H. L. SUD, INCOME-TAX OFFICER, BOMBAY vs. TATA ENGINEERING & LOCOMOTIVE CO. LTD. BOMBAY

CIVIL APPEAL No. 688/1968Supreme Court[1969] 2 S.C.R. 2106 September 1968Bench: 3 JudgesAuthor: J.C. SHAH, V. RAMASWAMI, A.N. GROVER8 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court held that the respondent could not be treated as an agent of the non-resident firms for the assessment year 1962-63, and therefore, advance tax could not be demanded under Section 18A for that year on that basis. The Court reasoned that the assessment for each year is self-contained. The vicarious liability imposed by an appointment under Section 43 extends only to the assessment year for which the appointment is made and cannot extend to any other assessment year. The expression "for all purposes" in Section 43 means for all purposes related to the assessment year for which the appointment is made, such as imposing tax liability, determining its quantum, and recovering it. The liability sought to be imposed under Section 18A in this case was for a subsequent assessment year (1962-63), not the year for which the appointment was made (1961-62). Therefore, a fresh appointment under Section 43 was necessary for the assessment year 1962-63. The Court noted that no notice was served, no opportunity to be heard was given, and no formal order was passed under Section 43 for the assessment year 1962-63. The Court upheld the High Court's decision, dismissing the appeals.

What were the facts?

The respondent, Tata Engineering & Locomotive Co. Ltd., collaborated with non-resident German firms. For assessment years up to 1961-62, the Income-tax Officer (ITO) issued notices under Section 43 of the Indian Income-tax Act, 1922, treating the respondent as the agent of these firms. However, for the assessment year 1962-63, no such notice or order was issued. Despite this, the respondent received demand notices under Section 29 and an order under Section 18A(1) requiring advance tax payment for 1962-63 as agent for the German firms. The respondent denied liability, and the Commissioner of Income-tax rejected their representation. The respondent filed writ petitions in the High Court, which quashed the demand notices. The ITO appealed to the Supreme Court.

What were the issues?

1. Whether the respondent could be treated as an agent of the non-resident firms for the assessment year 1962-63, thereby making them liable for advance tax under Section 18A, despite no fresh notice or order under Section 43 being issued for that year? Assessee's Contention: The respondent argued that since no notice under Section 43 was issued for the assessment year 1962-63, they could not be treated as the agent of the non-resident firms for that year, and thus advance tax could not be demanded from them. They relied on the principle that an appointment as an agent under Section 43 is year-specific. Revenue's Contention: The appellant (ITO) argued that an appointment made under Section 43 was good for all purposes of the Act, including Section 18A. They contended that the appointment made for the assessment year 1961-62 was sufficient, and the advance tax demanded for the financial year 1961-62 (which corresponded to assessment year 1961-62) was rightly levied. They also noted that the appointment under Section 43 was made on October 21, 1961, and the demand notices were issued subsequently on November 2/3, 1961.

Which sections of the Income-tax Act were involved?

Section 18A,Section 43,Section 29

AI-generated summary — verify with the full judgment below

A . ' B c D E F ' G H H. L. SUD, INCOME·TAX OFFICER, BOMBAY v. TATA ENGINEERING & LOCOMOTIVE CO. LTD. BOMBAY September 6, 1968 [J, C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.)

Income-tax Act (11 of 1922), ss. l8A and 43-Advance tax of non- resident firm-Liability of agent of the firm-Whether notice to be given each year.

The respondent-company, carried on manufacturing business in colla· boration with some non-resident German firms.

For each of the assess- ment years up to 1961-62, the Income-tax Officer issued a notice to the respondent under s. 43 of the Indian Income-tax Act, 1922, intimating that he intended treating the respondent as the agent of the non-resident firms, and thereafter passed orders treating the respondent as agent of the firms.

For the ass.,sment year 1962-63 no notice under s. 43 was issued or served upon the respondent by the Income-tax Officer and no order under that section was passed treating the respondent as their agent. The respondent received from the Income-tax Officer notic°' df demand under s. 29 together with an order under s. 18A(l) calling upon the respon- dent to make advance payment of the tax for the assessment ye

The order continues below.

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