Shah, J. - (1.) R. D. Aggarwal and Company called for the sake of brevity 'the assessee's are a registered firm having their place of business at Amritsar in the State of Punjab. The assessees carry on business as importers and as commission agent of non-resident exporters with two if whom we are concerned in these appeals. These two nonresident exporters Comptoirs Lainiers Osterieth s.a. Anvers (Belgium) and Filature Tessitura Di Tollengno Beilla (Italy) are exporters and manufacturers of worsted woollen yarn. The assessee communicate orders canvassed by them from dealers in Amritsar to the non-residents for acceptance; if a contract results and price for the goods purchased is paid by the Amritsar dealer to the non-resident exporter, the assessee become entitled to commission varying between 1 1/2 and 2-1/2 per cent of the price.
(2.) By letter dated March 24, 1951 the assessees were appointed "sole agents" for the Italian Company "for sale" of worsted woollen yarns in the Indian territories terminable by one month's notice. The assessees had to "maintain the existing customers" and to secure new customers "conforming to their general terms of sales", and were to receive 2- 1/2 per cent commission on the net cash amounts arising from the accepted business "concluded by the mediation" of the assessees or directly by the Italian Company with the customers. The Belgian Company appointed the assessees their representatives for the whole of India on condition that the latter did not represent any other Belgian Mill or yarn producer and did not sari Belgian yarn in India on their own account.
(3.) In proceedings for assessment of tax in the assessment year 1952-53 the Income-tax Officer, 'C' Ward, Amritsar computed the income of the assessee by adding Rs. 54,558 being 5 per cent of net total value of yarn sold by the non-resident companies to Indian merchants in the previous year, because in his view there subsisted business connections between the non-resident exporters and the assesses. The orders passed by the Income-tax Officer were confirmed in appeal by the Appellate Assistant Commissioner and also by the Income-tax Appellate Tribunal.;