TMI Blog2018 (10) TMI 1730X X X X Extracts X X X X X X X X Extracts X X X X ..... 172. There is hence no obligation on the payer to deduct tax and the payment is ensured by the non-resident or agent before departure or at least within 30 days from departure. The complete code under section 172 ensures assessment and payment of tax within a time frame; after which the assessee opts out of the scheme under section 172 to move under the regular assessment; when necessarily the assessee would be entitled to all benefits and mulcted with all liabilities flowing from the other provisions of the Act. On the questions of law framed, we find that the Tribunal has erred in so far as interfering with the order of rectification especially since the rectification was made on the basis of a decision of the hon'ble Supreme Court which was the declared law even when the original order which was rectified was passed. Circular No. 730 dated December 14, 1995 has lost its significance and validity, on the Supreme Court authoritatively speaking on the provision under section 172(7) and the effect of the option exercised, in A. S. Glittre [ 1997 (4) TMI 3 - SUPREME COURT] . There was hence an error apparent on the face of the record and the Tribunal erred in setting aside t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ping company, represented by its agent at that point of time, who also filed an option under section 172(7) to be assessed regularly under the provisions of the Act, before the expiry of the assessment year. Assessment was initiated by an intimation under section 143(1) as per annexure-A, which indicated that interest has been levied under sections 234A, 234B and 234C of the Act. Subsequently under section 143(3), scrutiny assessment was made as per annexure-C, when Circular No. 730 dated December 14, 1995, produced as annexure-B was taken into account. The assessment at annexure-C was passed levying interest under section 234A, but not levying interest under sections 234B and 234C. Thereafter, noticing annexure-D circular, bearing No. 9 of 2001 dated July 9, 2001, a rectification order was passed at annexure-E levying interest under sections 234B and 234C. 3. Circular No. 9 of 2001 was issued noticing the judgment of the hon'ble Supreme Court in A. S. Glittre D/5 I/S Garonne v. CIT [1997] 225 ITR 739 (SC). The assessee challenged the rectified order in appeal. The first appellate authority held in favour of the assessee and deleted interest under sections 234B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 172(7) to make payment of advance tax. The assessee hence is also not obliged to pay interest under sections 234B and 234C. 6. It is argued that the option to be exercised is prior to the expiry of the assessment year which could be on 31st of March of the year subsequent to the previous year. The advance tax payment has to be made quarterly, in the previous (financial) year of the assessment year and there could be no insistence of interest under sections 234B and 234C from the date of advance tax payable as contemplated under the statute. The liability to advance tax stands reduced to the extent tax would be deductible and collectible at source during the financial year by virtue of section 209(1)(c). The respondent-assessee, a non-resident having opted out of the assessment under section 172(1) to (6); the payer has a responsibility to deduct the entire tax due at source under section 195 and pay it to the Department. Any failure on that count could only result in such payer being treated as an assessee in default under section 201 and there could be no interest levied on the payee non-resident. To advance the above contention reliance is placed on the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Act in the determination of tax liability, including the ancillary, incidental or consequential matters pertaining to it are necessarily attracted (sic), on such option being exercised. 9. The assessee, who under a summary assessment, pays amounts and then seeks regular assessment on completion of which, he is entitled to a refund, would be entitled to interest under section 244A. As a corollary if there is any shortfall, the assessee would necessarily be liable to interest; on exercise of such option, under sections 234A, 234B and 234C. A. S. Glittre (supra) was on the question of entitlement of an assessee who exercises an option under section 172(7) to get interest, if eventually there is a refund due; on the amount of tax paid in advance under section 172(3) and (4) being in excess of the assessed tax under section 172(7). The Scheme of 172 was explained so : The scheme of section 172 of the Act appears to be this : section 172(1) of the Act gives a right to the Income-tax Officer to levy and recover tax in the case of any ship belonging to a non-resident, in a summary manner, (ad hoc assessment) notwithstanding anything contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rights and liabilities as provided for in the provisions under the Act kicks in and the non obstante clause no more has any effect. It is the assessee's option not to be assessed under section 172 in a summary manner and when such option is willingly exercised under sub-section (7) then, the provisions of section 172 cease to have any effect and in such circumstance, the overriding effect of the provision by reason of the non obstante clause also cease to have any effect. Necessarily, the assessee who exercised such option under sub-section (7) would have to comply with all the formalities and when entitled to such rights available thereunder would also be equally liable to any injurious consequence of payment of interest as contemplated under the Act. 11. The hon'ble Supreme Court held that the words shall be treated as a payment in advance of the tax is a fiction created by the statute. The learned judges found no perceptible distinction between the words advance tax as used otherwise in the statute and payment in advance of the tax as used in section 172(7). On how statutory fictions can operate it was reiterated that; when one is bidden to tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have to briefly state the chronology of events. The decision of the Supreme Court was in the year 1997 and annexure D circular withdrew annexure B circular on July 9, 2001. The assessment order annexure C was dated January 23, 1998; subsequent to the decision of the Supreme Court and without noticing the authoritative pronouncement. The learned counsel for the respondent had an argument that the levy was only on account of withdrawal of the earlier circular and it was not a valid cause for rectification; since it is a mere change of opinion of the Department. We are however not inclined to accede to such contention especially noticing that the second circular was on the basis of the decision of the hon'ble Supreme Court in A. S. Glittre (supra) which was passed before the assessment order. 14. With the interpretation placed on the provision by the hon'ble Supreme Court, the circular at annexure B has absolutely no effect as has been found in Ratan Melting and Wire Industries (supra). The Full Bench decision in CIT v. B. M. Edward, India Sea Foods, Cochin [1979] 119 ITR 334 (Ker) [FB] also would not have any application in view of the Constitution Bench dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... status of the respondent herein, a charterer or owner of a ship, termed as a special case under Chapter XV of the Act, liable under section 172. Being engaged in shipping business the appellant is treated as a special case and assessed under section 172(1) to (6) during the previous year in which the tax deduction at source would have been possible. Section 172 is a non obstante clause as evident from sub-section (1); providing a separate mode of levy and collection of tax in the case of a cargo or passenger ship belonging to or chartered by a non-resident. It is hence a complete code in itself for levy and collection of tax from ships of non-residents; subject only to the option provided under sub-section (7). Sub-section (2) deems seven and a half per cent. of any payment made to the owner or charterer of ships, for such carriage, either directly or through any person, whether it be paid or payable in and out of India, to be income accruing in India. Subsection (3) mandates that the master of the ship, shall file a return of the full amount paid or payable before the Assessing Officer, before its departure. The proviso speaks of the departure being permitted on the satisfaction o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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