Liability to deduct income tax on payments to an alleged non-resident firm remanded after erroneous determination of jurisdictional fact.

Whether a payer was liable to deduct tax on payments to a firm characterised as non-resident turned on the correctness of a jurisdictional fact; the Income-tax Officer cannot confer jurisdiction by erroneously deciding that fact, and such errors are open to challenge by writ of certiorari, with the consequence that the impugned appellate decision was set aside and the matter remanded for fresh consideration. The court emphasised that a special appeal provision requiring prior deduction and payment of tax cannot be invoked by a payer who contends the payee is not a non-resident.

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Issues: Jurisdiction of the Income-tax Officer to determine residency status of a firm; Competency of appeal under section 30(1A) of the Income-tax Act.

In this case, the appellant was directed by the Income-tax Officer to pay tax on a sum remitted as selling commission to a firm in Indonesia. The appellant contended that the firm was not a non-resident firm, but the Income-tax Officer disagreed. The Appellate Assistant Commissioner rejected the appeal on the grounds of non-compliance with conditions under section 30(1A). The Tribunal upheld this decision. The High Court, in a writ petition, initially ruled in favor of the appellant, stating the firm was not non-resident. However, the Appellate Bench reversed this decision, asserting that the Income-tax Officer had the jurisdiction to determine the residency status. The Supreme Court disagreed, emphasizing that a quasi-judicial authority cannot assume jurisdiction by deciding a jurisdictional fact erroneously. The Court held that the Appellate Bench's conclusion was incorrect, and the High Court had the authority to review such decisions through a writ of certiorari.

Regarding the competency of appeal under section 30(1A), the revenue argued that the appellant could have appealed if the tax amount had been deposited. However, the Court noted that this provision does not apply when the appellant disputes the non-resident status of the firm. If the appellant's contention is correct, they could not have deducted tax from a non-resident firm. Consequently, the Court allowed the appeal, set aside the Appellate Bench's order, and remanded the case for a fresh decision, enabling the appellant to present all relevant points. The costs of the appeal were to be borne by the appellant.

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