TMI Blog2010 (2) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... tion) in treating the appellant as an agent under section 163 of the Income-tax Act, 1961." 2. Facts in brief are that M/s. Birla Sunlife Asset Management Co. Ltd., (BSAMC), a company incorporated under the Companies Act, having its registered office at Ahura Centre, 2nd floor, Tower-A, 96/A-D, Mahakali Caves Road, Andheri (E), Mumbai-400093 carried on the business of Asset management. The Income-tax officer (IT) (TDS) Range-1, from C.A. certificates forwarded by Standard Chartered Bank, found that the company had made payments to following non-residents upon redemption of units of Birla Fixed Term Plan-Series B-Growth, a debt scheme of Birla Mutual Fund, without any deduction of tax at source: 1. Harjani Dayal, PO Box 26546, Dubai, UAE 2. Narain Awatrai Chinmani, Dubai, UAE 3. Pradeep Chhakanmal Lalijani, PO Box 33918, Dubai UAE 4. Shankardas Manwani, Dubai, UAE 5. Mon Sachdeva, Dubai, UAE 6. Vinay Kapoor, Dubai, UAE 7. Rajesh Kumar Sachdeva, Dubai, UAE 8. Hansa Agarwal Kailash. He issued a show-cause notice under section 163 on 16-1-2007 to M/s. BSAMC to show cause as to why it should not be held as an agent to the aforementioned persons, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company was covered by the provisions of section 163(1)(c) as it was from or through the company that the non-resident investors had received any income, whether directly or indirectly. He, therefore, rejected the assessee's appeal. Being aggrieved, M/s. BSAMC is in appeal before us. 5. Ld. counsel for the assessee submitted that proceedings under sections 201 and 201(1A) have been initiated against the company and, therefore, parallel proceedings under section 163 could not be taken against the same company. He submitted that, in any case, since in view of the provisions of section 90(2) of the Act, the assessee was entitled for the benefit of DTAA, in terms of which, income of the investors was not taxable. Ld. counsel for the assessee submitted that section 163 can be invoked only in respect of income accruing or arising in India as per the provisions of section 9(1) of the Act. Ld. counsel submitted that it will lead to recovery of tax twice. In this regard, ld. counsel elaborately referred to the scheme of Act. Ld. counsel for the assessee also relied on the decision of the Hon'ble Supreme Court in the case of CIT v. Eli Lilly and Co. (India) (P.) Ltd. [2009] 312 ITR 225. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment can be made. He referred to the decision of the Hon'ble Supreme Court in the case of Premier Automobiles Ltd. v. S.N. Shrivastava, ITO [1970] 76 ITR 1, wherein, it has been held that all responsibilities of the assessee falls on agent including payment of advance tax. Ld D.R. further submitted that treating the company as agent of non-resident investor is an integral part of assessment and, therefore, order has to be passed. He further pointed out that section 195 is for limited purposes of deduction, the default for which saddles his liability from its own action. He pointed out that in the present case, the company has dual capacity, one as an agent as representative assessee under section 163 of non-resident investors and the other as payer and consequently had to deduct tax in terms of section 195 and also was to be held as an agent under section 163. 7. We have considered the rival submissions and perused the record of the case. Ld. counsel for the assessee submitted that M/s. BSAMC could not be treated as agent under section 163 since it applies only with reference to income of a non-resident specified under sub-section (1) of section 9 and not otherwise. This p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including a person who is treated as an agent under section 163. (ii) in respect of the income of a minor, lunatic or idiot, the guardian or manager who is entitled to receive or his in respect of such income on behalf of such minor, lunatic or idiot; (iii) in respect of income which the Court of Wards, the Admn. General, the Official Trustee or any receiver or manager (including any person, whatever his designation, who in fact manages property on behalf of another) appointed by or under any order of a Court, receives or is entitled to receive, on behalf or for the benefit of any person, such Court of Wards, Administrator-General, Official Trustee, receiver or manager; (iv) in respect of income which a trustee, appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise (including any wakf deed which is valid under the Mussalman Wakf Validating Act, 1913 (6 of 1913) receives or his entitled to receive on behalf or for the benefit of any person, such trustee or trustees; (v) in respect of income which a trustee appointed under an oral trust receives or is entitled to receive on behalf or for the benefit of any person, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be regarded as agent.