2014 (8) TMI 6 - HC - Income Tax

Notice u/s 163(2) Employee of the assessee to be treated as representative agent for the particular assessment year u/s 163(1)(c) or not - Mr Francis who is no longer in the employment of the petitioner became a non-resident subsequently. - Held that - The relevant accounting year is the previous year ending on 31.03.2003 which pertains to the assessment year 2003-04. At that point of time Mr Francis Daly was not a non-resident. Therefore, in relation to that accounting period the petitioner cannot be appointed as a representative assessee. This is notwithstanding the fact that subsequently Mr Francis Daly attained the status of a non-resident and that when he was a non-resident the notice under Section 163(2) were issued. - the relevant period for consideration would be the relevant accounting period which in this case happened to be the year ending on 31.03.2003. Section 160(1)(i) of the said Act makes it clear that the expression representative assessee has to seen in respect of the income of a non-resident . It is obvious that when we construe the expression income of a non-resident it has reference to income in a particular previous year/accounting year. The income of that year must be of a non-resident. If that be so, the agent of the non-resident or the deemed agent under Section 163 of the said Act would be the representative assessee. The petitioner is not an agent of Mr Francis Daly. Section 163(1)(c) talks about the person from or through whom the non-resident is in receipt of any income, whether directly or indirectly relying upon Abdullabhai Abdul Kader Versus Commissioner of Income-tax 1952 (3) TMI 33 - BOMBAY HIGH COURT - the income bears reference to the accounting year for which the statutory agent is to be appointed thus, the assessee cannot even be regarded as a deemed agent u/s 163(1)(c) of the Act - assessee cannot be considered to be the representative assessee of Mr Francis Daly in respect of the AY 2003-04 Decided in favour of Assessee.

Summary

Issues Involved:

1. Validity of the order dated 18.03.2013 passed by the Commissioner of Income Tax under Section 264 of the Income Tax Act, 1961.
2. Validity of the notice dated 16.03.2010 issued under Section 163(2) of the Income Tax Act, 1961.
3. Validity of the order dated 31.01.2011 passed by the Assistant Commissioner of Income Tax under Section 163(1)(c) of the Income Tax Act, 1961.
4. Interpretation of Sections 160(1)(i) and 163 of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of the Order dated 18.03.2013:

The petitioner challenged the order dated 18.03.2013 passed by the Commissioner of Income Tax under Section 264 of the Income Tax Act, 1961, which upheld the petitioner as the representative assessee for Mr. Francis Daly for the assessment year 2003-04. The Commissioner concurred with the Assistant Commissioner's view that the petitioner could be treated as a representative assessee despite Mr. Francis Daly being a resident during the relevant assessment year.

2. Validity of the Notice dated 16.03.2010:

The notice issued under Section 163(2) on 16.03.2010 sought to treat the petitioner as the representative agent of Mr. Francis Daly, who had been assessed as a non-resident. The petitioner contended that Mr. Francis Daly was a resident during the assessment year 2003-04 and, therefore, the notice was invalid. The Assistant Commissioner dismissed this contention, stating that the notice was issued for treating the employer company as a representative assessee and not for assessment purposes.

3. Validity of the Order dated 31.01.2011:

The Assistant Commissioner's order dated 31.01.2011 held the petitioner as the representative assessee for Mr. Francis Daly. The petitioner argued that since Mr. Francis Daly was a resident during the relevant assessment year, the petitioner could not be treated as a representative assessee under Section 163(1)(c). The Assistant Commissioner rejected this argument, emphasizing that the relevant period was the date of the notice issuance when Mr. Francis Daly was a non-resident.

4. Interpretation of Sections 160(1)(i) and 163:

The petitioner's counsel argued that under Section 160(1)(i), a person could be a representative assessee only for the income of a non-resident during the relevant assessment year. They cited the Bombay High Court decision in Abdullabhai Abdul Kadar v. Commissioner of Income-tax, which emphasized that the relevant period for considering the non-resident status was the accounting year, not the date of notice issuance. The Court agreed, stating that since Mr. Francis Daly was a resident during the year ending 31.03.2003, the petitioner could not be deemed a representative assessee for that period.

Conclusion:

The Court concluded that the relevant period for determining the non-resident status was the accounting year, not the date of notice issuance. Since Mr. Francis Daly was a resident during the assessment year 2003-04, the petitioner could not be treated as his representative assessee. The writ petition was allowed, and the impugned orders were set aside. The parties were ordered to bear their respective costs.