Income-tax Officer demanded advance tax under s. 18A treating the respondent as agent of non-resident German firms for 1962-63, though no s. 43 notice or order was issued for that year. The Court held appointment as agent is year-specific and dismissed the appeals.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
A
H. L. SUD, INCOME·TAX OFFICER, BOMBAY
v.
. '
B
TATA ENGINEERING & LOCOMOTIVE CO. LTD. BOMBAY
September 6, 1968
[J, C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.)
'
| c D E |
Income-taxAct(11_of_1922),_ss.l8A_and43-Advancetaxofnon- resident firm-Liabilityofagentofthefirm-Whethernoticetobegiven eachyear. The respondent-company,carriedon manufacturing businessincolla· borationwithsomenon-resident Germanfirms. For each of theassess- mentyearsupto1961-62, the Income-taxOfficerissued a notice to the respondent unders.43of the Indian Income-tax Act,1922,intimating thatheintended treating the respondentasthe agent of the non-resident firms,and thereafter passed orders treating the respondentasagent of the firms. For the ass.,sment year1962-63no notice unders.43wasissued or served upon the respondentbythe Income-taxOfficerand no order under that sectionwaspassed treating the respondentastheir agent.The respondent received from the Income-taxOfficernotic°'_df_demand under s.29 together withanorder unders.18A(l)calling upon the respon- dent tomakeadvance payment of the tax for the assessment year1962-63 asagent of thefirms. The respondent denieditsliabilitytomake advance payment oftax. The Commissioner of Income-tax rejected the respon- dent's representation. The respondent, thereupon, filedwritpetitionsin the High Court challenging the demand of the advance tax and for quash- ing the notices of demand. The High Court granted the writ. Dismissing the appeals, this Court, HELD : The respondentcouldnot be treatedasanagent_df_the non- residentfirmsfor the ass.,sment year1962-63asadvance tax could not bedemanded unders.18Aforthat assessment year treating the respon- dentassuch statutoryagent. |
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| F G H |
Having regard to theschemeof the Income,tax Act, the assessment for each yearisself-<:ontainedand the vicarious liability imposed by an appointment unders.43only extends to the liability for the assessment of the year forwhichthe appointmentismade and cannot extend to the liability foranyotherass..sment.Nor can the expr.,sion ''for all pur- poses" used ins.43extendtheliability toanyother assessment excepting the liability fortheassessment year for which the appointment is made. The expression "for all pnrpo.es'',onlyindicates that when an appoint- mentismade for a particnlar assessment year itisgoodforallpurposes asfarasthe assessmentisconcerned_i.e.,_for allpurposesfor imposing tax liability, determing the quantnm_df_the liability and for recoveringit. The liability songht tobeimposedunders.18A in the presentcaseisnot in respect oftheincome-tax for the assessment year for which the appointmentismade,but for a subsequent assessment year. _Fdr_the re- covery of income-tax of the said subsequent yearunlessthereisafresh appointment of the respondent unders.43of the Actasa statutoryagent, no such liability canbeimposedon the respondentbythe Income-tax Authorities.[27C-F] · In the presentcase,no noticewasservedonthe respondent intimating that itwouldbe treatedasthe agent of the non-residentfirmsforthe 21 |
·22
SUPREME COURT REPORTS
(1969] 2 S.C.R .
. assessment year 1962-63. No opportunity was given to the respondent to be heard m the m.atter, nor was any formal order passed under s. 43 by the appellant treatmg the respondent as the agent of the noncresident firm~ for the assessment year 1962-63. Althongh a person may fail in a part1c_u1ar year to resist the claim that he is an a.gent, circumstances may alt~r m the next year and he may be able to resist the claim then. Hence nol!ce shall have to be given by the Income-tax Officer for each assessment year to appoint a person as agent. [27 G-28 A]
A B
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 688 and 689 of 1968.
Appeals by special leave from the judgment and order dated April 17, 1963 of the Bombay High Court in Misc. Petitions Nos. 229 and 230 of 1962. Sukumar Mitra, S. K. Ai.var, R. N. Sachthey and B. D . .Sharma, for the appellant (in both the appeals).
c
. .
