Time Incorporated vs Commissioner of Income Tax

B.N. Kirpal, J.—In respect of the asst. yr. 1973-74 the Tribunal has stated the case and referred the following two questions to this Court :

"1. Whether, on the facts and in the circumstances of the case, Time Service Bureau in Delhi constitutes business connection in India within the meaning of s. 9 of IT Act, 1961 ?

If the answer to the above question is in the affirmative, then whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that any income was attributable to the above business connection ?"

Briefly stated the facts are that the assessed is a non-resident company incorporated in New York, USA and publishes various magazines. The assessed also has a Bureau in New Delhi and the main function of this is to collect news as well as views and report to the Time magazine and other magazines which are published by the assessed. This Bureau has been functioning in New Delhi since 1964.

The ITO was of the view that the New Delhi Bureau was a branch of the non-resident company operating in India and that a business connection was clearly established. He invoked that provisions of s. 9(1). of the IT Act which, inter alias provided, at the time when the assessment was made, that all income accruing or arising whether directly or indirectly through or from any business connection in India shall be deemed to accrue or arise in India. The ITO having assessed income of Rs. 99,500 in the hands of the assessed in India, appeals were filed first to the AAC and then to the Tribunal, but without any success. It is thereafter that on an application being field under s. 256(1) the aforesaid two questions of law have been referred to this Court.

During the pendency of the reference an amendment has been made in s. Explanation (c) has been added to s. 9(1)(i) and the said provision reads as follows :

"in the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities which are confined to the collection of news and views in India for transmission out of India."

In this amendment a clause has been inserted by the Finance Act, 1983 but with retrospective effect from 1st April, 1962 the day on which the Act came into force. The effect of this amendment is that even if it be assumed that there was a business connection in the hands of a non-resident no income is to be deemed to accrue or arise in India. This being so the questions of law which are referred are answered in favor of the assessed and the assessed is not liable to be subjected to any tax.

There will be no order as to cost.