ANGLO-FRENCH TEXTILE CO. LTD. vs COMMISSIONER OF INCOME-TAX,MADRAS.

The Supreme Court held that systematic and habitual purchases of raw materials in India by a non-resident manufacturer through an established agency constitute an 'operation' under Section 42(3) of the Indian Income-tax Act, 1922. Consequently, profits attributable to such purchases are assessable to income tax under Section 42(1) and (3). The Court clarified that an isolated transaction does not establish a business connection, but a continuity of business relationship does, thereby affirming the High Court's decision.