S. 149(3) of the Income-tax Act, 1961 — Whether the time limit provided u/s.149(3) applies to the asses-see who has voluntarily filed the return of his principal non-resident, and in whose case no order u/s.163 has been passed treating him as the agent of

J. M. Baxi & Co., as agents of Chartering Singapore Pte Ltd. v. DDIT ITA No. 2965/M/2006 to ITA No. 2968/M/2006 A.Ys. : 1998-99 to 2002-2003. Dated : 5-3-2009

S. 149(3) of the Income-tax Act, 1961 — Whether the time limit provided u/s.149(3) applies to the asses-see who has voluntarily filed the return of his principal non-resident, and in whose case no order u/s.163 has been passed treating him as the agent of the non-resident — Held, No.

Facts :

M/s. J. M. Baxi & Co. (‘the assessee’) filed returns for A.Ys. 1998-99 to 2002-03 as agent of non-resident Singapore company, M/s. Thaoresen Chartering Singapore Pte Ltd. (TCSPL). In the returns filed the assessee and its principal claimed that under Article 8 of Double Tax Avoidance Treaty, the freight collected in India on account of various vessels owned/ chartered by TCSPL was taxable at a lower rate. The returns filed were accepted u/s.143(1) of the Act. Subsequently, the AO issued notices u/s.148 dated 6-1-2005 to the assessee as agent of non-resident.

Since the notices issued u/s.148 in the first three assessment years i.e., 1998-99, 1999-2000 and 20002001 were issued after the expiry of period of two years from the end of the relevant assessment year the same were claimed to be out of time u/s.149(3) on the ground that the assessee was an agent of a non-resident. On the other hand, the Revenue contended that the provisions of S. 149(3) do not apply to a person who is ‘agent’ under general law and that since the assessee has never been ‘treated as an agent’ u/s.163, the notices issued are not barred by the limitation prescribed u/s.149(3).

Since the Regular Bench found conflict of decisions between various authorities, the matter was referred to the Special Bench.

Held :

S. 160 to S. 166 are machinery and enabling provisions and give the Department the option to either assess the non-resident or his agent. A non-resident or his agent cannot claim that he be assessed under a particular clause of S. 163 and not u/s.160(1)(i) read with S. 161.

Under provisions of S. 160 to S. 166, there are agents of two types : (1) agents who admit their liability as agents of non-resident. Such liability may be expressly admitted or it may be implied from their act and conduct. Having accepted themselves to be ‘agent’ of the non-resident, the question of giving opportunity of being heard to such agents or passing order, treating them as agent of non-resident, would not arise. (2) There can be agents u/s.160(1)(i) or u/s.163(1), who deny their liability to be agents of the non-resident assessee. Because of their stand, it becomes necessary for the AO to allow them an opportunity of being heard and then adjudicate the matter relating to their liability to be agent in terms of S. 163(2). When an order u/s.163(2) is passed holding such persons to be agent of the non-resident, such person falls in the category of persons who are treated as agents u/s.163. Whether a particular person would fall under first category or second category, would depend upon facts and circumstances of the case.

S. 149(3) applies only in a case where a person is ‘treated as an agent’ of a non-resident u/s.163 i.e., persons disputing their liability as agent. It does not apply to persons who have voluntarily treated themselves as agent of the non-resident.

The SB upon going through the various clauses of the agreement entered into by the assessee with its principal and upon consideration of other facts viz. that the assessee had not disputed its liability to be assessed as an agent of the non-resident; it had signed income-tax returns and had filed them as agent for and on behalf of the non-resident, several documents were furnished with the income-tax authorities including an undertaking that taxes due from the non-resident would be paid by the asses-see, came to a conclusion that the assessee had treated himself as the ‘agent’ and that it was not necessary for the authorities in this case to provide any opportunity of being heard to the assessee as regards its liability to be treated as an agent under the Act, nor was there any necessity to pass any order in terms of S. 163(2). The time limit prescribed in S. 149(3) was held to be not applicable. The question referred to the SB was answered in favour of the Revenue and against the assessee.