TMI Blog2010 (5) TMI 540X X X X Extracts X X X X X X X X Extracts X X X X ..... tective assessment in the case of the Agent also - Hon'ble Kerala High court in the case of CIT Vs. Fertilizers & Chemicals (Travancore) Ltd., (1987 -TMI - 25894 - KERALA High Court) has held that the direct assessment on the nonresident would not affect the jurisdiction of the ITO to assess the agent of the non-resident under section 163 - Accordingly the assessee appeal is annulled Regarding interest u/s 234B - Since the relevant orders have already been quashed by us while deciding the assessee’s appeal, the departmental appeal is rendered infructuous and is liable to be dismissed on that ground - In the result, ITA No. 3667/Mum/05 is dismissed. ITA No.4685/Mum/05 is allowed. ITA No.4968/Mum/05 is dismissed. ITA No.6923/Mum/06 is dismissed - ITA Nos. 3667 and 4684/Mum/2005, 6923/Mum/2006 - - - Dated:- 14-5-2010 - B. RAMAKOTAIAH ACCOUNTANT MEMBER J. N.V. VASUDEVAN JUDICIAL MEMBER J. Assessee by : S/Shri S.E. Dastur, Pankaj Toprani S.M. Bandi Department by : Shri Narender Singh ORDER PER N. V. VASUDEVAN, JM:- 1.Therein after referred to as Hindalco}; while ITA No. 4968/Mum/2005 is an appeal by the revenue. Both these appeals are directed agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 323,366,347 Capital gains/(loss) in respect of shares acquired by utilizing US$ (270,148,177) Capital gains/(loss) in respect of bonus shares 3,123,912,736 Total capital gains 3,177,130,906 Total capital gains : (rounded off to) 3,177,130,910 Statement of taxes payable : Total capital gains 3,177,130,910 Taxes payable @10% on long term capital gains 317,713,091 Less : taxes deducted at source 400,000,000 Balance amount refundable 82,286,909 The Assessing Officer by his letter dated 30.5.2000 directed Hindalco to deduct a sum of Rs. 40 crores as tax from and out of amounts payable to Alcan. The certificates specifically refer to the fact that the calculation as given by the assessee was provisional and subject to change at the time of regular assessment as per the provisions of Income Tax Act. Hindalco made payment of Rs. 40 crores to the Central Government account being tax deducted at sources in two installments of Rs. 38,72,41,882/- on 30.5.2000 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 197(1) dated 30th May 2000, issued by JCIT, Spl.Rg-36, Mumbai. In the circumstances aforesaid, there is no factual or legal basis for treating Hindalco as an Agent of the non-resident company M/s. Alcan Inc. The Assessing Officer however by order dated 20.2.2004 treated Hindalco as Agent of Alcan for the reasons :- The argument put forward by HIL are not acceptable for the following reasons :- (a) HIL fulfills the conditions as applicable to it is evident enough from a plain reading of section 163(1) and the facts of the case as narrate above. (b) Section 163(1) is contained in Chapter XV(c) of the I.T. Act, 1961 which deals with Representative assessee-Special cases and begins with the Headnote who may be regarded as an agent . The relevant provisions of section 163(1) are given as under :- For the purposes of this Act, agent in relation to a nonresident includes any person in India- Who is employed by or on behalf of the non-resident; or Who has any business connection with the nonresident; or From or through whom the non-resident is in receipt of any income, whether directly or indirectly; or Who is the trustee of the non-resident; and includes also any o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of 20% was computed at Rs. 78,33,35,581/-. 8. Prior to the passing of the above assessment order in the case of Alcan on 23.2.2004, the Assessing Officer issued notice u/s. 147 to Hindalco as Agent of Alcan proposing to assess the very same capital gain in the hands of Hindalco as Agent of Alcan. On 15.3.2004 a day prior to passing of the order of assessment in the case of Alcan, the Assessing Officer passed an order of assessment in the case of Hindalco assessing the very same capital gain in the hands of Hindalco as Agent of Alcan. 9. Against the order dated 20.2.2004, treating Hindalco as agent of Alcan u/s. 163(1) of the Act, Hindalco filed appeal before learned CIT(A), who by order dated 21.2.2005 dismissed the said appeal. Against this order, Hindalco has filed appeal before the Tribunal which is ITA No. 3669/Mum/2005. Against the order of the Assessing Officer assessing capital gain in the hands of the Hindalco as Agent of Alcan, Hindalco filed appeal before learned CIT(A) who by order dated 31.3.2005 confirmed the assessment but deleted the levy of interest u/s. 234B of the Act. Against the said order of learned CIT(A), Hindalco has filed appeal before the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording to him liability of Hindalco in respect of tax dues of Alcan is a vicarious liability. Section 162(1) gives the representative assessee a right to retain any sums of the principal in his possession to the extent to which he pays as tax liability of the principal under the Act. Since the assessee paid the consideration after deducting tax at source to the principal on 31.5.2000, the delay on the part of the Revenue in initiating proceedings u/s. 163 will cause prejudice to the agent in as much as he will not be in a position to exercise his rights u/s 162(1). We may clarify that the learned counsel for the assessee Hindalco made a reference to the provisions of section 162(2) and submitted that since Hindalco remitted all payments to Alcan there was no asset of Alcan with Hindalco and therefore the proceedings u/s. 163 were not legal. This argument is not acceptable because provision of section 163(3) of the Act will be attracted only when the Agent has obtained a certificate from the Assessing Officer or the principal u/s. 195(2) of the Act. Admittedly there was no such certificate obtained by the Agent u/s. 195(2) of the Act. 13. We are of the view that the objections rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... According to him in a case where the non resident subjects himself to proceedings before