http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6  

PETITIONER: THE PREMIER AUTOMOBILES LTD.

       Vs.

RESPONDENT: S.N. SHRIVASTAVA & ANR.

DATE OF JUDGMENT: 10/10/1968

BENCH: SHAH, J.C. BENCH: SHAH, J.C. RAMASWAMI, V. MITTER, G.K. HEGDE, K.S. GROVER, A.N.

CITATION:  1970 AIR 1386            1969 SCR  (2) 353

ACT:     Indian  Income-tax,  1961,  ss.  160,  163,  209,   210, 212--Agent of non-resident whether liable to  pay   advance- tax  payable  by   non-resident--Provisions  creating   such liability whether violative of Constitution   of India, Art. 14.

HEADNOTE:    The Income-tax Officer, Companies Circle, Bombay treating the petitioner as an agent of a non-resident issued a notice of  demand  under  s. 156 read with s.  210  of  the  Indian Income-tax  Act,  1961.  By this notice the  petitioner  was called  upon  to  pay advance tax as agent  of  the  foreign principal during the financial year 1964-65.  The petitioner filed   a  petition  under  Art.  32  of  the   Constitution challenging the demand.  The contentions. in support of  the petition were: (i) that under ss. 209 and 210 of the  Indian Income-tax Act, 1961 no order for payment of advance tax can be  made  against an agent of a non-resident;  (ii)  that  a provision which authorises collection of advance-tax from an agent of a non-resident infringes the equality clause of the Constitution.   In  support of the first contention  it  was urged  that since under s. 209(1) the amount of  advance-tax payable  by  an  assessee in the financial  year  is  to  be computed on his total income of the latest previous year  in respect  of  which he has been assessed by  way  of  regular ’assessment, an agent cannot be directed to pay  advance-tax the  liability whereof   depends upon the  determination  of total income of the, principal.      HELD: (i) Sections 207 and 208 which impose   liability to   pay  advance-tax  in a financial  year,  s.  210  which authorises  the  Income-tax  Officer to make  a  demand  for payment  of  advance-tax  from a person  who  is  previously assessed,  and s. 212(3) which imposes the duty to  make  an estimate  of  the total income likely to be received  or  to accrue  or  arise.  and  to pay  advance-tax  if  the  total estimated income  exceeds the maximum amount not charge.able to  tax  in  his case by Rs.  2,500/apply  to  every  person whether he is assessed’ in respect of his own income or as a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6  

representative assessed and it is  not  possible  to   imply in  the  application of these:  provisions  ’an  unexpressed limitation on the express words of the statute in favour  of an agent of a non-resident principal. [358 C--D]     It is expressly enacted by s. 161 that as regards income in  respect     of  which  a  person  is  a   representative assessee,   he  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.   It  is  clearly  implicit  therein  that   a representative assessee is not exempt from liability to  pay advance-tax. [357 C]      of   the  liability  to  pay  advance-tax  it  is   not predicated  that the previous year should have come  to.  an end  before the liability can anse.    The previous year  of an   assessee may in some cases end after  the  commencement but before the end of a financial year in which advance  tax is  payable:  it may in other cases  commence and  end  with the financial year.  But the liability to pay advance tax is not in any manner 354 affected  because the previous year ends before or with  the financial year. There is nothing in the Act under which  the liability  to pay advance tax of a  representative  assessee depends  upon  determination of the total for  the  previous year. [357 C--G]     Accordingly,  it could not be held that  the  petitioner was  not  liable to pay advance tax on behalf  of  his  non- resident principal. [358 E--F]     (ii) The plea that the provisions imposing liability  to pay advance tax upon an agent of a non-resident infringe the equality clause of the Constitution  could not be  accepted. The only ground urged, that an assessee may escape liability to pay advance tax when his previous year coincides with the financial year, was without substance. [359 B--C]

