TMI Blog1957 (3) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... shares was ₹ 10,71,125. Out of that sum, the respondent company retained in its hands an amount of ₹ 1,48,812-8-0. It is said that parties to the transaction thought that the profit made by the vendors out of this deal might attract the capital gains tax and since it was not unlikely that the respondent company would be treated as an agent of the vendors, it was considered expedient to retain an amount which would be sufficient to cover the tax liability. Apparently, till 1954, the amount continued to lie in the hands of the respondent company, no one making any demand for its payment or any payment out of it. In the meantime on March 9, 1953, the Income-tax Officer, Companies District II, Calcutta, had completed the assessment of the Clive Investment Trust Co. Ltd. for the assessment year 1948-49. That assessment had been made on the basis that the Clive Investment Trust Co. Ltd. was resident and ordinarily resident in India and the total amount of tax payable under it had been determined at ₹ 3,72,372. As the assessee company had gone into liquidation and apparently had no assets in India directly held by it, the Department was thrown on indirect modes of rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t company next on March 15, 1955, and told the company that the tax recoverable on the transaction under section 18(3A) of the Act was ₹ 2,27,540-15-0 in respect of which it had deducted from the price paid to its vendors only a sum of ₹ 1,48,812-8-0. The company was, therefore, liable to pay the balance of ₹ 78,720-7-0 which it was asked to pay by 27th of March next. The Income-tax Officer purported to make this demand under section 18(7) of the Income-tax Act, which meant that he was treating the respondent company as in default in respect of the tax. Then commenced the correspondence out of which the principal point to be decided in this appeal has arisen. By a letter dated March 22, 1955, the respondent company returned the challan which the Income-tax Officer had sent along with his letter of March 15, 1955. It repudiated its liability to pay an amount of ₹ 78,728-7-0 or any other sum on account of income-tax and super tax payable by the Clive Investment Trust Co. Ltd. and pointed out that at the time when the transaction in question had taken place, the vendor company had been resident and ordinarily resident of India for income-tax purposes. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company at which the company's point of view was again pressed on the Income-tax Officer. There was next a letter, dated April 4, 1955, from the respondent company to the Income-tax Officer which in a way confirmed what had taken place at the interview. It was said that the respondent company had acted under the advice of Messrs. Lovelock Lewes who had told them that Clive Investment Trust Co. Ltd. was assessable as a resident for the year in the question and, in view of that information the respondent company had not made any deduction under section 18(3A) which, it thought, would clearly be not applicable. The only amount which the respondent company had been advised to retain was an amount that might be required to meet the vendor's liability for capital gains tax and that amount had been duly retained. The letter concluded by pointing out that the Income-tax Officer's reference to section 18(3C) was clearly irrelevant, inasmuch as that section had been introduced only by the Amendment Act of 1955, and by asking him to defer collection of the tax as the liability was still disputed. Although the respondent company was repudiating its responsibility for making a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, when it was made absolute. Sinha, J., directed the issue of a writ in the nature of certiorari, quashing and setting aside the notice under section 46(5A) of the Income-tax Act issued by the respondents on March 10, 1954, and the notice dated March 15, 1955, exhibits A and E to the petition, and also a writ of mandamus and prohibition, prohibiting the respondents to the petition from giving further effect to the said notices and/or orders and/or realising the sums mentioned therein or any part thereof from the respondent company. It is against that order that the present appeal has been preferred by the Income-tax Officer and the Union of India. Before dealing with the points canvassed before us, I might point out that some of the prayers made in the petition were not accurately framed, nor does the order made by the learned Judge seem to me to be fully and correctly adapted to the facts and orders it was dealing with. Since this question was not raised before us, I should not linger over it long, but I might point out, as an example of inaccuracies, that a writ in the nature of prohibition does not command anyone to refrain from usurping jurisdiction in respect of executive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the popular sense and not in the sense indicated by the definitions contained in the Act. The only reason which was urged before the learned trial judge and repeated before us in support of the Department's contention was that to require a person, responsible for making payments to third parties, to decide for himself whether the payee was or was not a resident in the income- tax sense would be to impose upon him an impracticable task. Not only would it be impracticable, but it would also not be possible for any one to say with any degree of certitude at the time when a parti- cular payment came to be made, whether or not the payee would be a resident or non-resident for his assessment for the year in question and that such difficulty about determining the residence of the payee would arise in the case of an individual as well as of company. The residence and ordinary residence of an individual requires an elaborate arithmetical calculation, spread over the large number of years and it is quite possible that a person, who is not resident in the income-tax sense at the time a particular payment comes to be made, may yet complete the necessary period of residence and become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e will be liable to a rate of income-tax less than the maximum rate. This certificate has got to be given by the Income-tax Officer when the data, upon which the decision of either of the two matters in question will ultimately depend, have not all come into existence and yet the certificate has got to be given. In the same way, the question of the payee's residence has got to be decided more or less in a rough and ready manner. While there is undoubtedly a difficulty, I cannot see in that difficulty any reason for holding that, in the various sub- sections of section 18, the Legislature abandoned the definition sense of