M. C. Chagla, B. Datta and P. C. Bhartari, for the respondent {in both the appeals) .
Th.e Judgment of the Court was delivered by D Ramaswami, J. The respondent is a limited company incorporated under the Indian Companies Act, 1913 and carries on business of manufacturing and selling diesel trucks and bus chassis locomotives and other heavy engineering products. The respondent manufactures diesel trucks and bus chessis in collaboration wtih the German firm "Daimler Benz A.G." The business of E manufacturing locomotives is carried on by the respondent in collaboration with the German firm "Kruss Maffei A.G." For each of the assessment years from 1955-56 to 1961_-62, the • Income Tax Officer issued a notice to the respondent under s. 43 of the Indian Income Tax Act, 1922 (hereinafter called the 'Act') intimating that he intended treating the respondent as the F Agents of the two German firms. In pursuance of the notices the Income Tax Officer actually passed orders under s. 43 of the Act treating the respondent as agent of the 'said two German • firms. For the assessment year 1962-63 no notice under s. 43 of the Act had been issued or served upon the respondent by the Income Tax Officer and no order under that section had been passed treating the respondent as the agent of the two German G firms. On September 8, 1961, the respondent received from the Income Tax Officer notices of demand under s. 29 of the Act together with an order under s. 18A(i) calling upon the respondent to make advance payment of the tax for the assessment year 1962-63 as agent of the said two German firms. The tax demanded was Rs. 90,833.29 in the case of Krauss A.G. and H Rs. 6,32,629.62 in the case of Daimler A.G. By its reply dated September 22, 1961, the respondent denied its liability to make advance payment of tax. The respondent also made a represen-
r
I.T.o. v. TEI.CO (Ramaswami, J.)
23
A talion to the Commissioner of Income Tax but on April 16, 1962 the respondent received a communication from the Commissioner rejecting its representation. The respondent thereupon filed two petitions in the Bombay High Court challenging the action of the Income Tax Officer demanding advance tax and asking for the grant of a writ in the nature of certiorari to quash the notices of demand under s. 29 of the Act. By its judgment dated April 17/18, 1963, the High Court allowed the petitions and granted a writ quashing the notices of demand issued to the respondent and restraining the Income Tax Officer from taking any further steps . or proceedings in the enforcement of the said notices. These appeals are brought by special leave to this Court on behalf of the Income Tax Officer, Companies Circle, Bombay, hereinafter c called the 'appellant'.
Sections 18A, 42 and 43 of the Act, as they stood at the material time, are to the following effect :
D
E
F
G
H
"18A. ( 1 )(a) In the case of income in respect of which provision is not made under section 18 for deduction of income-tax at the time of payment, the Income-tax officer may, on or after the 1st day of April in any financial year, by order in writing, require an assessee to pay quarterly to the credit of the Central Government on the 15th day of June, 15th day of September, 15th day of December and 15th day of March in that year, respectively, an amount equal to one-quarter of the income-tax and super-tax payable on so much of such income as is included in his total income of the latest previous year in respect of which he has been assessed, if that total income exceeded the maximum amount not chargeable to tax in his case by two thousand five hundred rupees. Such income-tax and super-tax shall be calculated at the rates in force for the financial year in which he is required to pay the tax, and shall bear to the total amount of income-tax and super-tax so calculated on the said total income the same proportion as the amount of such inclusions bears to his total income or, in cases where under the provisions of sub-section ( 1) of section 17 both income-tax and super-tax or super-tax are chargeable with reference to the total world income, shall bear to the. total amount of income-tax and super-tax which would have been payable on his total world income of the said previous year had it been his total income the same proportion as the amount of such inclusions bears to his total world income:
24
SUPREME COURT REPORTS
(1969] 2 S.C.R
Provided that, where the previous year of the assessee in respect of any source of income ends after the 31st day of December and before the 30th day of April the order in writing issued by the Income-tax Office; requiring the payment of income-tax and super-tax on that source of income shall substitute for the four quarterly payments hereinbefore specified, three payments of equal amount to be made on the 15th day of September, the 15th day of December and the 15th day of March, respectively :
(b) If the notice of demand issued under section 29 in pursuance of the order under clause (a) of this sub-section is served after any of the dates on which the instalments specified therein are payable, the tax shall be payable in equal instalments on each of such of· those dates as fall after the date of the service of the notice or demand, or in one sum on the 15th day of March if the notice is served after the 15th day of December.
(2) If any assessee who is required to pay tax by an order under sub-section (I) estimates at any time before the last instalment is due that the part of his income to which that sub-section applies for the period which would be the previous year for an assessment for the year next following is less than the income on which he is required to pay tax and accordingly wishes to pay an amount less than the amount which he -is so required to pay, he may send to the Income-tax Officer an estimate of the tax payable by him calculated in the manner laid down in sub-section (1) on that part of his income for such period, and shall pay such amount as accords with his estimate in equal instalments on such of the dates specified in sub-section (l)(a) as have not expired or in one sum if only the last of such dates has not expired :
A
B
c
D
E
F
G
( 3) Any person who has not hitherto been assessed shall, before the 15th day of March in each financial year, if his total income of the period which would be the previous year for an assessment for the financial year next following is likely to exceed the maximum amount not chargeable to tax in his case by two thousand five hundred rupees, send to the Income-tax Officer an estimate of the tax payable by him on that part of his
H
I.T.O. v. TELCO (Ramaswami, !.)
25
income to which the provisions of section _18 do not apply of the said previous year calculated in the manner laid down in sub-section ( 1)' and shall pay the. amount, on such of the dates specified in that sub-section as have not expired, by instalments which may be revised according to the proviso to sub-section (2) .
