TMI Blog1960 (1) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 17,656-10-0 as tax in respect of certain payments made by the mills to one Mr. Brodley, and which amount of tax according to the Income-tax Officer should have been deducted by the mills under section 18(3B) of the Act. The facts which give rise to this reference may be briefly stated. The mills, which are engaged in the production and manufacture of paper, entered into a contract with Messrs. Pusey Jones Corporation incorporated in the U.S.A. for the purchase of paper-making machinery through an intermediary corporation, Messrs. Shasco Services, also a corporation registered in the U.S.A. Under the agreement the U.S.A. corporation selling the machinery agreed to depute Mr. Brodley, one of its engineers, to Nepanagar, for the setti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a clearance certificate was issued to Mr. Brodley and the mills were asked to pay ₹ 17,656-10-0 as tax on the amount of ₹ 31,565 paid to Messrs. Pusey Jones Corporation, U.S.A. The mills paid the amount under protest and preferred an appeal before the Commissioner. The Commissioner held that the payment made by the mills to Messrs. Pusey Jones Corporation was a payment of a revenue nature in respect of technical help rendered in India by Messrs. Pusey Jones Corporation to the mills and the income earned by the non- resident corporation was liable to be charged to tax as income accruing within the taxable territories and that as the Income-tax Officer did not serve on the mills any notice of his intention of treating the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving regard to the second proviso to section 18(3B) read with the first proviso to section 43, Nepa Mills was liable to deduct income-tax and super-tax on the sum of ₹ 24,923 paid by it to the non-resident U.S.A. corporation? Before us Mr. Saranjame, learned counsel for the mills, did not place the case of the mills on the second proviso to section 18(3B) read with the first proviso to section 43. He argued that the question framed by the Tribunal did not correctly state the real contention of the mills and that the Tribunal had not fully appreciated the arguments advanced by him before it and the contention of the mills. Learned counsel stated that what he had contended before the Tribunal was that having regard to the second pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. Learned counsel did not dispute that he did make the concession that the matter fell within the ambit of the sub- stantive part of section 18(3B). But what he urged was that the concession was with the qualification that the second proviso to section 43 applied and so long as the mills were held not to be agents in accordance with that proviso, there can be no liability on the mills to make any deduction under section 18(3B). It seems to us that if the learned counsel did make such a concession before the Tribunal, then consistent with it he could not and should not have taken up the posi- tion that the status of the mills as agents of a non-resident assessee had not been determined as required by the second proviso to section 43. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d super-tax thereon as an agent occur- ring in sub-section (3B) is no doubt the status contemplated in section 43. Under section 40(2) and 42(1) the agent of a non- resident is personally liable to assessment in respect of a non-resident's income. Section 43 deals with the appointment of a statutory agent on whom the assessment may be made in respect of income covered by the aforesaid provisions. But it is at the option of the Department to assess a non-resident or his agent. Section 43 is really only a machinery for giving effect to section 42. Under section 43 no person can be deemed to be an agent of a non-resident unless the Income-tax Officer has served on him a notice of his intention to treat him as an agent and has further give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the tax amount under section 43, then it is always easy for him to show that in respect of a particular assessment year he has been made liable for the tax as an agent of the-non-resident assessee. An enquiry into the question whether a person has or has not been declared to be an agent under section 43 is quite different from an enquiry into the status of a person as an agent for liability to assess- ment as an agent of the non-resident assessee under section 43. The exception introduced in sub-section (3B) being one for the benefit of the person, it is for him to show that he has been made liable to pay income- tax and super-tax as an agent of the non-resident assessee. It was never the case of the mills that they have been made liable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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