2014 (10) TMI 624 - HC - Income Tax

Order passed u/s 163 - PILCOM to be treated as the Agent of two Non-residents or not Held that - Assessee rightly contended that the appellant was treated as an agent for the purpose of recovery of tax - The Tribunal came to a finding that the money received by the non-resident was not taxable in India - There was, as such, no question of holding the appellant as an agent - The agency was for the purpose of recovery of tax from out of the money paid during the AY - It is not connected with any other transaction - when the money received by the non-resident was not taxable in India, it should have automatically followed that the assessee is also not an agent which the Tribunal did not hold and thus committed an error of law also in earlier aseessement year of the same assessee wherein the assessment had been quashed, but the finding that the assessee was an agent of non-resident was maintained thus, the order of the Tribunal is to be set aside Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant was correctly treated as an agent for the purpose of recovery of tax.
2. Whether the money received by the non-resident was taxable in India.
3. Whether the appellant should be held as an agent if the money received by the non-resident was not taxable in India.

Analysis:

Issue 1:
The appellant contended that they were treated as an agent for tax recovery purposes, as evident from the order by the CIT (Appeal). The Tribunal upheld the AO's decision treating the appellant as an agent of non-residents. However, the appellant argued that since the money received by the non-resident was not taxable in India, there was no basis for holding them as an agent solely for tax recovery purposes.

Issue 2:
The Tribunal disposed of connected appeals by ruling that the payments received by the non-residents were not taxable in India as "fees for technical services." This decision was crucial in determining the taxability of the money received by the non-residents in India.

Issue 3:
Referring to a previous judgment, the appellant's counsel argued that if the money received by the non-resident was not taxable in India, then there was no basis for holding the appellant as an agent. The counsel sought a similar decision as in the previous case where the assessment was quashed, leading to a reevaluation of the appellant's status as an agent.

Conclusion:
The Court, after considering submissions from both parties and the absence of any appeal by the revenue, set aside the Tribunal's order based on the reasoning from a previous case. The judgment highlighted the importance of taxability in India concerning the appellant's role as an agent and emphasized the need for a consistent approach in such matters.