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Issues involved: Assessment of Dunlop Rubber Co. (India) Ltd. for the assessment years 1958-59 to 1964-65 under s. 256(2) of the I.T. Act, 1961.
Judgment Summary: Assessment of Remittances: The Income Tax Officer (ITO) considered remittances made by the assessee to its parent company as income chargeable to tax. The assessee contended that no tax deduction was required as the remittances did not constitute chargeable income. The Appellate Assistant Commissioner (AAC) found the payments to be in the nature of royalty and held the assessee liable to deduct tax. Time Barred Recovery Proceedings: The AAC found the order under s. 201(1) for recovery of tax to be time-barred under s. 231 of the Act, as recovery proceedings should have been initiated within one year from the last dates of the financial years in which defaults occurred. The Tribunal upheld this decision, confirming that the recovery proceedings initiated on 1st March, 1965, were out of time. Nature of Proceedings under s. 201(1): The Court considered whether proceedings under s. 201(1) were recovery proceedings. The revenue argued that s. 201 did not relate to recovery, but to deduction at source. However, the Court held that s. 201 encompassed assessment, quantification of tax payable, and deeming the person in default, without requiring further action by the ITO. Legal Precedents and Interpretation: The Court referred to legal precedents to support its interpretation of s. 201, emphasizing that failure to deduct and pay tax automatically deemed the person an assessee in default. The Court rejected the revenue's argument that the letter demanding tax payment was not a recovery proceeding, as the deeming provision in s. 201 made the person an assessee in default. Conclusion: The Court answered the referred questions in favor of the assessee, emphasizing that no further action by the ITO was needed to deem the person in default under s. 201. The Court declined to answer a question not pressed by the assessee and clarified that its decision pertained to recovery proceedings under the Income Tax Acts, without affecting the government's right to institute a suit within the limitation period. Additional Note: Justice Dipak Kumar Sen agreed with the judgment, and no costs were awarded.
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