TaxTMI 
TaxTMI 
1970 (2) TMI 37
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....ng the freight was to be considered as earned whether the ship and/or cargo was lost or not and was to be paid at destination. M/s. Khemka & Co. (Agencies) Private Ltd., the second petitioner (hereinafter referred to as " the Khemkas ") acted as the agent for the non-resident shipping company and collected Rs. 1,59,352.66 towards the freight of the cargo discharged by M.S. " Jiskara ", and Rs. 1,45,585.86 as the freight for the cargo discharged by " M. S. Pionyr " and after deducting the necessary disbursements wanted to remit the balance of the aforesaid freight, being the sums of Rs. 1,25,000 and Rs. 90,000, to Praha, where the head office of the non-resident company was situated and applied for the necessary sanction from the Reserve Bank of India through its own bankers, the Indian Overseas Bank Ltd. The Khemkas were informed by the Indian Overseas Bank Ltd. that the Reserve Bank required them to produce clearance certificate from the income-tax authorities that no income-tax was payable in respect of the aforesaid freights. By its letter dated the 1st April, 1966, addressed to the Income-tax Officer, A Ward, Companies District III, Calcutta, the 1st respondent herein, the Khem....
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....rd, Companies District III, Calcutta, being the respondent No. 2 herein, who was dealing with deductions under section 195, under intimation to the respondent. On the 15th September, 1966, M/s. Sandersons & Morgans, the petitioners' solicitors, wrote to the respondent No. 1, putting it on record that when their assistant, Mr. Gupta, saw him on the 3rd September, 1966, no order had been passed but the case had been referred to some other Income-tax Officer. The letter further required the respondent No. 1 to supply a copy of the order to pay the tax on freight earnings. By two orders dated the 15th November, 1966, purported to be orders for deduction under section 195, the respondent No. 2 determined the proportion of the sum chargeable to income-tax out of the amount to be paid to the non-resident as 1/6th and the rate at which tax should be deducted at 70 per cent. and directed the amounts of Rs. 18,591 and Rs. 16,985 to be deducted and deposited after obtaining the necessary challans from the said respondent. A demand for justice was made by the Khemkas on behalf of both themselves and their non-resident principals by their letter dated the 5th February, 1968, and this rule was o....
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....rought into India in cash or in kind or through the transfer of a capital asset situate in India. The next section to be considered is section 160 which defines a representative-assessee and such an assesssee under clause (i) means in respect of the income of a non-resident specified in clause (i) of sub-section (1) of section 9, the agent of the non-resident including a person who is treated as an agent under section 163, while sub-section (2) of that section provides that every representative-assessee shall be deemed to be an assessee for the purposes of the Act. Section 163, after declaring the categories of persons who could be treated as agents in relation to a non-resident, provides in sub-section (2) that no person shall be treated as such agent unless he has had an opportunity of being heard by the Income-tax Officer as to his liability to be treated as such. The next material section is section 172. It is to be mentioned that sections 160, 163 and 172 occur in Chapter XV of the Act, the heading of which is " Liability in special cases ". There is a sub-heading for section 172, namely, " profits of a non-resident from occasional shipping business ". The provisions of sectio....
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....terest on securities, dividend and salary) to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Income-tax Officer to determine, by general or special order, the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable. " The only other section to be considered is section 246 which gives a list of the orders of the Income-tax Officer from which appeals lie to the Appellate Assistant Commissioner and while clause (g) provides an appeal against an order treating the assessee as an agent of non-resident, no appeal is provided for from an order purported to be made under section 195(2). Mr. Majumdar, the learned counsel for the petitioner, contended that, as the provisions of section 5 are subject to the other provisions of the Act, they are subject to the provisions of the sections in Chapter XV which provides for liability in special cases. It is submitted that, as there is a special provision in section 172 for the imposition and recovery of tax from a non-reside....
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....ponsible for paying to a non-resident any interest or any other sum not being dividends shall at the time of payment, unless he is himself liable to pay any income-tax thereon as an agent, deduct income-tax thereon at the rates in force. Sub-section (2) of that section provides that where a person responsible for paying any such sum chargeable under the Act to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Income-tax Officer to determine, by general or special order, the appropriate proportion of such sum so chargeable and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable. This section enjoins a person responsible for making any payment to a non-resident to deduct tax if such payment is taxable under the Act before making the payment. Where such a person is not sure as to which part of the amount payable to the non-resident is chargeable to tax he can apply to the Income-tax Officer to determine the proportion of the sum so chargeable and on such application the Income-tax Officer is to make an order determi....
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.... Mr. Majumdar next argued that, as the Khemkas were accepting the position that they were the agents of the non-resident principals and as the respondent-Income-tax Officer was also treating them as such agents, the assessment should have been made on the Khemkas as such agents and no order for deduction could be made under section 195. Mr. Majumdar further contended that, as no notice of treating the Khemkas as the agent of the non-resident principals as provided for in section 163(2) had been given, no such assessment was permissible. I do not think that there is any substance in this contention. As pointed out by the Madhya Pradesh High Court in National Newsprint and Paper Mills Ltd. v. Commissioner of Income-tax, which was a decision under section 18(3B) of the 1922 Act, corresponding to sections 195(1) and 197(1) of the present Act, that it was not necessary that the status of a person paying any sum chargeable to income-tax to a non-resident, who was sought to be made liable for the deduction of tax under section 18(3B) of the Income-tax Act should first be determined in accordance with section 43 (present section 163) before seeing whether the other requisites of sub-secti....