1972 (9) TMI 15 - SC - Income Tax

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 ... Jurisdictional fact - non-resident - power of writ of certiorari - statutory duty to deduct tax at source - maintainability of appeal under section 30(1A)Jurisdictional fact - power of writ of certiorari - Validity of the Income tax Officer's decision that Messrs. Nathirmal and Sons was a non resident as a jurisdictional fact and whether that decision is immune from High Court review. - HELD THAT: - The Court held that a quasi judicial authority such as the Income tax Officer cannot confer jurisdiction on itself by erroneously deciding a jurisdictional fact. The correctness of the officer's conclusion on the question of residence is open to examination by the High Court in an application for certiorari; if the High Court finds that the officer 'clutched at the jurisdiction' by erroneously deciding the jurisdictional fact, relief by certiorari is appropriate. The Appellate Bench's view that the Income tax Officer could 'decide either way' on the question of residence was rejected as wholly wrong.The Income tax Officer's determination of residence is reviewable by the High Court and is not a self conclusive jurisdictional fact immune from certiorari.Maintainability of appeal under section 30(1A) - statutory duty to deduct tax at source - Whether an appeal under section 30(1A) is available to a person who disputes that the payee is a non resident and has not deducted and deposited tax as required. - HELD THAT: - The Court observed that, even assuming section 30(1A) applied, a person seeking to avail that appellate remedy must have first complied with the statutory preconditions: deduction of tax from the non resident and payment of the amount so deducted to the Government. Those prerequisites cannot be satisfied by a payer who maintains that the payee is not a non resident (and therefore that no deduction was due). Consequently, section 30(1A) cannot be invoked by a person who disputes the residency status of the payee and has not performed the deduction and payment obligations.Section 30(1A) is not available to a payer who contests that the recipient is a non resident and has not deducted and deposited tax as required.Remand for fresh decision - Disposition of the appeal in the light of the errors identified in the Appellate Bench's reasoning. - HELD THAT: - Having found the Appellate Bench's conclusion erroneous (particularly insofar as it treated the Income tax Officer's finding on residence as beyond review), the Court set aside that order and remanded the matter to the Allahabad High Court Appellate Bench for fresh consideration of the appeal. The assessee is entitled to raise all points taken in the proceedings when the Appellate Bench decides the appeal afresh.Order of the Appellate Bench set aside and the matter remanded to the Allahabad High Court for fresh adjudication of the appeal.Final Conclusion: Appeal allowed; Appellate Bench's order set aside. The question whether the payee firm is non resident is reviewable by the High Court by certiorari; section 30(1A) cannot be relied upon by a payer who disputes the payee's non resident status and has not deducted and deposited tax. Matter remanded to the Allahabad High Court Appellate Bench to decide the appeal afresh, with liberty to the assessee to urge all points. 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.