts from time to time and thus the whole of this money-lending business was done in Bombay and the interest accrued here although it was remitted through Messrs E.D Sassoon & Company on behalf of the Bombay Trust Corporation to China. I think it is clear this business was done in Bombay and that the income from it accrued to the Hongkong Corporation in Bombay.

39. Another question, however, arises in considering what meaning is to be given to the words “business connexion” in Ss. 42(1) and 43. The Sassoon family were interested very largely in both the Bombay and the Hongkong Trust Corporations as well as in the firm of E.D Sassoon & Company whose (Bombay office is in the same building as the Bombay Trust Corporation, through whom the moneys and the interest were remitted from time to time. There can be little doubt that although the Hongkong Trust Corporation and the Bombay Trust Corporation were separate legal entities there was that intimate connexion between them, as shown by their dealings, which shows that the Hongkong Trust Corporation was formed practically for the purpose of lending all its available cash to the Bombay Trust Corporation, and the intermediary between the two Corporations were the bankers, E.D Sassoon & Company. The Hongkong Corporation lent all its paid-up capital and cash deposits apparently without security to the Bombay Company. Such a connexion between the Hongkong Trust Corporation and the Bombay Trust Corporation would, I think, generally be regarded as a “business connexion” and therefore the interest paid by the Bombay Trust Corporation were profits or gains accruing to the Hongkong Trust Corporation in British India. In this view of the question, if the decision in Whitney v. Inland Revenue Commissioner is applicable to our Act the Hongkong Trust Corporation itself can be reached by a notice to make a return and be assessed on failure to do so in respect of this business done by it in Bombay.

40. But the further question arises whether the Bombay Trust Corporation are the proper persons who can be assessed as the agents, under Ss. 42(1) and 43, of the Hongkong Trust Corporation. In Imperial Tobacco Company of India, Ltd. v. Secretary of State the majority of the Court (Woodroffe and Greaves, JJ.) held that Ss. 41 and 43 were to be read together and that therefore the statutory agent created by S. 43 must be one who is in receipt of the income, & c., on behalf of the non-resident. That case was decided in January 1922 prior to the coming into force of the present Act in March 1922. The present Act has added the words in S. 43, “or through whom such person is in the receipt of any income, profits or gains,” and it is to be noted, as the learned Chief Justice has pointed out, that the legislature, had it wished to disagree with the decision in Imperial Tobacco Company's case, had the opportunity in the present Act of clearly indicating that S. 43 was not intended to be read with S. 41 as extending the meaning of the word “agent” only. On the other hand, act 11 of 1922 was probably introduced prior to January 1922 and it is of course quite possible that the decision in Imperial Tobacco Company's case was not then brought to the notice of the framers of the present Act.

41. Now, as to the case of non-residents we have Ss. 40 to 43 of the Act. S. 40 says tax shall be levied and recovered from his agent who is in receipt on his behalf of any income, profits or gains chargeable under the Act. Section 4(1) of the applies the Act to all income, profits and gains accruing or arising in British India. Also by it the Act may lay down that other income, profits and gains shall be regarded as accruing or arising in British India.

42. Here the profits or gains clearly accrued in British India and are, therefore, taxable. But assurance is made doubly sure by S. 42(1) which states that profits or gains accruing or arising to the non-resident from a business connexion in British India shall be deemed to be income accruing or arising in British India and here I have held there is such a business connexion.

43. Can it be successfully contended that in respect of income coming under both the descriptions, of accruing in British India and deemed to accrue in British India under S. 4 the agent liable to assessment for such income was intended to be vested with a different authority? I think not. I think that “agent” in S. 42(1) must mean agent in receipt of income on behalf of the non-resident as in S. 40. The income in S. 40 includes the income in S. 42(1). Otherwise we have a contradiction as to the agent to be assessed.

44. Then S. 43 creates a statutory agent. It does not substitute such agent for an agent in receipt of income on the non-resident's behalf. It says certain persons may be agents. They are:

(1) an employee,

(2) one having a business connexion with the non-resident; and

(3) one through whom the non-resident receives the income, or, it may be, one whose possession of the income is the constructive possession of the non-resident. Neither construction of (3) matters here, because the Bombay Trust Corporation are mere debtors and cannot, in my opinion, be regarded as fulfilling either description. If the legislature had intended that the statutory agent should be the source of the income it should have said so in clear and unmistakable terms.

45. Nor is the business connexion here existing between the two corporations such that the Bombay Trust Corporation can be regarded as a person in receipt of the income on the Hongkong Trust Corporation's behalf.

46. Any other construction of S. 43 would enable the Commissioner to serve any employee, who might not be in receipt of the income on the non-resident's behalf, so as to constitute him an assessee under the Act. This would be inequitable and can hardly have intended and at any rate any such liability should be expressed in clear and unambiguous terms. Having regard to the loose drafting of Ss. 40, 42(1) and 43 I decline to hold it has this effect. Further, I agree with respect with what the Chief Justice has pointed out in his judgment which I have had the advantage of perusing. If in this case there is no power of deduction under the Act the tax is payable by the assessee direct.

47. I agree with respect with the Chief Justice as to the answers to the questions submitted for our opinion.

48. Reference answered.