JUDGMENT:     ORIGINAL JURISDICTION: Writ Petition No. 67 of 1965.     Petition under Art. 32 of the Constitution of India  for enforcement of the fundamental rights.     M.C.   Chagla,  F.N.  Kaka,  O.P.  Malhotra   and   J.B. Dadachanji, for the petitioner.     B.  Sen,  T.A. Ramachandran and R.N. Sachthey,  for  the respondents.     The Judgment of the Court was delivered by     Shah,  J.   On’  February  25,   1965,   the  Income-tax Officer, Companies Circle I ( 3 ), Bombay, directed that for the  purpose  of  the  Income-tax  Act,  1961,  the  Premier Automobiles   Ltd.-hereinafter   called   ’the   Company--be treated  as  an   agent  of M/s  Dodge  Brothers  of  United Kingdom--a  non-resident  Company.   On  the  same  day  the Income-tax  Officer issued a notice of demand under  s.  156 read  with s. 210 of the Act  calling  upon the .Company  to pay  on  or  before  March  1,  1965,  advance-tax  of   Rs. 11,51,235-91 as agent of the foreign principal  during   the financial  year 1964-65.  The Company then moved a  petition in  this Court for an order quashing and setting  aside  the order under s. 163 and notice of demand under s. 156 for the assessment year 1965-66 and for an injunction or prohibition restraining   the  Income-tax  Officer  from  enforcing   or implementing the order under s. 163 and the notice under  s. 156  read  with  s. 210 of the  Incometax  Act,  1961.   The petition was resisted by  the  Income-tax Officer.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6  

    In  support of the petition counsel for  the    Company raised two contentions:                    (1)  that  under ss. 209 and 210  of  the               Indian  Income-tax  Act, 1961,  no  order  for               payment of advance-tax can be made against  an               agent of a  non-resident; and                    (2)  that  a provision  which  authorises               collection  of advance-tax from an agent of  a               non-resident infringes               the equality clause of the Constitution and is               on that account void.       Sections  207  and 208 of the  Income-tax  Act,  1961, insofar  as they are material, provide:     ’                     207--"(1)  Tax  shall  be   payable   in               advance  in accordance with the provisions  of               sections  208  to 219 in the  case  of  income               other than  income  chargeable under the  head               "Capital gains.""                     208--"Advance  tax shall be  payable  in               the financial year-                     (a)  where the total  income   exclusive               of  capital gains of the assessee referred  to               in   sub-clause (i) of clause (a)  of  section               209   exceeded    the   maximum   amount   not               chargeable  to  income-tax in his case by  two               thousand  five  hundred  rupees; or               (b)   .................................. Section  209 sets out the rules for computation  of   amount of advance-tax payable by an assessee in the financial year. Section 210 provides by sub-s. (1)-                     "Where  a  person  has  been  previously               assessed  by way of regular  assessment  under               this  Act or under the Indian Income-tax  Act,               1922, the Income-tax Officer may, on or  after               the  1st day of April in the  financial  year,               by  order in. writing, require him to  pay  to               the credit of the Central Government  advance-               tax   determined   in  accordance   with   the               provisions of sections 207, 208 and 209." Section,  207,  208,  209 and 210  prescribe  machinery  for imposition of liability for and determination of the quantum of  advance-tax in respect of income which is chargeable  to income-tax in the hands of a person on regular assessment.     Under the Income-tax Act, 1961 a  person is  liable   to be.  assessed to tax in respect of his own income, and  also in  respect  of  certain classes of income  received  by  or accruing  or  arising  others.   He is  also  liable  to  be assessed  to  tax  as a representative  assessee.   That  is expressly so enacted by s. 161 (1 ) which 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 356               that income; but any such assessment shall  be               deemed   to   be   made  upon   him   in   his               representative  capacity only, ....." A representative assessee by sub-s. (1 ) of s. 160  includes amongst  others, the agent of a non-resident in  respect  of the income of a non-resident specified in s. 9 (1 )(i),  and also  a person who is treated as an agent under s. 163.   By

