TMI Blog1989 (9) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of interest under section 201(1A) of Act are not barred by limitation ? 3. Whether the Tribunal was justified in holding that although the return regarding the deduction of tax in respect of the employees could have been filed to the Income-tax Officer mentioned in the Notification issued by the Central Board of Direct Taxes dated May 13, 1968, under section 126 of the Income-tax Act, 1961, the assumption of jurisdiction to treat the assessee as in default under section 201 and to levy interest under section 201(1A) of the Income-tax Act, 1961, by the Income-tax Officer, H-Ward, Companies Dist. IV, Calcutta, cannot be said to be bad in law ? 4. Whether the Tribunal was justified in holding that the jurisdiction of the Income-tax Officer to pass the impugned order could not be challenged by the assessee at the appellate stage because at the most it could be said to be a case of concurrent jurisdiction and the objection should have been taken earlier ? 5. Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that proceedings under section 201 can be initiated and continued and interest under section 201(1A) of the Income-tax Act, 1961, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of these payments as deductible amounts notwithstanding section 40(iii) and, therefore, it follows that the mere fact that the amounts in question were payable outside India would not take these payments out of the ambit of Chapter XVII. In this behalf, we may also refer to sub-section (6) of section 192 of the Income-tax Act which provides that for the purpose of deduction of tax on salary payable in foreign currency, the value in rupees of such salary shall be calculated at the prescribed rate of exchange. Though the mere existence of this provision does not mean that Chapter XVII necessarily applied to all these payments outside India, the fact that it finds place in section 192 shows it was intended to be applicable in case of salary payments." The Tribunal dealt with the argument that no interest could be charged. It held : "In the present case, the appellant should be deemed to be in default in the year 1973 and, therefore, no proceedings could be taken after the expiry of one year therefrom. For this purpose, reliance was placed on decision of the Calcutta High Court in CIT v. Dunlop Rubber Co. (India) Ltd. [1980] 121 ITR 476 (Cal). We are afraid, this argument again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst questioning the jurisdiction of the Income-tax Officer came into operation after the expiry of one month from the date of the return filed under section 139(1) or after the completion of the assessment whichever was earlier or where no return was filed, after the expiry of the time allowed by the notice under section 139(2) or section 148. In the present case, there was no return under section 139(1) or assessment nor was any notice under section 139(2) or section 148 ever issued. Therefore, sub-section (5) was not at all applicable to the case of the present assessee and apart from this there was no bar upon the assessee to challenge the notice in question. It was also contended that the question of jurisdiction is one which cannot be waived by the assessee and if an Income-tax Officer concerned had no jurisdiction, the entire proceedings are bad in law. Reliance was placed upon a decision of the Calcutta High Court in B. K. Gooyee v. CIT [1966] 62 ITR 109 for the proposition that submission of a return in response to a notice without any objection to jurisdiction is not sufficient relinquishment of the right to take objection to the validity of the notice." The Tribunal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the correctness of the assessee's claim could refer the matter to the Commissioner of Income-tax for determination of the question as to whether he had jurisdiction to make the present assessment. This again would be subject to the provisions of sub-section (5), i.e., it was for the assessee to call in question the jurisdiction of the present Income-tax Officer. It also cannot be argued for the assessee that he had no opportunity to challenge the jurisdiction because a notice was issued by the present Income-tax Officer to the assessee of the proposal to levy interest under section 201(1A) and the views of the assessee were invited in this regard. No objection to the jurisdiction of the Income-tax Officer was taken by the assessee, although a reply was filed to this letter on 5th June, 1978, contending that no interest was at all chargeable. In these circumstances, while it may be correct that the return regarding the deduction of tax in respect of the employees could have been filed to the Income-tax Officer mentioned in the notification referred to by the representative of the assessee, the assumption of jurisdiction to treat the assessee as in default under section 201 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in India, accrued or arose in India. It has been argued by Dr. Pal that only that portion of the salary, which was received by the employees in India, came within the scope of "total income" assessable under the Income-tax Act. This argument overlooks the fact that the salary income which was received by the employees outside India arose on account of rendering of services in India. It cannot be said that what was paid in the United Kingdom was without any consideration. In that event, the amount of salary or the furlough pay which was paid in the United Kingdom would become gifts to the employees and not part of their salary income. The only consideration for payment of the furlough pay in the United Kingdom was the rendering of services by the employees in India. Dr. Pal referred me to section 9 of the Act. But section 9 is a deeming section. This section need not be considered in a case where the income in question squarely comes within the ambit of section 5. Section 9 is a deeming provision. Certain types of income which might not come within the ambit of section 5 have been brought within the fold of the definition of "total income" by virtue of the provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlough pay took place in England. This construction cannot be given except by distorting the meaning of the word "earn" and making it equivalent to "receive". The amount which was received by the employees in England was not earned in England but was merely paid in England. The employees got it because they had rendered service in India. In other words, they received in the United Kingdom what they had earned in India. I was referred to a judgment of the Gujarat High Court in the case of CIT v. S. G. Pgnatale [1980] 124 ITR 391 (Guj). In that case, it was pointed out by the Gujarat High Court that the word "earned" had two meanings. One is the narrow meaning of rendering of service, etc. The word "earned" is also used in the wide sense of treating income as "earned" only if the assessee has contributed to its accrual or arising by rendering services and in respect of which a debt is created in his favour. Unless there is a debt in favour of the assessee by reason of his rendering services, it cannot be said to be "income earned" in the wide sense. The distinction drawn by the Division Bench of the Gujarat High Court between the narrow meaning and the wide meaning of the word "e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Similar will be the case if salary is payable to a person by a private Organisation for rendering services outside India. Therefore, a narrow meaning cannot be given to the scope of section 9(1)(ii) by referring to the provision of section 9(1)(iii). The position is abundantly made clear by section 9(2). A pension is earned by a person because of services rendered in the course of employment. When the term of employment comes to an end, it is said that the man has earned his pension. The earning takes place where the services had been rendered. Because of the fact that the provisions of section 9(1)(ii), if logically extended, would affect the persons who were residing permanently outside India in respect of pension payable to such persons, it had to be specifically provided that such pension payable to persons mentioned in sub-section (2) shall not be deemed to accrue or arise in India. Therefore, the first question must be answered in the affirmative and in favour of the Revenue. The second question has been dealt with at length in the judgment delivered on September 5, 1989, in the case of British Airways v. CIT by us in Income-tax Reference No. 212 of 1983 ([1992] 193 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner, as the case may be. These provisions are really provisions of administrative convenience and it is not a case of inherent lack of jurisdiction. Reference may be made in this connection to the case of Wallace Brothers and Co. Ltd. v. CIT [1945] 13 ITR 39 (FC) at 45, which was followed by the Patna High Court in the case of Raja Bahadur Kamakhya Narain Singh v. Union of India [1964] 51 ITR 596 (Pat). In the case of Wallace Brothers and Co. Ltd. [1945] 13 ITR 39, the Federal Court observed as under (p. 45) : "These provisions clearly indicate that the matter is more one of administrative convenience than of jurisdiction and that in any event it is not one for adjudication by the court." This passage was quoted with approval by the Supreme Court in the case of Pannalal Binjraj v. Union of India [1957] 31 ITR 565 (SC) and also in the case of Rai Bahadur Seth Teomal v. CIT [1959] 36 ITR 9 (SC). In view of the fact that the assessee did not raise any objection at the time of hearing of the case by the Income-tax Officer or within the period of one month of filing of the return and in view of the clear finding of the Tribunal and the statutory provisions conferring upon th ..... 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