Amiya Kumar Mookerji, J. - (1.) This appeal is directed against the judgment and order of Sabyasachi Mukharji J. discharging a rule nisi obtained by the appellants in an application under Article 226 of the Constitution on the ground that it is premature as an alternative remedy is provided under the Income-tax Act, 1961.
(2.) Two suits, one by the Bengal Chemical and Pharmaceutical Works Ltd. and the other by Ferbwerke Hoechst Aktiengesellschaft Vormals Meister Lucius & Burning (a corporation organised under the law of the Federal Republic of Germany), were brought against each other on the alleged infringement of patent on the Original Side of the Calcutta High Court. The appellant's firm under M/s. Orr, Dignam & Co. acted as the solicitors of the aforesaid German company. By a cable dated 31st of May, 1965, a firm of London solicitors, M/s. Ashurst Morris Grisp & Co., informed the appellant's firm that the said London solicitors acted for the said West German company in London and had instructed to retain Mr. Blanco White, a barrister with considerable practice in patent actions in London, in the said suits. The appellant's firm, however, did not deliver any brief to Mr. Blanco White nor did the appellants or any one of them know on what fees Mr. Blanco White had been engaged inasmuch as the copies of the brief delivered to Mr. Blanco White by the said London solicitors did not reveal the amount of such fees. The appellant's firm did not pay or undertake any obligation to pay any fees to the said Blanco White. On 27th January, 1970, the said suits were called on for hearing. The hearing lasted for several days and it was concluded on the 16th of February, 1970. After the hearing of the said suits was over, Mr. Blanco White left India. Thereafter, on 19th February, 1970, the appellant's firm received a letter from the respondent No. 1, the Income-tax Officer, " A " Ward, Foreign Section, whereby the appellant's firm was informed that the said respondent understood that M/s. Orr, Dignam & Co. was acting as solicitors for a West German pharmaceutical concern in the patent suits before the Calcutta High Court and the respondent No. 1 had learnt that Mr. White, Queen's Counsel, had been engaged by the appellant's firm in the said suits on behalf of the said West German client before the Calcutta High Court on a fee of Rs. 17,000 per day. The Income-tax Officer drew attention of the appellant's firm to provisions of Section 195(2) of the Income-tax Act, 1961, which required that the tax should be deducted at source on payments made to a non-resident. By the said letter, the Income-tax Officer requested the appellant's firm to let him know whether the firm had made any payment to the said Blanco White and the tax had been deducted at source. The appellant's firm thereafter by its letter dated 24th February, 1970, informed the respondent No. 1, the Income-tax Officer, that it did not brief Mr. Blanco White nor did it know on what fees, if any, Mr. Blanco White had been engaged. The firm by the said letter pointed out that it did not pay or incur any liability to pay any fee to the said Blanco White. In that circumstance the question of deduction of tax under Section 195 of the said Act did not arise. Thereupon, the Income-tax Officer by his letter dated 27th February, 1970, informed the firm that in view of the alleged connection of the firm with Mr. Blanco White, the Income-tax Officer proposed to treat the firm as an agent of Mr. Blanco White under Section 163(1) of the Income-tax Act. 1961. On the llth March, 1970, the appellant's firm by a letter informed the Income-tax Officer that that the firm had engaged Mr. Blanco White was entirely incorrect. It was pointed out in the said letter that Mr. Blanco White being a barrister did not carry on any business. Even if a profession was a business, Mr. Blanco White appearing before a court in India in particular suits when briefed by London solicitors in London could not constitute a connection in India. It was also pointed out in the said letter that Mr. Blanco White's fees were honorarium and he had no legal right to recover them. Therefore, no income was accrued or arose to Mr. Blanco White. In these circumstances, the firm requested the Income-tax Officer to drop the proposal to treat the firm as an agent of Mr. Blanco White. By a letter dated 25th March, 1970, the Income-tax Officer, the respondent No. 1, informed the appellant's firm that he was unable to drop the proposal to treat the appellant's firm as an agent of the non-resident, Mr. Blanco White, on the basis of the contentions made by the appellant's firm. The firm might make further submissions on the 18th of April, 1970, when the matter would he heard. Being aggrieved by the said communication of the Income-tax Officer to treat the firm of M/s. Orr, Dignam & Co. as an agent of Mr. Blanco White under Section 161(1) of the Income-tax Act, 1961, the appellants moved an application under Article 226 of the Constitution in this court and obtained a rule nisi. The said rule was finally heard and discharged by Sabyasachi Mukharji J. on 12th of May, 1971, upon the view that the said application was premature and the appellant had an alternative remedy under the Income-tax Act. The learned trial judge further found that having regard to the nature of the question involved in the instant case, the Income-tax Officer had jurisdiction to decide the matter. The appellants being aggrieved by the said judgment and order, dated 12th of May, 1971, preferred the present appeal.
(3.) Mr. Ginwalla, appearing on behalf of the appellants, contends that the appellants had challenged the existence of the conditions on the satisfaction of which the appellant's firm could be treated as an agent of Mr. Blanco White under Sections 160 and 163(1) of the Income-tax Act, 1961. The learned trial judge should have decided the appellant's case on merits as the questions raised went to the very root of the matter and affected the jurisdiction of the Income-tax Officer to treat the appellant's firm as an agent of Mr. Blanco White under Section 163(1) of the said Act.;