TMI Blog2006 (8) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... Let us take a look at the material facts of the case which have lead to this litigation before us. The assessee is a company incorporated in Mauritius. It claims to have, and has been assessed as, the status of 'non-resident'. The business of the assessee is shipping operations. The original income-tax return for the assessment year before us was filed on 8th November, 1996 disclosing a taxable income of Rs. 11,91,776. This return was signed, verified and filed by one James Mackintosh Co. Pvt. Ltd. ('JMCPL' in short), in its capacity as an agent of this non-resident company. There is also no dispute that JMPCL has been filing returns in respect of income of this Mauritian company all along in past as well, and in the capacity as an agent of the said company. 4. On 31st March, 2003, a reassessment notice under section 148 was served upon JMCPL as the Assessing Officer had "the reasons to believe that the income of R Lines Limited, Mauritius in respect of which you (JMCPL) are assessable or chargeable to tax for the assessment year 1996-97 has escaped assessment within the meanings of section 147 of the Income-tax Act". The reasons of reopening were as follows: "The assessee, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is registered in Mauritius; (ii) that two directors are resident of Mauritius; (iii) that all the board meetings are held in Mauritius; (iv) that all key managerial and commercial decisions are conducted in Mauritius; and (v) that the books of account are maintained in Mauritius. It was also pointed out that once the Mauritius tax authorities have issued a 'tax residency certificate' in favour of the assessee, one has to be proceed on the basis that these authorities must have satisfied themselves that the effective place of management is in Mauritius. Reliance was also placed on judicial precedents in the cases Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 (SC), V.VR.N.M. Subbaya Chattiar v. CIT [1951] 19 ITR 168 (SC), CIT v. Nandlal Gandalal [1960] 40 ITR 1 (SC) and Union of India v. A. Sanyasi Rao [1996] 219 ITR 330 (SC). None of the assessee's contentions, however, found favour with the Assessing Officer. The Assessing Officer took note of the position that while 50% of the shareholding is with James Mackintosh Co Pvt. Ltd., a company registered in India, the balance 50% shares are held by the UAE residents. None of the shareholders admittedly belonged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as thus concluded that the assessee was taxable in India, and that, as held by the Tribunal in the case of Integrated Container Feeder Service, global freight earnings of the assessee are taxable in India under section 44B of the Act. 6. Aggrieved by the stand so taken by the Assessing Officer, assessee carried the matter in appeal before the Commissioner (Appeals). Grievance of the assessee was that, on the facts and circumstances of the case, the Assessing Officer erred in issuing a notice under section 148 of the Act, beyond the time-limit prescribed in section 149(3) for issuance of such a reassessment notice, as the reassessment notice has been served upon JMCPL as agent of the non-resident under section 163 of the Act. Without prejudice to this main grievance, the assessee also raised grievances against the Assessing Officer's holding (i) that the assesseecompany has an effective place of management in India; (ii) that the assessee-company was liable to be treated as resident ofIndia under section 6(3)(ii) of the Act; (iii) that the assessee-company had an agency PE in India; (iv) that the assessee was liable to be taxed on gross basis under section 44B of the Act and not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elying upon Tribunals' decision in the case of Haryana Warehousing Corporation v. Dy. CIT [2000] 75 ITD 155 (Delhi) (TM) and upon Hon'ble Uttaranchal High Court's decision in the case of CIT v. Sedco Forex International Drilling Co. Ltd. [2003] 264 ITR 320, held that, on the facts of this case, the assessee could not be said to be liable to pay advance tax and, accordingly, tax under section 234B was not leviable. 9. None of the parties is satisfied by the stand so taken by the Commissioner. Revenue is aggrieved of interest levy under section 234B having been quashed by the learned Commissioner. The assessee, on the other hand, is aggrieved of the learned Commissioner's holding that the reassessment proceedings were legally valid, that the assessee did not have an effective place of management in Mauritius, that the assessee's earnings are taxable on gross basis under section 44B and not on net basis, and also of the learned Commissioner's not adjudicating on assessee's grievances against being held as residents under section 6(1)(iii) of the Act and against being held to have an agency PE in India. 10. We have conscientiously heard the rival contentions, carefully perused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous choice by Legislature, has changed from time to time, and is not, therefore, without significance or purpose. It is also to be noted that so far as section 160(1)(i) is concerned, it includes an agent under section 163 of the Act - though for the limited purposes of taxability under section 9(1) of the Act. It is, therefore, clear that so far as the provisions of section 160(1)(i) are concerned, the scope of 'representative assessee' is confined to the incomes which are deemed to accrue or arise in India under section 9(1) of the Act, and that the scope of this income does not extend to all the incomes of the assessee. There cannot be, therefore, any question of JMCPL being agent under section 160(1)(i), in respect of R Lines Limited, Mauritius, for all its incomes - whether accruing or arising in India, deemed to accrue or arise in India, received in India, deemed to be received in India and accruing or arising outside India. Section 9(1), as its heading aptly describes, deals with only such type of income, i.e., 'income deemed to accrue or arise in India'. The plain wordings of the section do not support the contention that a person can be treated as 'representative assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny transactions, does not deal directly with the or on behalf of the non-resident principal but deals with or through a nonresident broker shall not be deemed to be an agent under this section in respect of such transaction, 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 out on such transactions in the course of his business and not as principal (2) No person shall be treated as an agent of a non-resident unless he has had an opportunity of being heard by the Assessing Officer as to his liability to be treated as such." 16. The above section lays down as to who can be regarded as an agent of the non-resident and under what circumstances he can be so treated as an agent of the non-resident. Section 163(2) refers to an opportunity of hearing to be given to a person before he can be treated as agent of the non-resident. A view is thus taken that normally an order under section 163(1) is required to be passed treating a person as agent of the non-resident, before reassessment notice under section 148 can be issued. However, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idly served a reassessment notice beyond two years from the end of the relevant assessment year, as is the mandate of section 149(3) of the Act. The plea raised in the cross objection is legally correct. 18. Having arrived at the above findings, we should normally end here, but, on rather peculiar facts of this case, we consider it appropriate to deal with one more aspect of the matter. 19. It is difficult to miss, even on a cursory reading of the assessment order, a glaring and categorical finding in the assessment order to the effect that effective control and management of the Mauritian company is in India, and, therefore, the assessee-company is a resident in India by the virtue of section 6(3)(ii) of the Act. Yet, in column 7 at page 1 of the assessment order, the residential status of the company is shown as 'nonresident' and the Assessing Officer has taxed the income under section 44B of the Act which is titled 'Special provisions for computing profits and gains of shipping business in the cases of non-residents'. If one is to hold the assessee as a resident, section 44B cannot have any application in the matter and the income is only to be taxed on the net basis. There ..... X X X X Extracts X X X X X X X X Extracts X X X X
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