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6  

sub-s.  (2)  a representative assessee is deemed  to  be  an assessee  for  the  purpose  of  the  Act.  By  s.  162  the representative assessee, who as such pays any sum under  the Act,  may recover the sum so paid from the person  on  whose behalf it is paid.  Section 163(1) defines for the  purposes of the Act an "agent" in relation to a non-resident.  Resort to the machinery for assessing a representative assessee  is however not obligatory: it is open to the Income-tax Officer to  make a "direct assessment of the person on whose  behalf or   for  whose  benefit  income  therein  referred  to   is receivable", or to recover "from such person the tax payable in respect of such income". On regular assessment an  agent of a  non-resident  is,   by virtue of s. 160.(1) read with s. 163 liable to be  assessed to  tax and the tax so assessed may be recovered  from  him. The agent, if assessed to tax, has the right to recover  tax paid  by  him from the person whom he  represents:  s.  162. Since  a  non-resident is in respect of income  which  forms part  of his total income liable to be assessed to  tax,  he may also be called upon to pay advance-tax in respect of the income  accruing to. or received by him which forms part  of his total income chargeable to  tax by  virtue  of ss. 4,  5 and  207.   So far there is no dispute.  Counsel   for   the Company however urged that an agent of a non-resident may be assessed  in  regular assessment in respect  of  the  income accruing.  -or arising to his principal,. but he  cannot  be called  upon to pay advance-tax even-though he is by  virtue of s. 160(2) deemed an assessee for the purposes of the Act. Diverse reasons were suggested in support of that  argument. It  was  said  that since under s. 209( 1 )  the  amount  of advance-tax payable by an assessee in the financial year  is to  be computed on his total income of the  latest  previous year  in  respect of which he has been assessed  by  way  of regular  assessment,  an agent cannot be  directed  ’to  pay advance-tax, the incidence of liability whereof depends upon the  ,,determination of total income of the  principal.   We fail  to  see any substance in this argument.   Section  207 imposes   liability for payment of advance-tax, and  s.  208 prescribes the conditions of liability to. pay  advance-tax. Determination  of total income of the previous year  of  the assessee  is  not made a condition of the liability  to  pay advance-tax. Advance-tax payable by an assessee is  computed in the manner provided by s. 209 when the assessee has  been previously assessed to tax.  The Income-tax Officer is  also enjoined  by  s. 210 to issue a notice to a person  who  has been 357 previously  assessed"by way of regular  assessment"  to  pay advance-tax for the financial year.  If the assessee has not been previously assessed by way of regular assessment, he is required  by  s. 212(3) to make an estimate  ’of  his  total income--excluding  capital gains--if it is likely to  exceed the  maximum  amount not chargeable to tax by  two  thousand five   hundred  rupees,   These  provisions  apply  to   all assessees.   If an assessee is chargeable to tax in  respect of his own income or income of others which is chargeable to tax as his own income, those provisions indisputably  apply. It is expressly enacted by s. 161 that as regards income  in respect  of which a person is a representative assessee,  he 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.   It  is clearly  implicit therein that a representative assessee  is not  exempt  from  liability  to  pay  advance-tax.  of  the liability  to pay advance-tax it is not predicated that  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6  