residence and used the expression in the popular sense. The matter may be examined further. If the residence con- templated be physical residence, the question inevitably arises: residence at what time? It must be residence at the time the pay- ments is made. What will the nature of such residence be? If a casual visit suffices, it would be quite possible for any non-resident, entitled to receive income from persons in India, to pay occasional visits to this country at the time when the payments fall due and collect the amounts payable to them without any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difficulty in holding that in construing section 18(3A), the special defini- tion of residence , contained in section 4A, could not be applied. As, however, I have already pointed out, no such insuperable difficulty was made out. If the contention of the Department was to be accepted, one would have to read section 18 as contemplating not only persons, resident and non-resident in the income-tax sense, but also a third class of persons who might be not resident in the income-tax sense and yet physically resident at the time of a particular payment or resident in the income- tax sense, but not physically resident at the time of a payment. To introduce such an indeterminate and fluctuating class of residents would, in my view, increase rather than diminish the difficulties of working the section which are already not inconsiderable and would bring into existence a more or less chaotic condition. I can find nothing in the language of the section or in good sense or right reason to hold that the residence contemplated in the various sub-sections of section 18, particularly section 18(3A), is something new and strange and altogether different from the residence contemplated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and yet it is insisting that the respondent company should have treated it as non-resident and should have deducted tax under section 18(3A) and that, not having done so, it has made itself personally responsible for the payment of the tax which it ought to have retained in its hands. This, looking at the matter from a broad and common-sense point of view, does not seem to be either logical or fair and I am glad to be able to hold that the Act does not justify the adoption of such an inconsistent attitude by the taxing authorities. Two other points were canvassed before the learned judge. It was contended that the application under article 226 ought not to be entertained, because the respondent company had an alternative remedy by way of an appeal under section 30(1A). The learned trial judge overruled that contention on the authority of the decision of the Supreme Court in the case of Himmatlal v. State of Madhya Pradesh [1954] S.C.R. 1122. Under section 30(1A) a person who denies his liability to make a deduc- tion under section 18(3A) and to pay the amount deducted can prefer an appeal only if he has actually deducted and paid the tax. The respondent company in the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inferior jurisdiction and the qualifications and conditions of its exercise; the other is the observance of the law in the course of its exercise. It will thus be seen that not merely error of jurisdiction, but error of law also can be corrected by a writ of certiorari. In the case of Rex v. Northumberland Compensation Appeal Tribunal : Ex parte Shaw [1951] 1 K.B. 711, Lord Goddard, C.J., had to deal with this matter when the case was in the High Court. The Tribunal have told us, observed the learned Lord Chief Justice, what they have taken into account, what they have disregarded, and the contentions which they accepted. They have told us their view of the law, and we are of opinion that the construction which they placed on this they complicated set of regulations was wrong. It is, therefore, no answer to an application for a writ of certiorari to say that the error at which it is directed is at its worst an error of law, committed in the course of the exercise of jurisdiction. I must, however, add that the error must be an error appa- rent on the face of the record. It is trite knowledge that in connection with an application for certiorari, the applicant cannot state n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the learned judge directed the assessment records of the Clive Investment Trust Co. Ltd. to be produced before him and he said in his judgment that the record in the present case would include the record which has been called for, including the assessment order . This was said by the learned Judge in the course of his making out that the error which he was correcting was an error appearing on the face of the record. I do not think that if a court, approached for a writ of certiorari itself calls for records of other proceedings, although those may be in some way connected with the proceedings, before him, such records can be said to be the record for the purpose of a writ of certiorari or that an error appearing from those subsidiary records called for the court itself, would be an error on the face of the record, as contemplated by the law relating to this writ. This question arises only when the error alleged is not an error of jurisdiction, but only an error of law and in the case of such an error, it is not permis- sible to call for other records and seek the basis of the error there. In my view and with respect to the learned Judge it was really not necessary to call fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or is it anybody's case that the respondent company owed any further sum to the Clive Investment Trust Co. Ltd., or held any further sum on that company's account. The order quashing the notice of March 10, 1954, even assuming that such a notice can be quashed, therefore, serves no purpose. In any event, the writs of mandamus and prohibi- tion, restraining the Income-tax Officer from giving further effect to the very notices, which were being quashed, appear to me to have been unnecessary and inapposite. The writ of prohibition, again, does not seem to have been appropriate, because that writ goes only to inferior Tribunals to control judicial or quasi judicial action and is not intended to control executive acts or administrative action aimed at collection of revenue. These observations which I have felt bound to make will not cause any prejudice to the respondent company, because we are not interfering with the actual orders made by the learned Judge and, in any event, the writ of mandamus restraining the Income-tax Officer and the Union of India from realising the sums mentioned in the notices or any part thereof secures for the respondent company complete and permanent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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