Full Judgment Text
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PETITIONER:
THE PREMIER AUTOMOBILES LTD.
Vs.
RESPONDENT:
S.N. SHRIVASTAVA & ANR.
DATE OF JUDGMENT:
10/10/1968
BENCH:
SHAH, J.C.
BENCH:
SHAH, J.C.
RAMASWAMI, V.
MITTER, G.K.
HEGDE, K.S.
GROVER, A.N.
CITATION:
1970 AIR 1386 1969 SCR (2) 353
ACT:
Indian Income-tax, 1961, ss. 160, 163, 209, 210,
212--Agent of non-resident whether liable to pay advance-
tax payable by non-resident--Provisions creating such
liability whether violative of Constitution of India, Art.
14.
HEADNOTE:
The Income-tax Officer, Companies Circle, Bombay treating
the petitioner as an agent of a non-resident issued a notice
of demand under s. 156 read with s. 210 of the Indian
Income-tax Act, 1961. By this notice the petitioner was
called upon to pay advance tax as agent of the foreign
principal during the financial year 1964-65. The petitioner
filed a petition under Art. 32 of the Constitution
challenging the demand. The contentions. in support of the
petition were: (i) that under ss. 209 and 210 of the Indian
Income-tax Act, 1961 no order for payment of advance tax can
be made against an agent of a non-resident; (ii) that a
provision which authorises collection of advance-tax from an
agent of a non-resident infringes the equality clause of the
Constitution. In support of the first contention it was
urged that since under s. 209(1) the amount of advance-tax
payable by an assessee in the financial year is to be
computed on his total income of the latest previous year in
respect of which he has been assessed by way of regular
’assessment, an agent cannot be directed to pay advance-tax
the liability whereof depends upon the determination of
total income of the, principal.
HELD: (i) Sections 207 and 208 which impose liability
to pay advance-tax in a financial year, s. 210 which
authorises the Income-tax Officer to make a demand for
payment of advance-tax from a person who is previously
assessed, and s. 212(3) which imposes the duty to make an
estimate of the total income likely to be received or to
accrue or arise. and to pay advance-tax if the total
estimated income exceeds the maximum amount not charge.able
to tax in his case by Rs. 2,500/apply to every person
whether he is assessed’ in respect of his own income or as a
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representative assessed and it is not possible to imply
in the application of these: provisions ’an unexpressed
limitation on the express words of the statute in favour of
an agent of a non-resident principal. [358 C--D]
It is expressly enacted by s. 161 that as regards income
in respect of which a person is a representative
assessee, he shall be subject to the same duties,
’responsibilities. and liabilities as if the income. were
income received by or accruing to or in favour of him
beneficially. It is clearly implicit therein that a
representative assessee is not exempt from liability to pay
advance-tax. [357 C]
of the liability to pay advance-tax it is not
predicated that the previous year should have come to. an
end before the liability can anse. The previous year of
an assessee may in some cases end after the commencement
but before the end of a financial year in which advance tax
is payable: it may in other cases commence and end with
the financial year. But the liability to pay advance tax is
not in any manner
354
affected because the previous year ends before or with the
financial year. There is nothing in the Act under which the
liability to pay advance tax of a representative assessee
depends upon determination of the total for the previous
year. [357 C--G]
Accordingly, it could not be held that the petitioner
was not liable to pay advance tax on behalf of his non-
resident principal. [358 E--F]
(ii) The plea that the provisions imposing liability to
pay advance tax upon an agent of a non-resident infringe the
equality clause of the Constitution could not be accepted.
The only ground urged, that an assessee may escape liability
to pay advance tax when his previous year coincides with the
financial year, was without substance. [359 B--C]
JUDGMENT:
ORIGINAL JURISDICTION: Writ Petition No. 67 of 1965.
Petition under Art. 32 of the Constitution of India for
enforcement of the fundamental rights.
M.C. Chagla, F.N. Kaka, O.P. Malhotra and J.B.
Dadachanji, for the petitioner.
B. Sen, T.A. Ramachandran and R.N. Sachthey, for the
respondents.
The Judgment of the Court was delivered by
Shah, J. On’ February 25, 1965, the Income-tax
Officer, Companies Circle I ( 3 ), Bombay, directed that for
the purpose of the Income-tax Act, 1961, the Premier
Automobiles Ltd.-hereinafter called ’the Company--be
treated as an agent of M/s Dodge Brothers of United
Kingdom--a non-resident Company. On the same day the
Income-tax Officer issued a notice of demand under s. 156
read with s. 210 of the Act calling upon the .Company to
pay on or before March 1, 1965, advance-tax of Rs.
11,51,235-91 as agent of the foreign principal during the
financial year 1964-65. The Company then moved a petition
in this Court for an order quashing and setting aside the
order under s. 163 and notice of demand under s. 156 for the
assessment year 1965-66 and for an injunction or prohibition
restraining the Income-tax Officer from enforcing or
implementing the order under s. 163 and the notice under s.
156 read with s. 210 of the Incometax Act, 1961. The
petition was resisted by the Income-tax Officer.
