Law: Income Tax Act, 1961

Section: 162

Income-tax----Representative assessee---Agent of non-resident---Liability of agent to its principal---Amount retained by agent towards payment of surtax in 1987--¬Amount paid in response to notice under S. 226(3) of Income-tax Act, in .1990---Claim by non-resident that it was not liable to pay surtax and for return of such amount---Amount had not been retained wrongfully by agent---Difference due .to fluctuation in exchange rate between time when amount was retained and time when it was paid to Revenue was not payable by agent to non-resident---Indian Income Tax Act, 1961, S.162---Indian Arbitration Act; 1940, S.30. The petitioner was a statutory public sector corporation engaged in oil exploration, development and production of oil and natural gas. It invited tenders from qualified marine construction contractors. M, a foreign company submitted a bid which was accepted by the petitioner. Thereafter, disputes arose between the petitioner and M which were referred to arbitration. One of the disputes pertained to the amount of US ,$ 432,500.35 retained by the petitioner towards payment of the surtax liability of M. According to M, its chargeable profit did not exceed 15 percent. of its capital as computed in accordance with the Surtax Act and it was, therefore, not labile to pay any surtax nor was any surtax due from or payable by it. This amount had been wrongfully withheld. Admittedly, the petitioner had on May 21, 1990, deposited with the Income-tax Authorities a sum of Rs.88,16,484 on the basis of notices under section 226(3) of the Income Tax Act, 1961, the said amount having been held to be due by the income-tax authorities from M. An alternative claim was made that giving credit for the amount paid to the Income-tax Authorities by the petitioner, M was entitled to get .US $ 100,733.89 and interest thereon. The stand taken by the petitioner was that it had really retained the amount- with it under section 162 of the Income Tax Act, 1961. The petitioner also referred to a letter received from the Income-tax Department by which the petitioner was directed not to release the surtax amount till further orders. Pursuant to an order under section 226(3) of the…

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