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TMI Blog2005 (6) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... . The facts of the case, briefly are that the assessee is a company incorporated in India in which Kinetic Technology International B.V., Netherlands (now Technip Benelux B.V. of the Netherlands) had 50 per cent shareholding. One Mr. W.G. Holt joined the company as Vice President on 3rd January, 1988 and later on became the Managing Director of the assessee-company on 27th April, 1998. There was a survey operation under section 133A(1) of the Act conducted at the business premises of the assessee-company on 1st December, 1999. During the course of survey operation statement of Shri W.G. Holt was recorded. In the course of the statement Mr. Holt denied having received any salaries overseas for the services rendered in India. However, subsequently, when Mr. Holt's statement was recorded under section 131 on 6th December, 1999 Mr. Holt admitted having received the following salary from Kinetic Technology International B.V. Netherlands:- Financial year Amount of overseas salary 1998-99 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 55,812 4. However, the assessee filed appeal before the ld. CIT(A) against the orders under section 201(1) and 201 (1A) made by the Assessing Officer on 7th February, 2000. During the course of proceedings before the CIT(A), the assessee argued that it had no knowledge about the salaries paid overseas to Mr. Holt. Mr. Holt never disclosed this fact to the Principal Officer of the company in-charge of tax deduction at source and, therefore, the assessee-company had no occasion or basis to deduct tax at source in relation to salaries received by Mr. Holt from Kinetic Technology International B.V., Netherlands outside India. The ld. CIT(A) considered this contention of the assessee. He found the contention of the assessee-company in India that it had no knowledge of salaries paid to Mr. Holt overseas to be not correct. Kinetic Technology International B.V., Netherlands had 50 per cent share in the assessee-company and there was commonality of funds, technology and other interests. In fact, it was Kin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t source only in respect of the amount paid by it in India as salaries to Mr. Holt more so, when Mr. Holt had never brought the fact of salaries being paid to him overseas to the notice of the assessee-company as he was required to do under the provisions of section 192(2) of the Act. When the pointed attention of the assessee was drawn to the provisions of Explanation appended to section 9(1)(ii) and section 163(1) of the Act, the ld. Counsel for the assessee argued that the order made by the Assessing Officer cannot be justified under those provisions because no notice had been served upon the assessee for being treated as "agent" of Kinetic Technology International B.V., Netherlands. 6. The ld. DR. argued that the assessee had during the course of proceedings under section 201(1) and 201(1A) before the Assessing Officer admitted its default within the meaning of these two provisions and the assessee also paid both the amount of short deduction of TDS as well as interest payable thereon. These facts were duly mentioned by the Assessing Officer in his order under section 201 (1) and 201 (1A) for both the financial years 1998-99 and 1999-2000. Secondly the ld. DR argued that it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther company is concerned, there was no legal responsibility on the assessee-company which was a separate juristic person to deduct tax at source on such salary. It is a different matter that in view of the discussion held in the meeting with the Addl. Commissioner of Income-tax as per letter dated 6-3-2000 on record, the assessee-company agreed to bear the interest under section 201(1A), but so far as the question of penalty under section 271(1)(c) is concerned, there was no default on the part of the assessee-company, because it was not even aware of any salary being paid abroad by KTIB V to Mr. Holt. Therefore, there was no shortcoming in the deduction of tax and deposit thereof in respect of salary and perquisite paid to Mr. Holt in India by the assessee-company. It may be pointed out that as the assessee was not liable to deduct TDS on salary paid abroad to the expatriate employee, there was no liability on the assessee under section 192(1) and (2). It may also be pointed out that in the show-cause notice issued under section 271(1)(c) the assessee was required to show as to why it failed to deduct tax at source. As there was no liability of the assessee to deduct tax, there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudicated the question of assessee's liability under section 201(1) and 201(1A) in dispute before us. 8. In our opinion, the impugned orders under section 201(1) and 201(1A) are good orders both in terms of the provisions of section 192 of the Act as well as under the provisions of Explanation to section 9(1)(ii) read with section 163(1) of the Act. We see considerable force in the contention of the Ld. DR that Mr. W.G. Holt was Managing Director of the assessee-company and, therefore, his having received the salary overseas in respect of services rendered by it in India to the assessee-company, from Kinetic Technology International B.V., Netherlands instantaneously came to the knowledge of the assessee-company. The fact that Mr. Holt did not formally communicate it in writing to the assessee-company may be considered a mitigating circumstance for the purposes of the penal provisions of the Act only. 9. As to the provisions of Explanation appended to section 9(1)(ii) the provisions are quite clear. As long as Mr. Holt was paid salaries overseas for services rendered in India, such payments fell under the head "Salaries", as income earned in India and chargeable to income-tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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