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In support of the petition counsel for the Company
raised two contentions:
(1) that under ss. 209 and 210 of the
Indian Income-tax Act, 1961, no order for
payment of advance-tax can be made against an
agent of a non-resident; and
(2) that a provision which authorises
collection of advance-tax from an agent of a
non-resident infringes
the equality clause of the Constitution and is
on that account void.
Sections 207 and 208 of the Income-tax Act, 1961,
insofar as they are material, provide: ’
207--"(1) Tax shall be payable in
advance in accordance with the provisions of
sections 208 to 219 in the case of income
other than income chargeable under the head
"Capital gains.""
208--"Advance tax shall be payable in
the financial year-
(a) where the total income exclusive
of capital gains of the assessee referred to
in sub-clause (i) of clause (a) of section
209 exceeded the maximum amount not
chargeable to income-tax in his case by two
thousand five hundred rupees; or
(b) ..................................
Section 209 sets out the rules for computation of amount
of advance-tax payable by an assessee in the financial year.
Section 210 provides by sub-s. (1)-
"Where a person has been previously
assessed by way of regular assessment under
this Act or under the Indian Income-tax Act,
1922, the Income-tax Officer may, on or after
the 1st day of April in the financial year,
by order in. writing, require him to pay to
the credit of the Central Government advance-
tax determined in accordance with the
provisions of sections 207, 208 and 209."
Section, 207, 208, 209 and 210 prescribe machinery for
imposition of liability for and determination of the quantum
of advance-tax in respect of income which is chargeable to
income-tax in the hands of a person on regular assessment.
Under the Income-tax Act, 1961 a person is liable to
be. assessed to tax in respect of his own income, and also
in respect of certain classes of income received by or
accruing or arising others. He is also liable to be
assessed to tax as a representative assessee. That is
expressly so enacted by s. 161 (1 ) which provides:
"Every representative assessee, as regards
the income in respect of which he is a
representative assessee, shall be subject to
the same duties, responsibilities and
liabilities as if "the income were income
received by or accruing to or in favour of him
beneficially, and shall be liable to
assessment in his own name in respect of
356
that income; but any such assessment shall be
deemed to be made upon him in his
representative capacity only, ....."
A representative assessee by sub-s. (1 ) of s. 160 includes
amongst others, the agent of a non-resident in respect of
the income of a non-resident specified in s. 9 (1 )(i), and
also a person who is treated as an agent under s. 163. By
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sub-s. (2) a representative assessee is deemed to be an
assessee for the purpose of the Act. By s. 162 the
representative assessee, who as such pays any sum under the
Act, may recover the sum so paid from the person on whose
behalf it is paid. Section 163(1) defines for the purposes
of the Act an "agent" in relation to a non-resident. Resort
to the machinery for assessing a representative assessee is
however not obligatory: it is open to the Income-tax Officer
to make a "direct assessment of the person on whose behalf
or for whose benefit income therein referred to is
receivable", or to recover "from such person the tax payable
in respect of such income".
On regular assessment an agent of a non-resident is, by
virtue of s. 160.(1) read with s. 163 liable to be assessed
to tax and the tax so assessed may be recovered from him.
The agent, if assessed to tax, has the right to recover tax
paid by him from the person whom he represents: s. 162.
Since a non-resident is in respect of income which forms
part of his total income liable to be assessed to tax, he
may also be called upon to pay advance-tax in respect of the
income accruing to. or received by him which forms part of
his total income chargeable to tax by virtue of ss. 4, 5
and 207. So far there is no dispute. Counsel for the
Company however urged that an agent of a non-resident may be
assessed in regular assessment in respect of the income
accruing. -or arising to his principal,. but he cannot be
called upon to pay advance-tax even-though he is by virtue
of s. 160(2) deemed an assessee for the purposes of the Act.
Diverse reasons were suggested in support of that argument.
It was said that since under s. 209( 1 ) the amount of
advance-tax payable by an assessee in the financial year is
to be computed on his total income of the latest previous
year in respect of which he has been assessed by way of
regular assessment, an agent cannot be directed ’to pay
advance-tax, the incidence of liability whereof depends upon
the ,,determination of total income of the principal. We
fail to see any substance in this argument. Section 207
imposes liability for payment of advance-tax, and s. 208
prescribes the conditions of liability to. pay advance-tax.
Determination of total income of the previous year of the
assessee is not made a condition of the liability to pay
advance-tax. Advance-tax payable by an assessee is computed
in the manner provided by s. 209 when the assessee has been
previously assessed to tax. The Income-tax Officer is also
enjoined by s. 210 to issue a notice to a person who has
been
357
previously assessed"by way of regular assessment" to pay
advance-tax for the financial year. If the assessee has not
been previously assessed by way of regular assessment, he is
required by s. 212(3) to make an estimate ’of his total
income--excluding capital gains--if it is likely to exceed
the maximum amount not chargeable to tax by two thousand
five hundred rupees, These provisions apply to all
assessees. If an assessee is chargeable to tax in respect
of his own income or income of others which is chargeable to
tax as his own income, those provisions indisputably apply.
