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.

R. D. Jolly with Ms. Prem Lata.

Bansal for the Commissioner.

A.K. Mata for the Assessee.

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:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law and in facts in holding that the Explanation added to section 9(1)(ii) is a substantive amendment and not clarificatory in nature and thereby giving the finding that the assessee acted in a bona fide manner in not deducting tax at source on French portion of the salary and was thus not covered under the provisions of section 201(lA) of the Income‑tax Act?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the proceedings should be cancelled on account of inordinate delay on the part of the Revenue in taking action under section 201(lA) when there is no time limit for passing order under section 201(lA) of the Income‑tax Act?"

The assessee is 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 of francaise". However, the assessee did not deduct or deposit income‑tax on the said mount under section 192 of the Act, 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(1A) of the Act for non‑deduction of tax by the assessee on the afore noted 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. While doing so the Tribunal came to the conclusion that the assessee was under a bona fide belief that part of the salary paid outside India as "part francaise" was not chargeable to tax. It was observed that prior to the amendment of section 9(1)(ii) of the Act in 1983, the decision of the Gujarat High Court in the case of CIT v. S.G. Pgnatale (1980) 124 ITR 391, held the field and as per the said decision no tax was chargeable on the French portion of the salary. From a bare reading of the order of the Tribunal it is evident that Question No.1 does not arise out of the said order. The Tribunal has nowhere expressed its view on the question whether the amendment of section 9(1)(ii) of the Act is prospective or retrospective. It has merely observed that prior to the said amendment the assessee was under the bona fide belief and that no tax was chargeable on the aforesaid portion of the salary paid to its employees outside India. We find that the finding recorded by the Tribunal to the effect that the assessee was under a bona fide belief that it was not liable to deduct tax has not been challenged by the Revenue in the proposed Question No.1. In this view of the matter proposed Question No.2 is rendered academic.

We do not find any infirmity in the order of the Tribunal declining to refer the aforenoted questions to this Court.

The petition fails and is accordingly dismissed.

M.B.A./639/FC

Petition dismissed.