DTAA relief and agency status require independent verification before exemption from Indian tax is accepted

An assessee claiming to have acted only as an agent of a UK company could not rely on that assertion or on treaty exemption without independent verification of the relationship and the applicability of the DTAA to the receipts. Material produced for the first time in appeal had not been confronted to the Assessing Officer, and the relevant treaty provisions were not examined against the income in question. Since income received or accrued in India is taxable under section 5 of the Income-tax Act, 1961, relief under the treaty had to be specifically established. The existing finding of agency and exemption was therefore not sustained, and the assessment was remitted for fresh examination.

---

---

Issues: Whether the finding that the assessee acted only as an agent of the UK company and the claimed treaty exemption required acceptance, or whether the matter had to be remitted for fresh examination.

Analysis: The assessee's claim of acting merely as an agent of the foreign company was not verified on the record before the Assessing Officer. The appellate order had relied on material furnished during appeal without confronting it to the Assessing Officer and without examining the relevant treaty provisions or their applicability to the receipts in question. Since income received or accrued in India is taxable under section 5 of the Income-tax Act, 1961, any claim of relief under Chapter IX had to be established by showing that the income was covered by the applicable treaty articles. The relationship between the entities and the entitlement to DTAA relief therefore required independent examination. The annual no objection certificate did not preclude such scrutiny.

Conclusion: The finding of agency and treaty exemption was not sustained on the existing material, and the assessment had to be reconsidered afresh by the Assessing Officer.

---