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14 Hindalco Industrial Ltd v.
DCIT
AIT 2010 211 ITAT-Mum.
S. 163 of Income-tax Act
A.Y. : 2001-02. Dated : 14-5-2010
Indian company purchasing shares of another Indian company
from non-resident—Non-resident assessed to tax—AO treated Indian company as
agent and also assessed tax in its hands—Held : (i) withholding tax u/s.195 is
not a bar to order u/s.163; (ii) there is no time limit u/s.163; and (iii) same
income cannot be assessed simultaneously in hands of non-resident as well as
agent.
Facts :
The taxpayer was an Indian company (‘IndCo’). IndCo purchased
shares of another Indian company from a foreign company. the foreign company was
a non-resident in terms of the Income-tax Act. The non-resident applied to the
AO u/s.197 of the Income-tax Act for lower withholding tax on the sale proceeds
of the shares. The AO issued certificate for lower withholding tax. Based on
this certificate, IndCo withheld and deposited the tax. Pursuant to the transfer
of the shares, the non-resident was chargeable to capital gains tax.
The non-resident furnished the return of its income. In the
course of assessment, the AO while assessing the non-resident, also issued
notice u/s.163 of the Income-tax Act to IndCo as representative assessee of the
non-resident, because the non-resident was in receipt of income from IndCo.
IndCo contended before the AO that as per the scheme and intent of the
Income-tax Act and particularly the provisions of S. 160(1)(i) read with S.
161(1), S. 162 and S. 163, no person could be treated as ‘Agent’, in relation to
a non-resident after the expiry of previous year corresponding to the assessment
year in question. The AO however, treated IndCo as Agent on the basis of plain
reading of S. 163(1), S. 160(1)(i) and S. 149(3).
The CIT(A) dismissed the appeal of IndCo.
Held :
The Tribunal held that :
-
The non-resident received
income from IndCo. Therefore S. 163(1)(c) was attracted. Liability is not
fastened on the representative assessee merely on passing of order u/s.163.
-
The fact that the agent
had withheld tax u/s.195 cannot be a bar to pass order u/s.163.
-
The Income-tax Act does
not contemplate any time limit for initiating proceeding u/s.163. The purpose
of S. 163 is to secure payment of taxes by the non-resident. The proceedings
were also not time-barred under the
Income-tax Act. Hence order u/s.163 was valid.
-
In a similar issue in
Saipem UK Ltd v. DDIT, (2008) 298 ITR (AT) 113 (Mum.), the Mumbai Tribunal has
held that the same income cannot be assessed simultaneously in the hands of
the non-resident as well as the agent, since such double taxation militates
against the cardinal principles of taxation. Hence, once the assessment in the
case of principal becomes final, the assessment of the same income in the
hands of the agent cannot be made. Therefore the assessment of capital gain of
the non-resident in the hands of IndCo was not proper.
