PREMIER AUTOMOBILES LIMITED Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THIS petition has been filed by the Premier Automobile Limited under article 226 of the Constitution to challenge certain orders passed by an Income -tax Officer who is respondent No. 1 to the petition and confirmed by the 2nd respondent, the Appellate Assistant Commissioner for Income -tax.

(2.) THE petitioner carries on the business of assembling and manufacturing motor vehicles. For enabling the petitioner to carry on that business, the petitioner entered into an agreement with Messrs. Chrysler Corporation of the U. S. A. in 1947. For some years past the petitioner has been assessee to income -tax as the statutory agent of Messrs. Chrysler Corporation in respect of the income earned by the Corporation under the said agreement. These assessment orders are the subject of references made to this court by the Labour Appellate Tribunal. We are not concerned with those orders in the present petition. The facts which gave rise to the present petition are that on 17th September, 1962, the 1st respondent served a notice on the petitioner under section 163 of the Income -tax Act, 1961 (hereinafter referred to as the Act), requiring the petitioner to show cause why the petitioner should not be treated as the agent of Messrs. Chrysler Corporation for the assessment year 1963 -64. It is common ground that the accounting year in question was from 1st July, 1961, to 30th June, 1962, so that the above notice was given after the termination of the accounting year and prior to the commencement of the assessment year. The petitioner objected to the issue of the notice on the ground, inter alia, that a notice under section 163 of the Act could not be validly issued before the commencement of the assessment year. The objection was overruled by the 1st respondent, who by his order dated 7th November, 1962, appointed the petitioner a statutory agent of Messrs. Chrysler Corporation for the assessment year 1963 -64. Then on 11th December, 1962, the 1st respondent issued an order under section 210 of the Act calling upon the petitioner as the statutory agent of Messrs. Chrysler Corporation to pay Rs. 75,000 and odd as advance payment of income -tax for the said assessment year. The petitioner filed appeals before the 2nd respondent from the two orders under sections 163 and 210 of the Act respectively. The 2nd respondent held that the order under section 163 appointing the petitioner a statutory agent of Messrs. Chrysler Corporation was correct and that the order under section 210 calling upon the petitioner to pay advance tax was not appealable. Both the appeals were accordingly rejected by the 2nd respondent. This petition seeks to quash the 1st respondent's orders under sections 163 and 210 and the appellate order of the 2nd respondent.

(3.) IN order to appreciate the main argument advanced by Mr. Palkhivala on behalf of the petitioner, it is necessary to notice some relevant provisions of the Act. Section 9 of the Act deals with income which is deemed to accrue or arise in India and section 9(1)(i) provides, inter alia, that all income accruing or arising, whether directly or indirectly, through or from any business connection in India, shall be deemed to accrue or arise in India. Under section 5(2) a person who is a non -resident is liable to income -tax for income which accrues or arises or is deemed to accrue or arise to him in India during any previous year. It is thus clear that Messrs. Chrysler Corporation as a non -resident was assessable to income -tax for the income derived by it from its agreement with the petitioner if it is held that the agreement and its implementation amounted to a business connection between the two. Then section 163, so far as it is relevant to the present petition, provides that, in relation to a non -resident, an agent includes any person in India who has a business connection with non -resident. Sub -section (2) of section 163 provides that an opportunity of being heard shall be given to a person before he is treated as the agent of a non -resident. Now, an agent appointed under section 163 is a representative assessee as defined by section 160. According to section 160, the expression 'representative assessee' includes the agent of a non -resident as well as a person who is treated as an agent under section 163 in respect of the income of the non -resident specified in clause (i) of sub -section (1) of section 9. The expression 'representative assessee' also covers other persons such as the guardian or manager of the income of a minor, lunatic or idiot, the court of wards, a trustee under a trust deed, etc. Section 161 defined the liability of a representative assessee. Sub -section (1) of section 161 provides : 'Every representative assessee, as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income; but any such assessment shall be deemed to be made upon him in his representative capacity only, and the tax shall, subject to the other provisions contained in this Chapter, be levied upon and recover from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him.'