Law:

Section:

Section 195 of the Income-tax Act, 1961 [Corresponding to section 18(3B) of the Indian Income-tax Act, 1922] - Deduction of tax at source - Payment to non-resident - Assessment year 1954-55 and 1955-56 - Petitioner/assessee, an Indian Company, acquired exclusive right to exploit forests in North Andaman - In order to carry out exploitation, petitioner chartered a vessel from 'S' Co. of Honkong - As per terms of charter-party agreement, petitioner had been paying hire charges at London - Further, in accordance with terms of charter-party, petitioner made certain payments towards advances to vessel owner in Calcutta (i.e. within Indian territory) which were to be adjusted subsequently from hire charges - Whether since aforesaid payments were made to vessel owner (i.e. non-resident company) within taxable territory, tax was to be deducted in terms of section 18(3B) of 1922 Act while making said payments - Held, yes - Whether, therefore, order passed by revenue authorities to that effect was to be affirmed - Held, yes FACTS The petitioner was a company incorporated in India under the Indian Companies Act, 1956, and had its registered office situate in Calcutta. In 1954, the petitioner came to have exclusive right to exploit forest in North Andamans from the Government of India. In order to carry out the exploitation, it was found necessary for the company to charter a ship for carrying timber from the Andamans to Indian ports. By a charterparty dated 25-8-1954, executed in London, the petitioner company chartered from 'S' Co. of Hongkong, a vessel on terms and conditions contained in the said charter party. The petitioner had been paying the owners in terms of the charter-party agreement, at London. During the relevant period it had also made disbursements in terms of clause 14 of the charter by advancing funds by way of disbursements on the vessel's account. The particulars of disbursements were contained in a statement furnished by the petitioner itself to the ITO. Upon receipt of the statement, the ITO wrote to the petitioner company that it was apparent that certain amount was constructively received in India by the non-resident owner of the above-mentioned…

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