Tax at source remains payable on sums to non-residents despite payment through an instructed Bombay agent.

Section 18(3A) of the Income-tax Act, 1922 fastened the duty to deduct tax at source on any person responsible for paying a chargeable sum to a non-resident, unless the payer was himself liable as agent. Payment routed to the non-resident's Bombay agent at the non-resident's instruction did not alter the assessee's underlying liability to the Hongkong firm or the non-resident's right to receive the amount. The same principle applied under section 18(3C) for super-tax. The payer therefore remained bound to deduct income-tax and super-tax at source, and the position favoured the Revenue.

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Issues: Whether the assessee, being the person responsible for paying a sum chargeable to income-tax to a non-resident, was bound to deduct tax at source notwithstanding that payment was made to the non-resident's Bombay agent at the non-resident's instruction.

Analysis: Section 18(3A) of the Income-tax Act, 1922 fastened the obligation to deduct income-tax on any person responsible for paying to a person not resident in the taxable territories any sum chargeable under the Act, unless such person was himself liable as agent. The correspondence only indicated a mode of payment suggested by the non-resident and did not alter the underlying legal responsibility of the assessee to the Hongkong firm. The nomination of the Bombay agent for receipt of payment did not change the character of the liability or the right of the non-resident to receive the amount. The position under section 18(3C) with respect to super-tax was identical.

Conclusion: The assessee remained liable to deduct income-tax and super-tax at source, and the answer was in the affirmative, in favour of the Revenue.

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