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TMI Blog2010 (5) TMI 540X X X X Extracts X X X X X X X X Extracts X X X X ..... mited (Alcan) is a company incorporated under the laws of Canada. After taking necessary approval from the Reserve Bank of India (RBI) from time to time, Alcan had acquired 3,88,44,324 shares in Indian Aluminium Company Limited (Indal) over a period of time. Alcan has agreed to sell its entire holdings in Indal at an agreed price of Rs. 190/- per share to Hindalco. Alcan being a non-resident company and holding shares in a company incorporated in India is governed by the provisions of section 45 read with section 48 of the Income Tax Act, 1961 (ITA). Therefore it is liable to pay tax in respect of gains made from sale of shares in Indal. Under the provisions of section 195 of the Act, any person responsible for paying to a non-resident any sum chargeable to tax under the Act has an obligation to deduct income tax at the time of making payment at the rates in force. Under section 197(1) of the Act the recipient of the payment can make an application to the Assessing Officer for issue of a certificate regarding no deduction of tax or deduction of tax at a lower rate by the person making payment. If the Assessing Officer is satisfied with such claim by the recipient of the payment, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 4.2.2004 to Hindalco proposing to treat Hindalco as Agent of Alcan in respect of income which Alcan received on sale of shares to Hindalco. The Assessing Officer proposed to treat Hindalco as Agent and representative assessee of Alcan u/s. 163(1) of the Act. In reply, Hindalco submitted that the proposed action u/s. 163(1) of the Act is without jurisdiction and unsustainable in law. It was submitted by Hindalco that the proposed action of treating it as a representative assessee of Alcan was for A.Y. 2001-02. It was contended by Hindalco that having regard to the scheme and intent of the Act and more particularly of the provisions of section 160(1)(i) read with section 161(1), 162 and 163, no person could be treated as a 'Agent' in relation to a non-resident after the expiry of the previous year corresponding to the assessment year in question to fasten with a vicarious liability of the non-resident company after the expiry of two years and 10 months from the end of previous year ended 31.3.2001 corresponding to A.Y. 2001-02, was improper. The transactions of sale and purchase of shares in question were made and completed in the financial year 2000-01 (A.Y. 2001-02) and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limit for notice to be issued u/s. 148 for reopening an assessment, stipulates the following :- "If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or re-computation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of two years from the end of the relevant assessment year." In the present case, the relevant A.Ys. 2001-02, and thus notice u/s. 148 could be issued in the case of HIL for A.Y.2001-02 till 31.3.2004. This time limit has not yet expired. On the basis of the above, the arguments put forward by HIL, are rendered otiose. M/s. Hindalco Industries Ltd., is held to be a Representative assessee in relation to M/s. Alcan Inc., a non-resident company for A.Y. 2001-02, as it fulfils the conditions laid down in section 163(1)(b) and 163(1)(c) and further it has acquired from Alcan a non-resident capital asset in India by ........of a transfer during A.Y. 2001-02." 7. On 16.3.2004 the Assessing Officer passed an order u/s. 143(3) of the Act on Alcan determining t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of tax on capital gain would only be 10% and not 20% as claimed by the Reevnue. Thus, the tax deducted at source by Hindalco was more than sufficient to discharge the tax liability of Alcan on sale of shares by it to Hindalco. It was stated before us that the revenue is in appeal before the Hon'ble High court against the order of the Tribunal in the case of Alcan. 11. The order of learned CIT(A) in the appeal by Hindalco against the order of assessment u/s. 163 read with section 147 was decided on 31.3.2005 much later in point of time to his order confirming order of the Assessing Officer dated 16.3.2004 making assessment of capital gain in the hands of the Alcan, which was dated 16.4.2004. It is in the above background of facts that those appeals have to be decided. 12. First, we shall take up for consideration ITA No. 3665/Mum/2005 appeal by Hindalco challenging the order u/s. 163 of the Act treating it as Agent and representative assessee of Alcan. In this appeal the contention of the learned counsel for the Hindalco was :- a) Hindalco could not be treated as Agent and Representative assessee of Alcan u/s. 163 of the Act as the conditions contemplated u/s. 163 are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agent had deducted tax u/s 195 of the Act will not be a bar to proceed and pass an order u/s. 163 of the Act. 14. The next objection of Hindalco that there has been a delay in initiating proceedings u/s. 163 of the Act which has resulted in prejudice to the Agent, we do not think that the law contemplates any time limit for initiating proceedings u/s. 163 of the Act. It is also not the case of Agent that proceedings for assessing income of the principal, is barred by time. We therefore reject this argument also. The purpose of section 163 is to secure payment of taxes by the non-resident. We therefore uphold the order u/s. 163 of the Act. ITA No. 3667/Mum/05 is therefore dismissed. 