Tax deduction at source under section 195 can be examined without first deciding agent status under section 163

Business connection and resulting agency on the facts of the agreement were treated as questions of fact, not as raising a question of law in reference jurisdiction. The text also states that the obligation to deduct tax at source under section 195(1) can be examined without first deciding whether the assessee is an agent under section 163, because the section 195(1) exception operates for the benefit of the person proposed to be made liable. On that basis, the second question was answered in favour of the Revenue and against the assessee.

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Issues: Whether the assessee could be treated as an agent of the non-resident for the purpose of assessment proceedings under the Income-tax Act, 1961, and whether the status under section 163 had to be determined before the requirements of section 195(1) were examined.

Analysis: The determination of business connection and consequent agency, on the facts of the agreement relied upon by the Tribunal, was treated as a question of fact and not as raising a question of law in reference jurisdiction. On the second question, the liability to deduct tax at source was held to arise on the basis of section 195(1), and it was not necessary that the assessee's status as an agent under section 163 should first be adjudicated before examining the other requirements under section 195(1). The exception in section 195(1) operates for the benefit of the person sought to be made liable for deduction.

Conclusion: The second question was answered in the affirmative, in favour of the Revenue and against the assessee. The references were disposed of accordingly.

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