Venkataramiah, J. - (1.) 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 partners of a firm of Solicitors known as M/s. Orr. Dignam and Co., having its office at Calcutta. The appellants acted as the Solicitors of a German Corporation known as Ferbwerke Hoechst Aktiengesellschaft Vormals Meister Lucius and Burning (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. 511 of 1962 filed by the Bengal Chemical and Pharmaceutical Works Ltd. against the German Corporation and another Suit No. 1124 of 1962 filed by the German Corporation against the Bengal Chemical and Pharmaceutical Works Ltd. on the alleged infringement of a patent. The appellants were instructed by a firm of Solicitors in London namely M/s. Ashurst, Morris, Crisp and Co. (hereinafter referred to as 'the London Solicitors') who were also acting for the German Corporation by a cable dated May 31, 1965 to retain in the said suits Mr. Blanco 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 accordingly retained Mr. Blanco White as the 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 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 commencing from January 27, 1970 and was concluded on February 16, 1970. Mr. Blanco White left India on February 17, 1970, 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, 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 counsel engaged by them to argue the case of their clients i. e., the 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 deduct the tax payable under the Act at source on payments made to a non-resident. The appellants sent a reply to that letter on February 24, 1970, starting that Mr. Blanco White had been engaged by the London Solicitors of the German Corporation to appear before the Calcutta High Court on behalf of the German Corporation and that they had neither briefed him nor had they incurred any liability to pay him any fees. They, 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 engaged for the German Corporation. Thereupon by a letter dated February 27, 1970, 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 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 10/11, 1970, denying their liability to be proceeded against under See. 163 (1) 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 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 barrister who was not carrying on any business but had only rendered professional service in Calcutta, and hence the connection if any, could not be a business connection. They also questioned the jurisdiction of the Income-tax Officer to make any assessment treating them as the representative assessees of Mr. Blanco White. The Income-tax Officer by his letter dated March 25, 1970, rejected the plea of the appellants and called upon them to appear before him on April 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, 1970 calling upon the Income-tax officer, the Commissioner of Income-tax West Bengal I and the Union of India to show cause as to why the proposal to initiate proceedings under the Act as stated above; should not be quashed and, a writ in the nature of mandamus prohibiting them from proceeding against the appellants under Section 163 (1) of the Act should not be issued. The petition was contested by the respondents. In the counter affidavit filed by the Income-tax Officer, it was asserted that the Department had received information that Mr. Blanco White had charged Rupees 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 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 who in the instant case happened to be the appellants and that, therefore, there existed a business connection which brought the appellants within the scope of Section 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 the purview of Section 163 (1) had to 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. Accordingly he dismissed it without expressing any opinion on the merits of the case. Aggrieved by the decision of the Single Judge, the appellants preferred an appeal before the Division Bench of the Calcutta High Court. The Division Bench dismissed the appeal holding, inter alia, that from the facts disclosed before the Court it appeared that from May 31, 1965, up to February 16, 1970, there was business connection (directly or 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 solitary and isolated one 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 contention of the appellants that no income either accrued or arose to Mr. Blanco White in India. The appeal was accordingly dismissed. On a certificate granted by the Division Bench under Article 133 of the Constitution, the appellants have come up in appeal to this Court against the judgment of the Division Bench of the High Court.
(2.) It should be stated here that along with the petition for a certificate 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: " (1) The respondents will be at liberty to decide after giving the petitioners a hearing whether the petitioner's firm should be treated as agent of Mr. Blanco White under Section 163 of the Income Tax Act, 1961; (2) If they so decide the respondents will be at liberty to issue a notice under Section 148 of the Act but will not take any further steps thereafter until the disposal of the application; (3) the petitioners will also be at liberty to appeal from any order made under Section 163 without prejudice to their contentions in the proposed appeal to Supreme Court."
(3.) We are informed that pursuant to the liberty given by the said order, the Income-tax Officer made an order on March 23, 1977, 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 under Sections 148 of the Act to the appellants to file a return of the income of Mr. Blanco White. It is also stated that the appellants preferred an appeal against that order before the Appellate Assistant 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 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 148 of the Act, the appellants filed a 'nil' return. Thereafter we are informed that the Income-tax Officer intimated the appellants an September 17, 1977, that he had completed the assessment of Mr. Blanco White for the assessment year 1970-71, 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.;