1957 (3) TMI 76 - HC - Income Tax

Summary

Issues Involved:
1. Interpretation of "residence" under Section 18(3A) of the Income-tax Act.
2. Validity of the Income-tax Officer's demand under Section 18(3A).
3. Appropriateness of the writs issued by the trial judge.
4. Availability of alternative remedies for the respondent company.
5. Jurisdictional error and applicability of certiorari.

Detailed Analysis:

1. Interpretation of "Residence" under Section 18(3A) of the Income-tax Act:
The principal question in controversy was whether the "residence" contemplated by Section 18(3A) of the Income-tax Act, now Section 18(3B), is physical residence or residence as defined by the special definitions contained in the Act itself. The court held that the "residence" should be interpreted according to the definitions provided in the Act. The court reasoned that the Income-tax Act's definitions should apply unless there is something repugnant in the context. The court found no such repugnance and stated that the definitions in Section 4A should be applied. The court rejected the argument that the payer should determine the payee's physical residence, noting that such an interpretation would complicate the administration of the Act and could lead to inconsistent and unfair results.

2. Validity of the Income-tax Officer's Demand under Section 18(3A):
The court examined the Income-tax Officer's demand that the respondent company should have deducted tax under Section 18(3A) from the payments made to Clive Investment Trust Co. Ltd. The court found that the vendor company was assessed as resident and ordinarily resident for the relevant year, and thus, the respondent company was not required to make any deduction under Section 18(3A). The court held that the Income-tax Officer's interpretation, which required the respondent company to treat the vendor as non-resident despite its assessment as resident, was incorrect and inconsistent with the Act.

3. Appropriateness of the Writs Issued by the Trial Judge:
The trial judge issued a writ of certiorari to quash the notices under Section 46(5A) and Section 18(3A), and writs of mandamus and prohibition to prevent the Income-tax Officer from enforcing these notices. The court noted some inaccuracies in the trial judge's order but ultimately agreed that the respondent company was entitled to relief. The court suggested that a writ of mandamus alone would have been sufficient to restrain the Income-tax Officer from realizing the sums mentioned in the notices.

4. Availability of Alternative Remedies for the Respondent Company:
The court addressed the contention that the respondent company had an alternative remedy by way of an appeal under Section 30(1A) of the Income-tax Act. The court referred to the Supreme Court's decision in Himmatlal v. State of Madhya Pradesh, which held that an alternative remedy requiring the entire amount to be paid or deposited before an appeal could be preferred was not adequate. The court concluded that the respondent company did not have an adequate alternative remedy, as it would have had to pay the entire disputed amount to acquire the right to appeal.

5. Jurisdictional Error and Applicability of Certiorari:
The court discussed whether the Income-tax Officer's actions constituted a jurisdictional error amenable to correction by certiorari. The court clarified that certiorari could correct errors of law apparent on the face of the record, not just errors of jurisdiction. The court found that the Income-tax Officer's interpretation of "residence" was an error of law apparent on the face of the record and thus subject to correction by certiorari. The court also noted that the writ of certiorari applies to judicial or quasi-judicial orders, and while the Income-tax Officer's notices were administrative, the error in law justified the issuance of the writ.

Conclusion:
The appeal was dismissed, and the court upheld the trial judge's decision to issue writs of certiorari, mandamus, and prohibition, providing the respondent company complete and permanent relief from the Income-tax Officer's demands. The court emphasized the importance of adhering to the definitions provided in the Income-tax Act and rejected the Income-tax Officer's interpretation that required the respondent company to treat the vendor as non-resident for tax deduction purposes.