the AO and expresses his willingness to discharge tax liabilities and if the same is accepted and assessment made on the non resident, there was no necessity to make an assessment on the Agent in India. In this regard our attention was drawn to the decision of the Hon ble Bombay High Court in the case of Maharaja of Patiala Vs. CIT 11 ITR 202 (Bom), Chaturbhuj Raghvji Trust (Trustees of) v. CIT [1963] 50 ITR 693 (Bom), Saipem UK Ltd. Vs. DDIT 298 ITR (AT) 113 (Mum). The learned D.R. relied on the order of the CIT(A) and submitted that it was the choice of the AO and that he can proceed against either the principal or the agent or both. According to him, the Assessment in the hands of the Principal (Alcan) is relevant only to the extent of tax liability or computation of capital gain. Therefore the fact that assessment was made on the principal will not render the proceedings against the Agent improper or invalid. 16. On the above issue, the findings of the CIT(A) is as follows: I have carefully considered the various submissions of the appellant, but not in agreement with the same, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the non-resident principal cannot be a bar for either continuing those proceedings or initiating fresh proceedings against the resident agent of the non-resident. Similarly, the Hon'ble Kerala High court in the case of CIT Vs. Fertilizers Chemicals (Travancore) Ltd., 166 ITR 823 has held that the direct assessment on the nonresident would not affect the jurisdiction of the ITO to assess the agent of the non-resident under section 163. The reliance placed by the appellant on certain court cases and Board Circular to contend that the Department has to choose one person and then after having made the choice, no action can be taken against the other person, is misplaced. In this regard, it may be stated that these decisions etc. have been rendered only in the context of assessment of trustee or the beneficiary and not in the context of assessment of nonresident assessee and its agent. Needless to say that the circumstances and need leading to simultaneous assessment in the hands of a non-resident and its Indian agent are different. It is true that the appellant had obtained a certificate for deduction of tax at source under section 197, but his does not make the taking of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee that since the substantive assessment made by the Assessing Officer in the hands of the principal has been upheld by the learned CIT(A), he was wholly unjustified in confirming the protective assessment in the case of the Agent also. It was the claim of the Agent that doing so would amount to double taxation of the same income, which is not permissible under law. The tribunal distinguished the case of Barium Chemicals Ltd.(Supra) as follows: Another important issue is as to whether the Assessing Officer having already assessed the income in the hands of the real assessee, can make a protective assessment in the case of the assessee holding it to be agent of Valentine. It would be appropriate to deal with the cases referred to by the learned CIT(A) and also relied upon by the learned Departmental Representative. In the case of Barium Chemicals Ltd. (supra), while disposing the writ petitions filed by the assessee, the Andhra Pradesh High Court held that merely because the agent of the non-resident can be assessed under sections 160 and 163 of the Income-tax Act, assessment and recovery of tax in the hands of the non-resident principal is not barred. In that case, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade only at the time of the assessment of the trustees or that the choice only belongs to the Income-tax Officer who is assessing the trust. If these observations are read in the context in which they are made, it would not be difficult to understand that what all their Lordships said was that Champavahoo having already been assessed and tax recovered from her, the Income-tax Officer could not have proceeded against the trustees for recovery of tax on the same transaction. It is true that their Lordships have read section 41(2) to suggest that there are two alternative methods, namely, either to tax the income in the hands of the trustees, or directly in the hands of the person on whose behalf the income was receivable. But their Lordships immediately said that the income-tax department having availed of one of the methods, viz., having proceeded against Champavahoo and recovered the tax from her, the trustees could not have been proceeded against. From the above discussion, it may be seen that in the case of Trustees of Chaturbhuj Raghavji Trust (supra), the relevant amount was assessed in the hands of Bai Champavahoo directly and the Bombay High Court held that such income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We therefore hold the assessment of the capital gain of Alcan in the hands of the Hindalco as agent of Alcan cannot be sustained. The assessment order is therefore annulled. In view of our above conclusion, we deem it unnecessary to deal with the other issues raised by the Assessee in its appeal. 20. The only issue raised in this departmental appeal pertains to deletion by the learned CIT(A) the interest charged under section 234B. Since the relevant orders have already been quashed by us while deciding the assessee s appeal, the departmental appeal is rendered infructuous and is liable to be dismissed on that ground. 21. ITA No. 6923/Mum/06: This is an appeal by Hindalco arising out of proceedings by the AO u/s.250 of the Act, pursuant to the order of the CIT(A) dismissing appeal against order passed u/s.147 read with Sec.163 of the Act and while doing so giving certain directions to the AO in the matter of computation of capital gain. Since the assessment on Hindalco as agent of Alcan is held to be not valid, this appeal also becomes infructuous and is therefore dismissed. 22. In the result, ITA No. 3667/Mum/05 is dismissed. ITA No.4685/Mum/05 is allowed. ITA No.4968/Mum/0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