It is expressly enacted by s. 161 that as regards income in
respect of which a person is a representative assessee, he
shall be subject to the same duties, responsibilities and
liabilities as if the income were income received by or
accruing to or in favour of him beneficially. It is
clearly implicit therein that a representative assessee is
not exempt from liability to pay advance-tax. of the
liability to pay advance-tax it is not predicated that the
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previous year should have come to. an end before liability
can arise. The previous year of an assessee may in some
cases end. after the commencement ’but before the end of a
financial year in which advance-tax is payable: it may in
other cases commence and end with the financial year. But
the liability to pay advance-tax. is not in any manner
affected because the previous year ends before or with the
financial year. Where an assessees previous, year is the
financial year, his total income may not be determined for
the previous year before the commencement of the financial
year, but on that account no exemption from payment of
advance-tax is granted by the Act. On the commencement of a
financial year, a person who. is previously assessed to tax
is liable to pay advance-tax on demand by the Income-tax
Officer under s. 210. The quantum of tax will be determined
by s. 209 and will be adjusted in the manner provided by s.
210(3). That applies to every assessee Whether the tax is
liable to be paid by him on his own total income, or on the
income assessed.in his hands as a representative assessee.
If he has not been previously assessed in the character in
which he is liable to pay tax, an obligation is imposed by
s. 212(3) upon him to make an estimate of his income and to
pay advance-tax. That provision also applies to his own
income and also to the income in respect of which he is a
representative assessee. There is nothing in the Act under
which the liability to pay advance-tax of a representative
assessee depends upon determination of the total income for
the previous year.
An argument of hardship was also raised. It was said
that an agent of a non-resident may not normally have in his
possession any materials on which he may estimate the income
in respeet of which he may be chargeable to advance-tax, if
he has not been previously assessed to tax as an agent of a
non-resident. That again, in our judgment, is not a ground
which exempts an
358
agent from liability to pay advance-tax on behalf of his
principal. Liability to submit an estimate necessarily
implies the duty to secure the requisite information from
the non-resident for submitting the estimate. The tax, it
must be remembered, is assessed on the agent for and on
behalf of the principal, and the Act has made an express
provision enabling the agent to recover from the principal
the tax so paid by him. Once the Income-tax Officer
treats a person as an agent of a non-resident, liability to
pay tax on regular assessment arises; and his liability as a
representative assessee to pay advance-tax is not excluded
by any provision of the Act.
In our judgment, ss. 207 and 208 which impose liability
to pay advance-tax in a financial year, s. 210 which
authorise the Income-tax :Officer to make a demand for
payment of advancetax from a person who is previously
assessed, and s. 212(3) which imposes the duty to make an
estimate of the total income likely to be received or to
accrue or arise and to pay advance-tax if the total
estimated income exceeds the maximum amount not chargeable
to tax in his case by Rs. 2,500, apply to every person
whether he is assessed in respect of his own income or as a
representative assessee, and we are unable to imply an
unexpressed limitation on the express ’words of the statute
in favour of an agent of a non-resident principal.
In the present case by order dated February 25, 1965,
for the assessment year 1964-65 the Company was treated as
an agent of the non-resident principal. Since the Company
was treated as an agent of the non-resident, it became
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liable to pay advancetax in the financial year 1964-65. By
virtue of s. 207 read with s. 208 the declaration that the
Company was an agent involved liability to pay advance-tax
as well as tax assessed on regular assessment. We are
unable to hold that the liability to pay advance-tax did
not arise against the Company.
The plea that the provisions imposing liability to pay
advancetax upon an agent of a non-resident infringe the
equality clause of the Constitution has no. substance. As
already observed, the liability to pay advance-tax arises
under ss. 207 .and 208 and its quantum is determined by ss.
209, 210 and 212(3), and it is not predicated of the accrual
of liability that the total income of the previous year
should be ascertained or precisely ascertainable when
demand is made by the Income-tax Officer under s. 210, or
when the assessee is required to. make an estimate. The
assumption that an assessee whose year of account coincides
with the financial year is not in respect of that year
liable to pay advancetax is not warranted. The computation
of advance-tax is not dependent upon the completion of the
previous year: it depends upon the rules prescribed by ss.
209, 210 and 212. Every person who has been previously
assessed to tax is liable when ordered
359
by the Income-tax Officer to pay advance-tax, subject to the
right to make an estimate under s. 212( 1 ). A person who
has not been previously assessed but whose income is likely
to exceed the specified amount is also liable to pay
advance-taX. The Act does not accord discriminatory
treatment between different assessees. Payment of advance-
tax is on account and is always liable to be adjusted
against the tax assessed on regular assessment. That again
applies. to all assessees. It is then difficult to
appreciate the grounds on which the plea of denial of equal
protection may be sustained. The only ground urged, that an
assessee may escape liability to pay advance-tax where his
previous year coincides with the financial year, is
without substance, and no other ground is set up in support
of the plea of violation of the guarantee of equality under
Art. 14 of the Constitution.
The petition therefore fails and is dismissed with costs.
G.C. Petition dismissed.
360