Case Note & Summary
The Premier Automobiles Ltd. petitioned the Supreme Court under Article 32 of the Constitution challenging a demand for advance tax as agent of a non-resident. The Income-tax Officer had, on February 25, 1965, treated the company as an agent of M/s Dodge Brothers, a non-resident company, and issued a notice of demand under section 156 read with section 210 of the Income-tax Act, 1961, calling upon it to pay advance tax of Rs. 11,51,235-91 for the financial year 1964-65. The company sought quashing of the order under section 163 and the notice, contending that under sections 209 and 210, no order for payment of advance tax could be made against an agent of a non-resident, and that the provision authorising such collection infringed Article 14 of the Constitution. The Supreme Court dismissed the petition. On the first issue, the Court held that sections 207 and 208 which impose liability to pay advance tax, section 210 which authorizes the Income-tax Officer to make a demand, and section 212(3) which imposes a duty to estimate income and pay advance tax apply to every person whether assessed in respect of his own income or as a representative assessee. Section 161(1) expressly provides that a representative assessee, as regards the income in respect of which he is representative, shall be subject to the same duties, responsibilities and liabilities as if the income were received by him beneficially. The Court rejected the argument that the liability depends upon determination of total income of the previous year, observing that determination of total income is not a condition of the liability to pay advance tax. The previous year of an assessee may end after the commencement but before the end of the financial year, but the liability to pay advance tax is not affected. On the second issue, the Court held that the plea that the provisions infringe the equality clause was without substance; the only ground urged—that an assessee may escape liability when his previous year coincides with the financial year—was invalid. The Court accordingly upheld the validity of the demand and dismissed the petition.
Headnote
A) Income Tax - Advance Tax - Liability of Representative Assessee - Income-tax Act, 1961, Sections 161(1), 207, 208, 209, 210, 212(3) - The assessee, as agent of a non-resident, challenged a notice demanding advance tax - The Court held that a representative assessee is subject to the same duties, responsibilities and liabilities as if the income were received beneficially, and the liability to pay advance tax does not depend on determination of total income of the previous year. The provisions for advance tax apply to all assessees including agents of non-residents. Held, the agent is liable to pay advance tax on behalf of the non-resident principal. (Paras Not mentioned) B) Constitutional Law - Equality Clause - Article 14 of Constitution of India, 1950 - Advance tax liability on agent of non-resident - The assessee contended that the provision authorizing collection of advance tax from an agent of a non-resident violates Article 14 of the Constitution - The Court held that the only ground urged, that an assessee may escape liability when his previous year coincides with the financial year, was without substance and did not infringe the equality clause. Held, the provision is not violative of Article 14. (Paras Not mentioned)
Issue of Consideration
Whether an agent of a non-resident can be directed to pay advance tax under sections 209 and 210 of the Income-tax Act, 1961; and whether such provision violates Article 14 of the Constitution.
Final Decision
The Supreme Court dismissed the petition, holding that a representative assessee, including an agent of a non-resident, is liable to pay advance tax under sections 207, 208, 209, 210, and 212 of the Income-tax Act, 1961, and that the advance tax provisions do not violate Article 14 of the Constitution. The demand for advance tax was upheld.
Law Points
- Legal points not extracted
- Advance tax liability applies to representative assessees
- Representative assessee is subject to same duties and liabilities as beneficial owner
- Determination of total income not a condition for advance tax liability
- Advance tax provisions do not violate Article 14
