2010 (5) TMI 540 - AT - Income Tax

Tribunal Decision: Representative Assessee, Capital Gains Assessment, Interest Levy, Computation of Gains

The Tribunal upheld the decision treating Hindalco as a representative assessee of Alcan under Section 163. However, it annulled the assessment of capital ... Capital gain - TDS - The order treating Hindalco as Agent of Alcan had been passed on 20.2.2004 i.e. after a period of two years and ten months from the end of the previous year in which Hindalco made payment to Alcan - The income so chargeable to tax was received by Alcan from Hindalco and therefore section 163(1)(c) were clearly attracted - Agent had deducted tax u/s 195 of the Act will not be a bar to proceed and pass an order u/s. 163 of the Act - It is also not the case of Agent that proceedings for assessing income of the principal, is barred by time - The purpose of section 163 is to secure payment of taxes by the non-resident where the non resident subjects himself to proceedings before the AO and expresses his willingness to discharge tax liabilities and if the same is accepted and assessment made on the non resident, there was no necessity to make an assessment on the Agent in India - Since the substantive assessment made by the Assessing Officer in the hands of the principal has been upheld by the learned CIT(A), he was wholly unjustified in confirming the protective assessment in the case of the Agent also - Hon'ble Kerala High court in the case of CIT Vs. Fertilizers & Chemicals (Travancore) Ltd., (1987 -TMI - 25894 - KERALA High Court) has held that the direct assessment on the nonresident would not affect the jurisdiction of the ITO to assess the agent of the non-resident under section 163 - Accordingly the assessee appeal is annulled Regarding interest u/s 234B - Since the relevant orders have already been quashed by us while deciding the assessee’s appeal, the departmental appeal is rendered infructuous and is liable to be dismissed on that ground - In the result, ITA No. 3667/Mum/05 is dismissed. ITA No.4685/Mum/05 is allowed. ITA No.4968/Mum/05 is dismissed. ITA No.6923/Mum/06 is dismissed Issues Involved:1. Treatment of Hindalco as a representative assessee of Alcan under Section 163 of the Income Tax Act.2. Validity of assessing the same capital gains in the hands of both Alcan and Hindalco.3. Deduction of tax at source by Hindalco under Section 195.4. Time limit for initiating proceedings under Section 163.5. Levy of interest under Section 234B.Issue-wise Detailed Analysis:1. Treatment of Hindalco as a Representative Assessee of Alcan under Section 163:The Assessing Officer treated Hindalco as the agent of Alcan for the income received from the sale of shares under Section 163(1). Hindalco contested this, arguing that the conditions under Section 163 were not satisfied and that they had already deducted tax at source as required under Section 195. However, the Tribunal upheld the Assessing Officer's decision, stating that the capital gains derived by Alcan were chargeable to tax and received from Hindalco, thus fulfilling the conditions of Section 163(1)(c). The Tribunal also clarified that the deduction of tax at source does not preclude the passing of an order under Section 163.2. Validity of Assessing the Same Capital Gains in the Hands of Both Alcan and Hindalco:Hindalco argued that once the capital gains were assessed in the hands of Alcan, the same income could not be assessed in their hands as an agent. The Tribunal agreed, referencing the case of Saipem UK Ltd., which held that once the income is assessed in the hands of the principal, it cannot be assessed again in the hands of the agent. The Tribunal annulled the assessment order against Hindalco on this basis.3. Deduction of Tax at Source by Hindalco under Section 195:Hindalco had deducted tax at source as per the certificate issued under Section 197(1). The Tribunal noted that the deduction of tax at source does not bar the initiation of proceedings under Section 163, as these are separate provisions intended to ensure tax compliance.4. Time Limit for Initiating Proceedings under Section 163:Hindalco contended that the proceedings under Section 163 were initiated after an undue delay, causing prejudice. The Tribunal rejected this argument, stating that the law does not prescribe a time limit for initiating proceedings under Section 163, and the assessment of the principal was not barred by time.5. Levy of Interest under Section 234B:The Tribunal did not delve into the issue of interest under Section 234B in detail, as the primary assessment order against Hindalco was annulled. Consequently, the departmental appeal on this issue was rendered infructuous and dismissed.Conclusion:The Tribunal dismissed Hindalco's appeal against the order treating it as a representative assessee under Section 163. However, it annulled the assessment of capital gains in Hindalco's hands, as the same income had already been assessed in Alcan's hands. The appeals regarding the levy of interest under Section 234B and the computation of capital gains were dismissed as infructuous.