-(1) For the purposes of this Act, agent, in relation to a non-resident, includes any person in India: (a) who is employed by or on behalf of the non-resident; or (b) who has any business connection with the non-resident; or (c) from or through whom the non-resident is in receipt of any income, whether directly or indirectly; or (d) who is the trustee of the non-resident; and includes also any other person who, whether a resident or non-resident, has acquired by means of a transfer, a capital asset in India: Provided that a broker in India who, in respect of any transactions, does not deal directly with or on behalf of a non-resident principal but deals with or through a non-resident broker shall not be deemed to be an agent under this section in respect of such transactions, if the following conditions are fulfilled, namely: (i) the transactions are carried on in the ordinary course of business through the first-mentioned broker; and (ii) the non-resident broker is carrying on such transactions in the ordinary course of his business and not as a principal. (2) No person shall be treated as the agent of a non-resident unles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion then he is liable for the consequences contemplated under the Act as assessee in default. But he does not come within the purview of the term 'person' so as to come within the purview of section 4 of the Income-tax Act. Merely because one is treated as assessee in default does not ipso facto implies that he is also liable for tax dues of the person on whose behalf he was required to deduct tax. As in the present case, M/s. BSAMC was responsible for the payments to non-resident and had to deduct the tax in its capacity as payer but since M/s. BSAMC did not deduct tax, therefore, it was held to be an assessee in default but that does not imply that the tax liability could be fastened on M/s. BSAMC in respect of tax liability of the non-resident. However, since the payments were made through M/s. BSAMC to the non-resident, therefore, in terms of section 163(1)(c) M/s. BSAMC was also treated as agent of non-resident so that the assessment proceedings could be taken against M/s. BSAMC in regard to tax liability of non-resident investors. The tax liability could be fastened directly on non-resident investor in respect of their income or on their agent in the capacity of representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The purpose of these sections is to secure payment from the non-resident of the tax chargeable on him, though the person directly affected is the statutory agent. 11.1 Therefore, when the Assessing Officer simultaneously took the proceedings of holding M/s. BSAMC as agent of non-resident along with the proceedings under section 201 then it was only part of same proceedings viz-, determination of tax liability of non-resident investors. The proceedings under section 163 are for the purposes of treating the company as agent of non-resident investors in terms of section 163(1)(c) because it was through M/s. BSAMC that the non-resident investors had received the income. Whereas proceedings under section 201 against M/s. BSAMC were for payment to non-residents without deduction of tax in terms of section 195. Whatever amount is deducted under section 195 is to be adjusted with reference to actual tax liability of the non-resident through representative assessee viz., M/s. BSAMC in terms of section 199. Both the proceedings are complementary to each other. Merely because M/s. BSAMC is treated as agent of non-resident investors, does not in any way affect the benefit available to no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the situation within the State of the money or property from which the taxable income is derived, (see The Law and Practice of Income tax by Kanga and Palkhivala, seventh edition, at page 10) ** ** ** On the question as to whether there is any inter-linking of the charging provisions and the machinery provisions under the 1961 Act, we may at the very outset, point out that in the case of CIT v. B.C. Srinivasa Shetty [1981] 128 ITR 294 this court has held that the charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. We may add that, the 1961 Act is an integrated code and, as stated hereinabove, section 9(1) integrates the charging section, the computation provisions as well as the machinery provisions, [see section 9(1)(i) read with sections 160, 161 and 163]. ** ** ** Examples showing inter-linking of various provisions of the 1961 Act: (a) it may be noted that sections 160(1)(i), 161, 162 and 163 are machinery sections. They do not affect the incidence of taxation u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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