1984 (6) TMI 80 - AT - Income Tax

Summary

Issues Involved:
1. Liability to deduct tax at source under section 195.
2. Liability to pay interest under section 201(1A).
3. Treatment of the assessee as an agent under section 163(1)(c).

Issue-wise Detailed Analysis:

1. Liability to Deduct Tax at Source under Section 195:

The assessee-company entered into an agreement with a non-resident company for the erection of machinery, stipulating that payments would be free of taxes in India. The assessee sought clarification from the ITO on the amount to be deducted at source under section 195. The ITO determined the amounts payable, which the assessee paid, albeit after remitting the amounts to the non-resident. The assessee contended that it should not be liable to deduct tax at source under section 195 because it was acting as an agent of the non-resident under section 163(1)(c). However, the Commissioner (Appeals) rejected this additional ground, noting that the assessee never claimed to be an agent before the ITO and had accepted liability under section 195.

2. Liability to Pay Interest under Section 201(1A):

The assessee paid the tax long after remitting the amounts to the non-resident, attracting interest under section 201(1A). The Commissioner (Appeals) upheld the levy of interest, noting that the liability to pay interest was clearly attracted due to the delayed payment. The Tribunal agreed, stating that the provisions of section 201(1A) were applicable because the tax was not deducted at the time of payment to the non-resident, and interest was correctly calculated from the date the tax was deductible to the date it was actually paid.

3. Treatment of the Assessee as an Agent under Section 163(1)(c):

The assessee argued that it should be treated as an agent of the non-resident, thus exempting it from the obligation to deduct tax under section 195. The Tribunal noted that sections 160 to 163 and sections 195 to 201 are mutually exclusive. A person liable to pay tax as an agent under section 163 cannot be required to deduct tax under section 195. However, the Tribunal emphasized that no person can be treated as an agent without an opportunity of being heard under section 163(2). Since no order under section 163(2) was passed, the assessee could not claim to be an agent. The Tribunal concluded that the assessee was liable to deduct tax under section 195 and pay interest under section 201(1A).

Conclusion:

The Tribunal held that the assessee was liable to deduct tax at source under section 195 and pay interest under section 201(1A) due to the delayed payment of tax. The argument that the assessee was an agent of the non-resident was rejected because no order under section 163(2) was passed, and the assessee never claimed to be an agent before the ITO. The appeal was dismissed, affirming the orders of the lower authorities.