Tax deduction at source from non-resident payments is not barred by the absence of prior agent determination under section 43.

Under section 18(3B) of the Indian Income-tax Act, 1922, a payer's duty to deduct tax from payment to a non-resident depends on the payment being chargeable under the Act, unless the payer has already been made liable as the non-resident's agent. Section 43 is an assessment machinery provision for fixing liability on an agent, and its notice and adjudication requirements are not a condition precedent to deduction under section 18(3B). The exception operates only where agent liability has in fact been established. The payer was therefore liable to deduct tax, and the absence of a prior section 43 determination did not excuse non-deduction.

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Issues: Whether, under section 18(3B) of the Indian Income-tax Act, 1922, the payer was liable to deduct tax from the sum paid to a non-resident corporation without a prior determination under section 43 that the payer was an agent of the non-resident.

Analysis: The liability to deduct under section 18(3B) turns on whether the payment is to a non-resident and is chargeable under the Act, unless the payer is himself liable to pay tax as an agent. Section 43 is concerned with the appointment and assessment of a statutory agent and operates as machinery for assessment of a non-resident through an agent. The prior service of notice and adjudication contemplated by section 43 are required when the Department seeks to impose substantive assessment liability on an agent, but they are not a condition precedent to the payer's obligation to deduct under section 18(3B). The exception in section 18(3B) is for the benefit of the payer, and it must be shown that the payer has in fact been made liable as an agent.

Conclusion: The payer was liable to deduct tax under section 18(3B), and the absence of a prior determination under section 43 did not exempt it from that obligation.

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