1968 (10) TMI 1 - SC - Income Tax

Plea that the provisions imposing liability to pay advance tax upon an agent of a non-resident infringe the equality clause of the Constitution has no substance - computation of advance tax is not dependent upon the completion of the previous year; it depends upon the rules prescribed by ss. 209, 210 & 212 - Assessee s petition is dismissed

Summary

Issues:
1. Whether an agent of a non-resident can be directed to pay advance tax under the Income-tax Act, 1961?
2. Whether the provision authorizing the collection of advance tax from an agent of a non-resident violates the equality clause of the Constitution?

Analysis:
The judgment of the Supreme Court dealt with a case where the Income-tax Officer directed a company to be treated as an agent of a non-resident company and demanded advance tax payment. The company challenged this order, arguing that no advance tax can be levied against an agent of a non-resident and that such a provision violates the equality clause of the Constitution. The court examined the relevant sections of the Income-tax Act, 1961, which prescribe the imposition and determination of advance tax liability. It was established that a representative assessee, including an agent of a non-resident, is subject to the same duties and liabilities as if the income were received by them beneficially. The court clarified that liability to pay advance tax is not dependent on the completion of the previous year but is determined by specific rules outlined in the Act.

Furthermore, the court rejected the argument that an agent of a non-resident should be exempt from advance tax payment due to lack of information or hardship. It emphasized that the agent is liable to secure necessary information from the non-resident principal for tax estimation. The judgment highlighted that the Act explicitly enables the agent to recover the tax paid from the principal. The court concluded that the provisions imposing advance tax liability apply to every person, whether assessed for their own income or as a representative assessee, without implying any limitation in favor of an agent of a non-resident principal.

Regarding the constitutional challenge, the court found no merit in the argument that the advance tax provisions violate the equality clause. It reasoned that the liability to pay advance tax is determined by specific statutory provisions and is not contingent on the precise ascertainment of total income for the previous year. The court emphasized that the Act does not discriminate between different assessees and that advance tax payment is subject to adjustment against tax assessed on regular assessment. Ultimately, the court dismissed the petition, upholding the legality of directing an agent of a non-resident to pay advance tax and rejecting the claim of constitutional violation.