TMI Blog2004 (12) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... atter are that Mr. W.G. Holt was working as Managing Director of the assessee company, namely, M/s. Kinetics Technology (India) Ltd., since27th April, 1998. Vide resolution passed by the Board of Directors Shri Holt was sent to work with the company fromNetherlandsby the other company KTIB V. (now Technip Benelux B.V.), which company held 50% shares in the assessee-company. 4. A survey was conducted under section 133 A of the Income-tax Act in the office premises of the company and during the survey statement of Mr. Holt, Managing Director, was recorded in which he denied about receipt of any salary, allowance, perquisites or benefits outside India for the services rendered in India. But, during the survey proceedings and in proceedings u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n behalf of the assessee that Mr. Holt was not aware that the salary received outsideIndiawas taxable inIndiaand when he became aware and the legal position, he disclosed the amount received outsideIndiaand paid tax along with the interest on the entire amount. It was pointed out that tax and interest was deposited suo motu in good faith by him. It was further pleaded that penalty under section 271C was not leviable as the assessee was not covered by the provisions of section 192. The plea of reasonable cause for non-deduction of tax at source was also taken. The learned CIT(A) considered various pleas raised before him by the assessee and upheld the order of Assessing Officer by observing as under: "10. I had in course of appeal hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person responsible for paying the salary earned by Mr. Holt outsideIndiabecause that salary was paid to him by another company. Thus, at the time of making payment of that part of salary, which was received by Mr. Holt from another employer, question of deducting income-tax by the assessee did not arise. According to Shri Gupta, as per provisions contained under section 192(2), the liability was that of the employee who was earning salary from another employer and as Mr. Holt had not disclosed the fact regarding earning of income from another employer to the assessee, the assessee remained totally unaware about such receipt of salary by him. It was pointed out by the learned counsel that under the Company Law, it is the liability of the emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n if the salary was found to be taxable inIndiaat a latter stage, then also the liability remained there. In support, the learned Sr. DR placed reliance on the following decisions: Mohd. Ibrahim Azimullah v. CIT [1981] 131 ITR 680 (All.); CIT v. Indokom (P.) Ltd. [1981] 132 ITR 125 (Bom.); Dayabhai Girdharbhai v. CIT [1957] 32 ITR 677 (Bom.). 9. We have carefully considered the entire material on record. The agreement between M/s. Kinetics Technology (India) Ltd. and Mr. W.G. Holt is available at pages 35 to 39 of the paper book and as per this agreement in the meeting dated23-7-1998of the Board of Directors Mr. Holt was appointed as Managing Director of the company for three years. As per clause 2 of this agreement vide letter date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that as the assessee was not liable to deduct TDS on salary paid abroad to the expatriate employee, there was no liability on the assessee under section 192(1) (2). It may also be pointed out that in the show-cause notice issued under section 271C, the assessee was required to show as to why it failed to deduct tax at source. As there was no liability of the assessee to deduct tax, there was no violation as mentioned in the notice and on this ground the assessee challenged even the validity of the notice. 10. On going through the provisions contained in section 192(1), it is found that liability for deducting tax under section 192(1) is, "on any person responsible for paying any income chargeable under the head 'salary'". Thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts, held that there was a reasonable cause for not deducting tax at source on account of emoluments paid to expatriate employees outside India and, therefore, no penalty exigible for alleged default. In that case tax was being deducted at source under section 192 on salary paid to Chief Representative of the bank in its liaison office at Delhi who was Senior expatriate employee and was entitled to receive, apart from salary in India, salary from bank in Japan and overseas allowance for rendering service in India. In that case no tax was deducted at source from clement of salary and allowance payable to him by bank inJapan. The Assessing Officer imposed penalty on the assessee for failure to deduct tax at source on the amount, which was re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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