previous  year should have come to. an end before  liability can  arise.   The previous year of an assessee may  in  some cases  end. after the commencement ’but before the end of  a financial  year in which advance-tax is payable: it  may  in other  cases commence and end with the financial year.   But the  liability  to  pay advance-tax. is not  in  any  manner affected  because the previous year ends before or with  the financial  year.  Where an assessees previous, year  is  the financial year, his total income  may not be  determined for the previous year before the  commencement of  the financial year,  but  on  that account no exemption  from  payment  of advance-tax is granted by the Act.  On the commencement of a financial year, a person who. is previously assessed to  tax is  liable  to pay advance-tax on demand by  the  Income-tax Officer under s. 210.  The quantum of tax will be determined by s. 209 and will be adjusted in the manner provided by  s. 210(3).  That applies to every assessee Whether the  tax  is liable to be paid by him on his own total income, or on  the income  assessed.in his hands as a representative  assessee. If  he has not been previously assessed in the character  in which  he is liable to pay tax, an obligation is imposed  by s. 212(3) upon him to make an estimate of his income and  to pay  advance-tax.   That provision also applies to  his  own income  and also to the income in respect of which he  is  a representative assessee.  There is nothing in the Act  under which  the liability to pay advance-tax of a  representative assessee depends upon determination of the total income  for the previous year.     An  argument of hardship was also raised.  It  was  said that an agent of a non-resident may not normally have in his possession any materials on which he may estimate the income in respeet of which he may be chargeable to advance-tax,  if he has not been previously assessed to tax as an agent of  a non-resident.  That again, in our judgment, is not a  ground which exempts an 358 agent  from  liability to pay advance-tax on behalf  of  his principal.  Liability  to  submit  an  estimate  necessarily implies the  duty  to  secure the requisite information from the  non-resident for submitting the estimate.  The tax,  it must  be  remembered, is assessed on the agent  for  and  on behalf  of  the principal, and the Act has made  an  express provision  enabling the agent to recover from the  principal the  tax  so paid by  him.  Once   the   Income-tax  Officer treats a person as an agent of a non-resident, liability  to pay tax on regular assessment arises; and his liability as a representative  assessee to pay advance-tax is not  excluded by any provision of the Act.      In our judgment, ss. 207 and 208 which impose liability to  pay  advance-tax  in  a financial  year,  s.  210  which authorise  the  Income-tax  :Officer to make  a  demand  for payment  of  advancetax  from a  person  who  is  previously assessed,  and s. 212(3) which imposes the duty to  make  an estimate  of  the total income likely to be received  or  to accrue  or  arise  and  to  pay  advance-tax  if  the  total estimated  income exceeds the maximum amount not  chargeable to  tax  in  his case by Rs. 2,500, apply  to  every  person whether he is assessed in respect of his own income or as  a representative  assessee,  and  we are unable  to  imply  an unexpressed limitation on the express ’words of the  statute in favour of an agent of a non-resident principal.     In  the present case by order dated February 25,   1965, for  the assessment year 1964-65 the Company was treated  as an  agent of the non-resident principal.  Since the  Company was  treated  as  an agent of the  non-resident,  it  became

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6  

liable to pay advancetax in the financial year 1964-65.   By virtue  of s. 207 read with s. 208 the declaration that  the Company was an agent  involved liability to pay  advance-tax as  well  as tax assessed  on  regular assessment.   We  are unable  to hold that  the liability to  pay advance-tax  did not arise against the Company.     The  plea that the provisions imposing liability to  pay advancetax  upon  an agent of a  non-resident  infringe  the equality  clause of the Constitution has no. substance.   As already  observed, the liability to pay  advance-tax  arises under ss. 207 .and 208 and its quantum is determined by  ss. 209, 210 and 212(3), and it is not predicated of the accrual of  liability  that the total income of  the  previous  year should  be  ascertained or   precisely   ascertainable  when demand  is made by the Income-tax Officer under s.  210,  or when  the  assessee is required to. make an  estimate.   The assumption that an assessee whose year of account  coincides with   the  financial year is not in respect  of  that  year liable to pay advancetax is not warranted.  The  computation of  advance-tax is not dependent upon the completion of  the previous  year: it depends upon the rules prescribed by  ss. 209,  210  and 212.  Every person who  has  been  previously assessed to tax is liable  when ordered 359 by the Income-tax Officer to pay advance-tax, subject to the right  to make an estimate under s. 212( 1 ).  A person  who has not been previously assessed but whose income is  likely to  exceed  the  specified  amount is  also  liable  to  pay advance-taX.    The  Act  does  not  accord   discriminatory treatment  between different assessees. Payment of  advance- tax  is  on  account and is always  liable  to  be  adjusted against the tax assessed on regular assessment.  That  again applies.  to  all  assessees.   It  is  then  difficult   to appreciate the grounds on which the plea of denial of  equal protection may be sustained.  The only ground urged, that an assessee  may escape liability to pay advance-tax where  his previous   year   coincides  with  the  financial  year,  is without substance, and no other ground is set up in  support of the plea of violation of the guarantee of equality  under Art. 14 of the Constitution. The petition therefore fails and is dismissed with costs. G.C.                                   Petition dismissed. 360