The Premier Automobiles Ltd. Vs. S.N.
Shrivastava & ANR [1968] INSC 244 (10 October 1968)
10/10/1968 SHAH, J.C.
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 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]
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 Income tax Act,
1961. The petition was resisted by the Income-tax Officer.
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 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 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 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.
Back