. B "
•
"42. (1) All income, profits or gains accruing or arising, whether directly or indirectly, through or from any business connection in the taxable territories, or through or from any property in the taxable territories, c or through or from any asset or source of income in the taxable territories, or through or from any money lent at interest and brought into the taxable territories in cash or in kind or through or from the sale, exchange or transfer of a capital asset in the taxable territories, shall be deemed to be income accruing or arising within the taxable territories, and where the person entitled to D the income, profits or gains is not w;ident in the taxable territories, shall be chargeable to income-tax either in his name or in the name of his agent, and in. the latter case such agent shall be deemed to be, for all the purposes of this Act, the assessee in respect of such income-tax :
.E
Provided that where the person entitled to the income, profits or gains is not resident in the taxable territories, the income-tax so chargeable may be recovered by deduction under any of the provisions of section 18 and that any arrears of tax may be recovered also in accordance with the provisions of this Act from any F assets of the non-resident person which are, or may at any time come, within the taxable territories :
Provided further that any such agent, or any person who apprehends that he may be assessed as such an • agent, may retain out of any money payable by him to such non-resident person a sum equal to his estimated G liability under this sub-section, and in the event of any disagreement between the non-resident person and such agent or person as to the amount to be so retained, such agent or person may secure from the Income-tax Officer a certificate stating the amount to be so retained pending final settlement of the liability, and the certiB ficate so obtained shall be his warrant for retaining that amount:
............................................... " L2Sup CI/69-3;
, .
[1969] 2 S.C.!l •
. 26 SUPREME COURT REPORTS
"43. Any person employed by or on behalf of a person residing out of the ·taxable territories, or having any business connection with such person, or through whom such persen is in the receipt of any income, profits or gains upon whom the Income-tax Officer has caused a notice to be served of his intention of treating him as the agent of the non-resident person shall, for all the purposes of this Act, be deemed to be such agent :
B
Provided that where transactions are carried on in the ordinary course of business through a broker in the taxable territories in such circumstances that the broker does not in respect of such transactions deal directly with or on behalf of a non-resident principal but deals with or through a non-resident broker who is carrying on such transactions in the ordinary course of his business and not as a principal such first-mentioned broker shall not be deemed to be an agent under this section in respect of such transactions :
• c
D
Provided further that no person shall be deemed to be the agent of a non-resident person, unless he has had . an opportunity of being heard by the Income-tax Officer as to his liability.
Explanation.-A person, whether residing in or out of the taxable. territories, who acquires, after the 28th day of February, 1947, whether by sale, exchange or transfer, a capital asset in the taxable territories from a person residing out of the taxable territories shall, for the purposes of charging to tax the capital gain arising from such sale, exchange or transfer, be deemed to have a business connection, within the meaning of this section, with such person residing out of the taxable territories."
F
'
On behalf of the appellant Mr. Sukumar Mitra addressed the argument that an appointment made under s. 43 of the Act was good for all purposes of the Act and therefore also for the purpose of s. 18A of the Act. It was said that under s. 18A, advance G payment of tax is liable to be made in the current financial year that the assessment year 1961-62 is the same as the financial year 1961-62 and that for the said financial year in which the advance payment of tax was called to be made by the respondent, there was already an appointment of the respondent as the statutory agents of the non-resident firms, the advance payment of tax was . H rightly demanded from the respondent. The appointment of the respondent under s. 43 of the Act was made on October 21, 1961- and ·the notices· of demand in the present case were issued
•
G
.,
I.T.O. v. TELCO (Ramaswami, J.)
27
| 28 SUPREME COURT REPORTS [1969] 2 s.c.R |
||
|---|---|---|
| alter in the next year and he maybeabletoresist theclaimthen. Hence notice shall havetobe given by the Income-taxOfficerfor each assessment yeartoappoint a personasagent. Itfollows therefore that the respondent conld not be treatedasan agent of thetwoGermanfirmsfor the assessment year 1962-63 and ad- vance tax could not be demanded unders.18A of the Act for that assessment year treating the respondentassuch statutory agent. Weare accordingly of the opinion that the noticesofdemand issuedbythe appellanttothe respondent dated September5,1961 were illegal and_ultravires_and rightly quashedbytheHighCourt by the grant of a writ in the nature of_certiorari_under Art. 226 of the Constitution. For the reasons expressedwehold that these appeals fail and are accordingly dismissed with costs-therewillbeone set of hearingfee. |
A B C |
,..• |
| Y.P. Appealsdismiss11d. |
.•
1 issue framed by the court
Whether advance tax under s. 18A could be demanded from a person appointed as statutory agent under s. 43 for an earlier assessment year, without fresh appointment for assessment year 1962-63.
4 provisions across 3 enactments
H. L. Sud, Income Tax Officer, Companies Circle, Bombay
Tata Engineering & Locomotive Co. Ltd., Bombay
J. C. Shah
V. Ramaswami
A. N. Grover
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
