Law: Income Tax Act, 1961

Section: 9,9(1)(ii),201,201(1A),256

Income-tax--Reference---Deduction of tax at source---Interest---Salaries earned in India by foreigners---Part of salary paid outside India---Failure to deduct tax on part of salary paid outside India---Finding by Tribunal that failure was due to bona fide belief that part of salary paid outside India was not chargeable to tax---Tribunal not expressing any view on question whether amendment to S.9(1)(ii) was retrospective---Deletion of penal interest under S.201(lA) by Tribunal was valid---No question of law arose from its order--­Indian Income Tax Act, 1961, Ss.9, 201 & 256. The assessee was a foreign company with its head office in France. It paid salaries to some of its foreign employees posted in India, which included the amounts payable in France as "part francaise". However, the assessee did not deduct or deposit income-tax on the said amount under section 192 of the Income Tax Act, 1961. This fact came to the notice of the Revenue during search operations conducted at the premises of the assessee. The Income Tax Officer levied penal interest under section 201(lA) of the Act for non-deduction of tax by the assessee on the aforenoted amount. The assessee's appeal to the Commissioner of Income-tax (Appeals) failed but in further appeal to the Tribunal, the interest so levied was deleted. On an application to direct reference: Held, that the Tribunal had nowhere expressed its view on the question whether the amendment of section 9(1)(ii) of the Act is prospective or retrospective. It had merely observed that prior to the said amendment the assessee was under the bona fide belief that no tax was chargeable on the afore noted portion of the salary paid to its employees outside India. This ending had not been challenged by the Revenue. Hence, no question of law arose from the order of the Tribunal. CIT v. S.G. Pgnatale (1980) 124 ITR 391 (Guj.) ref. JUDGMENT By this application under section 256(2) of the Income Tax Act, 1961, the Revenue seeks a direction to the Income-tax Appellate Tribunal to draw up a statement of the case and refer the following questions, stated to be one of law, in respect of the assessment year 1983-84, for the opinion of this Court:…

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