H L SUD INCOME TAX OFFICER COM PANIES CIRCLE 1 1 BOMBAY Vs. TATA ENGINEERING AND LOCOMOTIVE COMPANY LIMITED

JUDGEMENT

(1.) The respondent is a limited company incorporate under the Indian Companies Act, 1913 and carries on business of manufacturing and selling diesel trucks and bus chassis, locomotives and other heavy engineering products. The respondent manufactures diesel trucks and bus chassis in collaboration with the German firm "Daimler Bens A. G." The business of manufacturing locomotives is carried on by the respondent in collaboration with the German firm "Kruss Maffei A. G." For each of the assessment years from 1955-56 to 1961-62, the Income-tax Officer issued a notice to the respondent under S. 43 of the Indian Income Tax Act, 1922 (hereinafter called the 'Act') intimating that he intended treating the respondent as the Agents of the two German firms. In pursuance of the notices the Income-tax Officer actually passed orders under S. 43 of the Act treating the respondent as agent of the said two German firms. For the assessment year 1962-63 no notice under S. 43 of the Act had been issued observed upon the respondent by the Income-tax Officer and no order under that section had been passed treating the respondent as the agent of the two German firms. On September 8, 1961, the respondent received from the Income-tax Officer notices of demand under S. 29 of the Act together with an order under S. 18-A (i) calling upon the respondent to make advance payment of the tax for the assessment year 1962-63 as agent of the said two German firms. The tax demanded was Rs. 90,833.29 in the case of Krauss A. G. and Rs. 6,32,629.62 in the case of Daimler A. G. By its reply dated September 22, 1961, the respondent denied its liability to make advance payment of tax. The respondent also made a representation to the Commissioner of Income-tax but on April 16, 1962, the respondent received a communication from the Commissioner rejecting its representation. The respondent thereupon filed two petitions in the Bombay High Court challenging the action of the Income-tax Officer demanding advance tax and asking for the grant of a writ in the nature of certiorari to quash the notices of demand under S. 29 of the Act. By its judgment dated April 17/18, 1963, the High Court allowed the petitions and granted a writ quashing the notices of demand issued to the respondent and restraining the Income-tax Officer from taking any further steps or proceedings in the enforcement of the said notices. These appeals are brought by special leave to this Court on behalf of the Income-tax Officer, Companies Circle, Bombay, hereinafter called the 'appellant.'

(2.) Sections 18-A, 42 and 43 of the Act, as they stood at the material time, are to the following effect:

(3.) On behalf of the appellant Mr. Sukumar Mitra addressed the argument that an appointment made under S. 43 of the Act was good for all purposes of the Act and therefore also for the purpose of S. 18-A of the Act. It was said that under S. 18-A, advance payment of tax is liable to be made in the current financial year that the assessment year 1961-62 is the same as the financial year 1961-62 and that for the said financial year in which the advance payment of tax was called to be made by the respondent, there was already an appointment of the respondent as the statutory agents of the non-resident firms, the advance payment of tax was rightly demanded from the respondent. The appointment of the respondent under S. 43 of the Act made on October 21, 1961 and the notice of demand in the present case were issued on November 2/3, 1961 and therefore subsequent to the said appointment. It was therefore contended that the advance payment of tax was properly demanded from the respondent and the respondent could not challenge the notices issued to it. In our opinion, there is no warrant or justification for the argument advanced on behalf of the appellant. The liability imposed upon a person by his appointment as a statutory agent under S. 43 of the Act is only in respect of the liability for the assessment year for which the appointment is made. The appointment of the respondent for the assessment year 1961-62 was in respect of the liability of the non-resident firms for the income of the previous year for the said assessment year 1961-62. Having regard to the scheme of the Act, the assessment for each year is self-contained and the vicarious liability imposed by an appointment under S. 43 of the Act only extends to the liability for the assessment of the year for which the appointment is made and cannot extend to the liability for any other assessment. Nor can the expression "for all purposes" used in S. 43 of the Act extend the liability to any other assessment excepting the liability for the assessment year for which the appointment is made. The expression "For the purposes", in our opinion, only indicates that when an appointment is made for a particular assessment year it is good for all purposes as far as that assessment is concerned i. e. for all purposes for imposing tax liability, determining the quantum of the liability and for recovering it. The liability sought to be imposed under S. 18-A of the Act is not in respect of the income-tax for the assessment year for which the appointment is made but for a subsequent assessment year. For the recovery of income tax of the said subsequent year unless there is a fresh appointment of the respondent under S. 43 of the Act as a statutory agent, no such liability can be imposed on the respondent by the Income-tax authorities. It is true, as Mr. Sukumar Mitra contends, that advance tax which is required to be paid under S. 18-A is charges during the financial year. But it must be remembered that it is charged not in respect of the previous year for which the financial year is the proper assessment yea but it is charges for the tax liability of the subsequent year. In the present case, it is admitted that there was no appointment of the respondent under S. 43 of the Act as statutory agent of the two German firms for the assessment year 1962-63. No notice was served upon the respondent under S. 43 of the Act intimating to the respondent that the appellant intended to treat it as the agent of the non-resident German firms for the assessment year 1962-63. No opportunity was given to the respondent to be heard in the matter, nor was any formal order passed under S. 43 of the Act by the appellant treating the respondent as the agent of the non-resident German firms for the assessment year 1962-63. Although a person may fail in a particular year to resist the claim that he is an agent, circumstances may alter in the next claim and be may be able to resist the claim then. Hence notice shall have to be given by the Income-tax Officer for each assessment year to appoint a person as agent. It follows therefore that the respondent could not be treated as an agent of the two German firms for the assessment year 1962-63 and advance tax could not be demanded under S. 18-A of the Act for that assessment year treating the respondent as such statutory agent. We are accordingly of the opinion that the notices of demand issued by the appellant to the respondent dated September 5, 1961 were illegal and ultra vires and rightly quashed by the High Court by the grant of a writ in the nature of certiorari under Article 226 of the Constitution.