1995 (2) TMI 126 - AT - Income Tax

Summary

Issues Involved:
1. Treatment of M/s V.B.C. Exports Pvt. Ltd. as an agent of M/s Guan Wah Enterprises of Singapore.
2. Applicability of Sections 5, 9, and 163 of the Income-tax Act.
3. Taxability of income received in kind in India.
4. Business connection and operations carried out in India.
5. Jurisdiction and procedural aspects under Section 163 of the Income-tax Act.

Detailed Analysis:

1. Treatment of M/s V.B.C. Exports Pvt. Ltd. as an Agent of M/s Guan Wah Enterprises of Singapore:
The Assessing Officer treated M/s V.B.C. Exports Pvt. Ltd. as the agent of M/s Guan Wah Enterprises of Singapore and completed the assessments under Section 143(3) of the Income-tax Act. The CIT (Appeals) cancelled this order, stating that the non-resident did not have any income taxable under Section 9(1) of the Act, and hence, M/s V.B.C. Exports Pvt. Ltd. could not be regarded as an agent of the non-resident.

2. Applicability of Sections 5, 9, and 163 of the Income-tax Act:
The CIT (Appeals) concluded that the income of the non-resident was received in India and thus taxable under Section 5 of the Act, without invoking Section 9(1). However, the Tribunal disagreed, emphasizing that the CIT (Appeals) misunderstood the applicability of Sections 5, 9, and 163. The Tribunal clarified that Section 9 gathers all types of income from all possible sources which a non-resident may have in India and that the business connection between the non-resident and the assessee justified the applicability of these sections.

3. Taxability of Income Received in Kind in India:
The CIT (Appeals) found that since the hire charges were received in kind at an Indian port, the income was received in India, making Section 9(1) inapplicable. The Tribunal refuted this, stating that the Assessing Officer taxed the deemed income due to business connection, not the hire charges. The Tribunal also highlighted that the assessee paid customs duty, indicating that the non-resident's income was liable to tax.

4. Business Connection and Operations Carried Out in India:
The Tribunal found that the CIT (Appeals) erred in concluding that the non-resident had no business connection in India. The Tribunal noted that the fishing operations, though carried out in international waters, involved bringing the catch to Indian ports for processing, preservation, and division of profits. This constituted a business connection and operations carried out in India, making the income taxable under Section 9.

5. Jurisdiction and Procedural Aspects under Section 163 of the Income-tax Act:
The Tribunal held that the CIT (Appeals) incorrectly determined that the assessee could not be treated as an agent under Section 163. The Tribunal cited the jurisdictional High Court's decision in Bharat Heavy Plate & Vessels Ltd., emphasizing that the Assessing Officer had the jurisdiction to treat the assessee as an agent due to the business connection and the non-resident receiving income from the agent.

Conclusion:
The Tribunal reversed the CIT (Appeals)'s order, reinstating the Assessing Officer's findings. The Tribunal concluded that the non-resident had a business connection in India, and the income was taxable under Sections 5 and 9 of the Income-tax Act. The revenue's appeals were allowed, and the orders of the Assessing Officer were upheld.