Law:

Section:

Section 163 of the Income-tax Act, 1961 - Non-resident - Statutory agent of - Whether the department has the authority to assess the representative assessee in respect of the income earned by the non-resident through the representative assessee separately in a case where, in regard to other items of income, the non-resident has already been assessed directly - Held, yes - Whether in absence of consideration by Tribunal of question of existence of business connection between assessee and non-resident, question of validity of treating assessee as agent of non-resident cannot be decided -Held, yes Interpretation of statutes - Generalia specialibus nonderogant Facts The assessee-company had entered into a collaboration agreement with a UK company 'P' for the construction of synthesis gas plants. The assessee was to pay a fee to the company 'P'. So far as the payments of fee were concerned, the ITO treated the assessee-company as the agent of the non-resident foreign company under section 163. The AAC 'on appeal' cancelled the assessment order made under section 163 holding that the assessee-company could not be treated as an agent of the foreign company as there was no business connection between the foreign company and the assessee and that since the non-resident foreign company had already been assessed directly in India, the said foreign company should not have again been assessed 'through an agent'. The Tribunal upheld the AAC's order. On reference the assessee contended that once the department made an assessment upon the non-resident directly, it could not later on initiate proceedings in terms of section 161 and assess the representative assessee in respect of the income earned by the nonresident through him, but was omitted to be included In the total income of the non-resident. In such cases of omission, the assessee submitted that the only possible method that could be adopted by the department was to assess the said income by initiating proceedings under section 147. On reference: Held The object sought to be achieved in enacting sections in Chapter XV is to fasten on the person who actually carries on the business, the liability to pay the tax on the…

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