15. As far as the appeals by the Assessee and revenue arising out of the order of assessment u/s.147 r.w.s.163 of the Act i.e. ITA 4685/Mum/05 (by Assessee) and ITA No.4968/Mum/05 (by Revenue) are concerned, the submission of the learned counsel for the Assessee on the issue raised in the Assessee's appeal was that having commenced and concluded the assessment in the case of the principal the very same income cannot be assessed in the hands of the Agent. In this regard it was pointed out that in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coming to the main argument of the appellant regardings imultaneous assessment proceedings against Alcan and the appellant I do not subscribe to the contention of the appellant that since the non-resident has independently filed the return of income, therefore the appellant cannot be treated as representative assessee. In fact, the scheme of the Act provides for taking action against the non-resident as well as its agent as representative assessee. Section 163 no where provides for a bar on taking action against a person where the conditions prescribed in the section are satisfied, merely for the reason that the non-resident has filed the return of income independently. In fact, the courts have held that there is no bar on the simultaneous assessment of the principal and agent. In the case of Barium Chemicals Ltd. Vs. ITO, 100 ITR 637 (A), the assessee entered into an agreement with a nonresident from the rectify certain defects in the plant and machinery supplied to it and also to supply designs, drawings and other technical know-how. Pursuant to the above said agreement, the non-resident firm supplied necessary designs and drawings, etc, and also sent one of its partners, Mr. Da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereon subject to regular assessment and by deduction of income tax the rights of the parties are not in nay manner adversely affected. 17. We have considered the rival submissions before us. In the case of Saipem UK Ltd. (Supra) identical issue arose for consideration before the Tribunal. The facts were as follows. The assessee company was incorporated under the laws of United Kingdom. Its operations in India pertained to execution of certain contract works awarded by certain Indian companies. In order to execute these contracts, the assessee company entered into various sub-contracts, which include the subcontracts with M/s. Valentine Maritime (Gulf) LLC, UAE (for short "Valentine"). It appears that the assessee-company as well as the aforesaid Valentine was being separately assessed to income-tax regularly. The Assessing Officer passed an order under section 163 of the Income-tax Act on 5.3.2002 treating the assessee-company as representative assessee of Valentine. Simultaneously on 5-3-2002 itself the Assessing Officer issued a notice under section 148 in the name of the assessee-company and on 28-3-2002, the Assessing Officer passed assessing income of the principal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the same amount could not be brought again to tax in the hands of the trustees. The above case could have been disposed of on one short ground that the beneficiary having already been assessed and tax recovered from the beneficiary, a fresh assessment and recovery of tax on the same transaction was neither possible nor permissible. The learned judges of the Bombay High Court, however, considered the argument that, since the said income had already been brought to tax in the hands of Champavahoo, it could not be brought to tax again in the hands of the trustees. While considering this argument, their Lordships of the Bombay High Court considered section 41(2) of the Indian Income-tax Act, 1922, which is in pari materia with section 166 of the Income-tax Act, 1961. Their Lordships observed that: 'Section 41 having provided for two alternative methods, namely, either to tax the income in the hands of the trustees or directly in the hands of the person on whose behalf the income was receivable under the trust, and one of them having been availed of by the income-tax department in directly assessing Champavahoo in respect of the income, the other was no longer available to the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was having several representative assessees in respect of several heads of income and in this context, the High Court observed that there can be more than one assessment in respect of the income accrued or arisen to a non-resident provided there are more than one representative assessee. The High Court held that direct assessment on the non-resident in respect of other income would not affect the jurisdiction of the ITO to assess the agent of the nonresident on income arisen to the non-resident through him (Emphasis supplied). What the High Court meant was if some other income has been assessed in the case of the non-resident, the Assessing Officer has jurisdiction to frame assessment on the agent of the non-resident in respect of some income flowing to the non-resident through the agent. This decision of the Kerala High Court, was held not to be interpreted to mean that the same income can be assessed simultaneously in the hands of the non-resident and in the hands of the agent. The Tribunal held that such double taxation militates against the cardinal principles for levying tax on income. The tribunal further held that when once assessment in the case of principal becomes fina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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