1988 (2) TMI 90 - AT - Income Tax

Summary

Issues Involved:
1. Justification of the ITO's order under Section 163(1)(c) of the IT Act, 1961.
2. Validity of the notice issued under Section 163 without specifying the assessment year.
3. Impact of the clerical mistake in mentioning the relevant section as Section 163(3).
4. Requirement for separate orders for each foreign technician.
5. Applicability of Section 163(1)(c) and Section 9(1) to the facts of the case.
6. Taxability of living allowance paid to foreign technicians.

Detailed Analysis:

1. Justification of the ITO's Order under Section 163(1)(c) of the IT Act, 1961:
The primary issue was whether the ITO was justified in appointing the appellant as a statutory agent of certain foreign technicians under Section 163(1)(c) of the IT Act, 1961. The tribunal found that the foreign technicians had rendered services to the Indian Company and had earned income in India. The payments made to the foreign technicians fell within the definition of income under Section 2(24) and were taxable under the provisions of the Act. The tribunal upheld the ITO's decision, noting that the appellant had a connection with the income sought to be assessed and that the legal requirement for invoking Section 163 was met.

2. Validity of the Notice Issued under Section 163 without Specifying the Assessment Year:
The appellant argued that the notice issued under Section 163 was invalid as it did not specify the assessment year. The tribunal dismissed this argument, stating that such objections should be raised at the first available opportunity. The tribunal noted that the notice was issued during the course of assessment proceedings for the assessment year 1982-83, making it clear that it pertained to that year. Additionally, the tribunal cited Section 292B of the Act, which states that defects in the notice do not invalidate the appointment order.

3. Impact of the Clerical Mistake in Mentioning the Relevant Section as Section 163(3):
The appellant contended that the ITO's order mentioned the relevant section as Section 163(3) instead of Section 163(1)(c). The tribunal considered this a clerical mistake that did not affect the merit of the order itself. The learned CIT(A) had also observed that this was a clerical mistake and did not impact the validity of the order.

4. Requirement for Separate Orders for Each Foreign Technician:
The appellant argued that the ITO should have passed separate orders for each foreign technician for each assessment year. The tribunal found no merit in this argument, stating that the facts relating to the cases of the foreign technicians were similar, and the ITO could dispose of the matter by a common order. The tribunal distinguished the present case from the Supreme Court decision in H.L. Sud, noting that the assessment year involved was 1982-83, and the ITO had issued notice and given the appellant an opportunity to be heard.

5. Applicability of Section 163(1)(c) and Section 9(1) to the Facts of the Case:
The appellant contended 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 rejected this argument, stating that the appellant had a connection with the income sought to be assessed. The tribunal also noted that the living allowance paid to the foreign technicians was for all practical purposes income in their hands and was taxable under the provisions of the Act. The tribunal upheld the ITO's reliance on the Supreme Court decision in Raghav Reddy vs. CIT and found that the decision of the Calcutta High Court in CIT vs. Atlas Steel Co. Ltd. was not applicable to the present case.

6. Taxability of Living Allowance Paid to Foreign Technicians:
The appellant argued that the living allowance paid to the foreign technicians was not taxable in India. The tribunal noted that the foreign technicians had claimed exemption under Section 10(6)(vii)(a) of the Act, indicating that the payments fell 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 and not in the present appeals. The tribunal held that the circumstances justified the appointment of the appellant as a statutory agent of the non-resident technicians.

Conclusion:
The tribunal dismissed the appeals, finding no merit in the arguments presented by the appellant. The ITO's order under Section 163(1)(c) was upheld, and the appellant was appointed as the statutory agent of the foreign technicians for the assessment year 1982-83. The tribunal concluded that the payments made to the foreign technicians were taxable income, and the appellant had a connection with the income sought to be assessed.