1988 (2) TMI 87 - AT - Income Tax

Summary

Issues Involved:
1. Justification of the Income-tax Officer (ITO) in passing an order under Section 163(1)(c) of the Income-tax Act, 1961, appointing the appellant as a Statutory Agent of certain foreign technicians.
2. Validity of the notice issued under Section 163 without mentioning the year.
3. Legality of passing a common order for all foreign technicians instead of separate orders.
4. Applicability of Section 9(1)(ii) and Section 163(1)(c) to the income received by foreign technicians.
5. Consideration of income and applicability of exemptions under Section 10(6)(vii)(a).

Issue-wise Detailed Analysis:

1. Justification of the Income-tax Officer (ITO) in passing an order under Section 163(1)(c) of the Income-tax Act, 1961:
The primary issue was whether the ITO was justified in appointing the appellant as a Statutory Agent for foreign technicians under Section 163(1)(c) of the Act. The appellant, an Indian Company, had entered into an agreement with a Swiss Company to avail the services of foreign technicians for their Nylon-6 Project. The foreign technicians were paid a living allowance in India, while their retention remuneration was paid outside India by the Foreign Company. The foreign technicians filed their returns, mentioning that their living allowance and retention remuneration were not taxable in India based on a Gujarat High Court decision. However, the ITO, after issuing a notice under Section 163(2), appointed the appellant as the agent of the foreign technicians, asserting that the living allowance paid was income taxable under the Act.

2. Validity of the notice issued under Section 163 without mentioning the year:
The appellant argued that the notice issued under Section 163 was invalid as it did not mention the assessment year. The Tribunal found this argument to be without merit, noting that such an objection was not raised at the first available opportunity. The Tribunal emphasized that the notice was issued during the assessment proceedings for the year 1982-83, making it clear that it pertained to that assessment year. The Tribunal further noted that any defect in the notice would not invalidate the appointment order due to Section 292B of the Act, which allows for rectification of such defects.

3. Legality of passing a common order for all foreign technicians instead of separate orders:
The appellant contended that the ITO erred in passing a common order for all foreign technicians instead of separate orders for each assessment year. The Tribunal found no merit in this argument, stating that the requirement under Section 163(2) was to provide an opportunity of being heard, which was satisfied when the ITO issued the notice. Since the facts relating to the foreign technicians were similar, the ITO was justified in passing a common order for the assessment year 1982-83.

4. Applicability of Section 9(1)(ii) and Section 163(1)(c) to the income received by foreign technicians:
The appellant argued that the provisions of Section 163(1)(c) did not apply as there was no direct or indirect payment to the foreign technicians by the appellant. The Tribunal clarified that Section 163(1)(c) allows for the appointment of an agent if the non-resident receives any income, directly or indirectly, from a person in India. The Tribunal noted that the living allowance paid to the foreign technicians constituted income under Section 2(24) and was taxable under Section 9(1)(ii) as it was earned in India. The Tribunal emphasized that the necessity for appointing an agent arises when a foreign national earns income in India, irrespective of whether the income is assessable or exempt under Section 10.

5. Consideration of income and applicability of exemptions under Section 10(6)(vii)(a):
The appellant claimed that the living allowance paid to the foreign technicians was exempt under Section 10(6)(vii)(a). The Tribunal noted that the claim for exemption presupposes that the payment falls within the definition of income. The Tribunal observed that the question of whether the living allowance was assessable income was to be considered in the assessment proceedings, not in the appeals arising from the order under Section 163. The Tribunal concluded that the payment made to the foreign technicians was income, justifying the appointment of the appellant as their statutory agent.

Conclusion:
The Tribunal dismissed the appeals, finding no force in the arguments presented by the appellant. The Tribunal upheld the ITO's decision to appoint the appellant as the statutory agent of the foreign technicians for the assessment year 1982-83, emphasizing that the living allowance paid constituted taxable income, and the procedural requirements under Section 163 were duly satisfied.