Delhi High Court
Cit vs Woodward Governor India (P) Ltd. on 18 April, 2007
Bench: Madan B. Lokur, V.B. Gupta
JUDGMENT
1. The revenue is aggrieved by an order 28-10-2005, passed by the Income Tax Appellate Tribunal, Delhi Bench "F" in I.T.A. (TDS) No. 06/Del/2002, I. T. A. (TDS) No. 02/Delhi/2002 and I.T.A. (TDS) No. 01/ Del/2002 relevant to the assessment year 1998-99.
2. The assessed is a joint venture in which Mr. Keshav Thirani and his associates have 26 per cent. equity shareholding and M/s. Woodward Governor Company, USA has the remaining balance shareholding of 74 per cent.
3. At the relevant time, the assessed had engaged one Kenneth Allen Axelsen as a managing director. He was paid a sum of Rs. 66.19 lakhs by the American collaborator by way of annual salary. According to the assessed, it was not aware that the foreign collaborator was paying salary to Kenneth Allen Axelsen. On its part, however, the assessed deducted tax at source on the salary that it was paying to its managing director.
4. So far as Kenneth Allen Axelsen is concerned, he paid the advance tax on his global salary, received from the assessed as well as from the foreign collaborator. There is no dispute about this.
5. According to the revenue , the assessed was required to deduct tax at source even on the salary component paid by the foreign collaborator. In other words, according to the revenue , the assessed was required to deduct tax at source on the entire salary that Kenneth Allen Axelsen was receiving. However, in so far as the assessed is concerned, its case was that first of all it was not aware that the foreign collaborator was paying salary to Kenneth Allen Axelsen and, secondly, that in any event, there was no question of deducting tax at source on an amount which was not paid by the assessed to Kenneth Allen Axelsen. The Tribunal accepted the contention of the assessed and that is why the revenue is before us in appeal under Section 260A of the Income Tax Act, 1961.
6. We find that Kenneth Allen Axelsen was receiving salary from two sources, even though he was working in India as a managing director only of the assessed. The assessed was not aware of any remuneration being received by its managing director from the foreign collaborator. This is a finding of fact that has been arrived at by the Tribunal and which cannot be disturbed by us in the present appeal.
7. As regards the liability to deduct tax at source in terms of Section 192 of the Act, the assessed was only liable to deduct tax at source on the payment that it was making to its managing director and it cannot be burdened with the liability of deducting tax at source on any other payment, either by way of salary or otherwise which Kenneth Allen Axelsen was receiving from some other source. We feel that it would be an impossible burden on the assessed (or anybody else for that matter) to deduct tax at source on an amount which it was not paying but on some other amount paid by a third person altogether.
8. The Tribunal also considered the provisions of Section 192(2) of the Act which is a case of dual employment but since the contention of learned Counsel for the revenue is that the present is not a case of dual employment, we need not interpret Section 192(2) of the Act.
9. We are of the opinion that since the conclusion of the Tribunal was correct on the merits, the assessed was not liable to deduct tax at source on payment received by Kenneth Allen Axelsen from the foreign collaborator by way of salary.
10. No substantial question of law arises for our consideration. The appeal is dismissed.