TMI Blog2005 (6) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... he case, briefly are that the assessee is a company incorporated in India in which Kinetic Technology International B.V., Netherlands (now Technip Benelux B.V. of the Netherlands) had 50 per cent shareholding. One Mr. W.G. Holt joined the company as Vice President on 3rd January, 1988 and later on became the Managing Director of the assessee-company on 27th April, 1998. There was a survey operation under section 133A(1) of the Act conducted at the business premises of the assessee-company on 1st December, 1999. During the course of survey operation statement of Shri W.G. Holt was recorded. In the course of the statement Mr. Holt denied having received any salaries overseas for the services rendered in India. However, subsequently, when Mr. Holt's statement was recorded under section 131 on 6th December, 1999 Mr. Holt admitted having received the following salary from Kinetic Technology International B.V. Netherlands:- Financial year Amount of overseas salary 1998-99 Rs. 40,10,037 1999-2000 Rs. 28,18,824 3. The Assessing Officer noticed that the assessee- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit with the sole objective of avoiding Indian tax on such salary payments. The ld. CIT(A) noted that the assessee was not alone in this kind of practice. As a matter of fact, this practice was being adopted in India by several multinationals so much so that when such facts come to light CBDT issued three circulars in quick succession being Circular No. 685 dated 20th June, 1994, Circular No. 686 dated 12th August, 1994 and Circular No. 696 dated 16th December, 1994. The survey under section 133A was conducted at the business premises of the assessee-company and similar surveys had been conducted also at the business premises of a large number of multinational companies operating in India. The CIT(A) held that legal position was quite clear. Under the provisions of section 9(1)(ii) of Income-tax Act, 1961 salaries paid overseas to Mr. Holt was chargeable to tax in India under the head "Salaries". That being so, there was liability to deduct tax at source not only from the salary paid to Mr. Holt in India, but also from the salary being paid to Mr. Holt overseas. The ld. CIT(A), therefore, held that the assessee had rightly been treated to be an assessee in default in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly came to the knowledge of the assessee-company. On the facts of the case it was patent that earlier an attempt was made to avoid Indian tax on the full salary paid to Mr. Holt. The assessee-company was a party to it. At any rate, for the sake of argument without admitting if the default was on the part of the Netherlands company the assessee was to make good the default being its agent within the meaning of section 163(1) of the Act. 7. We have carefully considered the rival submissions. At the outset, we may mention that the order of ITAT Delhi Bench 'B' relied upon by the assessee has been made under the provisions of section 271(1)(c) (sic) being penalty for concealment of income or for furnishing inaccurate particulars of income. Hence, the entire conspectus of that decision is vastly different from the proceedings before us. In that case the Tribunal have inter alia made the following observations:- "9. We have carefully considered the entire material on record. The agreement between M/s. Kinetic 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 dated 23-7-1998 of the Board of Directors Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponsible for paying income is liable to deduct tax. Thus, the liability to deduct tax on the employee is on the amount of salary, which such employer pays to the employee. But if another employer pays such salary to that employee simultaneously or otherwise, then no liability can be fastened on the first mentioned employer to deduct tax on that amount at source. The Revenue has not challenged that the assessee-company has not correctly deducted tax at source as per provisions of section 192(1) on the amount of salary paid by it. 11. It may be pointed out that in view of section 192(2) the responsibility was on the employee who was getting salary from another employer to furnish details. As in this case Mr. Holt had not disclosed the details of the salary received by him from the other company, there was no responsibility on the assessee-company to make deductions in relations to such salary. In view of the above, the fault under section 271(1)(c) cannot be laid on the assessee. 12. Besides above, in our considered view, the plea of reasonable cause being on part of the assessee in failing to deduct the tax also deserves to be allowed on the facts and in the circumstances of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the meaning of section 163(1) of the Act. During the course of hearing before us the ld. AR of the assessee argued that the assessee-company could not be treated as agent of the Netherlands company within the meaning of section 163(1) without having been served a notice of the ld. Assessing Officer's intention to appoint the assessee as an agent. Though the provisions of section 163(1) do not make a formal notice mandatory, we agree that a reasonable opportunity of being heard must be afforded before any person is treated as agent of a non-resident within the meaning of section 163(1) of the Act. We would have, therefore, restored the matter to the file of the Assessing Officer to grant the assessee such opportunity in the first instance and, thereafter pass fresh orders in accordance with law. But we find that during the course of proceedings under section 201(1) the assessee-company itself agreed to be treated as an assessee in default and has made full payments of the demands aggregating to Rs. 24,64,898. There is not even a whisper of an objection on the part of the assessee against being treated the assessee in default during the course of the proceedings under section 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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