9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (8) TMI 1025 - AT - Income TaxProceedings u/s. 163 - TDS liability u/s 195 - agent of non-resident assessee - assesses being treated as agent of the non resident for assessment of income of that non-resident - remittances made by the assessee towards reimbursement of expenses that were incurred by the latter on behalf of the assessee - As argued CIT(A) has erred in not appreciating that proceedings u/s. 201 are for treating the assesses in default for failure to comply with the provisions of section 195 HELD THAT - as the amounts remitted by the assessee company, viz. BIPL to Braitrim U.K have been held to be towards reimbursement of expenses (without any mark-up), therefore, in the absence of any Income element therein involved the assessee, viz. BIPL could not be held to be a representative assessee within the meaning of Sec. 160(1)(i) qua the said remittances. Treatment of the assessee as Agent of non-resident and assessee in Default for non Deducting TDS u/s 195 - HELD THAT - The Tribunal in 2010 (11) TMI 393 - ITAT, MUMBAI has observed that as the liability of an assessee to deduct tax at source under s. 195 is different from the liability of an assessee to file a return of income as an agent of a foreign principal, therefore, the claim of the assessee that simultaneous proceedings cannot be taken, i.e holding the assessee as an assessee in default under Sec. 201; and at the same time passing an order under s. 163, holding the assessee as a representative assessee, did not merit acceptance. We do not find favor with the observation of the CIT(A) that as he had upheld the order passed against the assessee u/s 201 of the Act, therefore, having held so, there cannot be one more assessment in respect of the same income on the assessee pursuant to Sec. 163 of the Act. Pursuant to the amendment made available on the statute vide the Finance Act, 1987 w.e.f 01.06.1987 as the words unless he is himself liable to any income-tax in Sec. 195 stood omitted w.e.f 01st June, 1987, therefore, the innate exception carved out for a person who was himself liable to pay tax as an agent of the non-resident person u/s 163 of the Act qua deduction of tax at source u/s 195 of the Act as per the pre-amended law i.e prior to 01.06.1987, had thereafter been dispensed with or in fact obliterated from the statute. We, thus, in terms of our aforesaid observations set-aside the view taken by the CIT(A) that as he had upheld the order passed against the assessee u/s 201 of the Act, therefore, having held so, there could not have been one more assessment in respect of the same income on the assessee pursuant to Sec. 163 Whether the assessee company, viz. BIPL could principally be held to be the agent of Braitrim U.K u/s 163? - As observed by the ITO(IT)-TDS-3, Mumbai, that the assessee, viz. BIPL was to be held to be an agent of Braitrim U.K u/s 163 of the Act for the reasons, viz. (i). that BIPL has a business connection with Braitrim U.K and its principal business is substantially controlled and managed over by Braitrim U.K ; (ii) that Braitrim U.K is directly or indirectly in receipt of income from or through BIPL; and (iii). that BIPL is the agent office managed on behalf of Braitrim U.K. Although, the assessee has assailed before the CIT(A) the aforesaid observations of the ITO(IT)-TDS-3, Mumbai, on the basis of which it was held to be an agent of Braitrim U.K, however, we find that the CIT(A) by merely confining his adjudication to the aspect that the assessee could not have been subjected to double jeopardy under the two provisions of the Act i.e Sec. 201 and Sec. 163 of the Act, had thus, not dealt with the specific contentions that were raised by the assessee before him, therein, assailing its being treated as an agent of Braitrim U.K under Sec. 163 of the Act. Also no contentions qua the aforesaid issue on merits i.e treating of the assessee as an agent u/s 163 of the Act were advanced by the authorized representatives for both the parties in the course of hearing before us. As we have set-aside the view taken by the CIT(A) that having upheld the order passed against the assessee u/s 201 of the Act, the assessee could not be held to be an agent of Braitrim U.K under Sec. 163 of the Act, therefore, in all fairness we restore the matter to the file of the CIT(A) for adjudicating by way of a speaking order the assessee s claim on merits that it could not have been held to be an agent of Braitrim U.K u/s 163.
Issues Involved:
1. Applicability of simultaneous proceedings under sections 201 and 163 of the Income Tax Act, 1961. 2. Nature of remittances made by BIPL to Braitrim U.K. and their taxability. 3. Determination of BIPL as an agent of Braitrim U.K. under section 163 of the Act. Issue-Wise Detailed Analysis: 1. Applicability of Simultaneous Proceedings under Sections 201 and 163: The CIT(A) held that sections 201 and 163 of the Income Tax Act are mutually exclusive and cannot be simultaneously applied. The CIT(A) relied on the judgments of the Bombay High Court in CIT vs. Premier Tyres Ltd. and the Calcutta High Court in Bunge & Co. Ltd. vs. ITO, which stated that once an assessee is treated as an agent under section 163, it cannot be held in default under section 201. However, the ITAT noted that these judgments were based on the pre-amended section 195, which included the words "unless he is himself liable to any income-tax." This wording was omitted by the Finance Act, 1987. The ITAT, following the judgment in National Aviation Co. of India vs. Dy. CIT, held that the liability to deduct tax under section 195 and the liability to file a return as an agent under section 163 are distinct and can be pursued simultaneously. Therefore, the ITAT set aside the CIT(A)'s view, allowing simultaneous proceedings under sections 201 and 163. 2. Nature of Remittances Made by BIPL to Braitrim U.K.: The Tribunal had previously determined that the remittances made by BIPL to Braitrim U.K. were reimbursements of expenses incurred on behalf of BIPL, without any profit element. This finding was based on the Cost Reimbursement Agreement (CRA) between BIPL and Braitrim U.K. The Tribunal observed that these reimbursements did not constitute income and, therefore, were not subject to tax withholding under section 195. Consequently, the ITAT quashed the demands raised under section 201(1) read with section 195, as there was no primary tax liability on the reimbursements. This determination was crucial in concluding that BIPL was not liable to deduct tax at source on these remittances. 3. Determination of BIPL as an Agent of Braitrim U.K. under Section 163: The ITO(IT)-TDS-3, Mumbai, had held BIPL as an agent of Braitrim U.K. under section 163, citing business connections and control by Braitrim U.K. The CIT(A) did not address the merits of this determination, focusing instead on the mutual exclusivity of sections 201 and 163. The ITAT restored the matter to the CIT(A) for a detailed adjudication on whether BIPL could be considered an agent of Braitrim U.K. under section 163. This decision was based on the need for a speaking order addressing the specific contentions raised by BIPL against its classification as an agent. Conclusion: The ITAT allowed the revenue's appeals for statistical purposes, directing the CIT(A) to re-examine the issue of BIPL's status as an agent under section 163 on its merits. The ITAT upheld the principle that sections 201 and 163 can be applied simultaneously, provided the remittances in question do not constitute taxable income. The ITAT's decision underscores the importance of distinguishing between reimbursement of expenses and income, and the implications of this distinction on tax withholding obligations.
|
