THE TRANSMISSION CORPORATION OF A.P. LTD. AND ANR. versus THE COMMISSIONER OF INCOME TAX, A.P.

Citation: [1999] SUPP. 1 S.C.R. 504 · Decided: 17-08-1999 · Supreme Court of India · Bench: D.P. WADHWA · Disposal: Dismissed

Judgment (excerpt)

A 
THE TRANSMISSION CORPORATION OF A.P. LTD. AND ANR. 
v. 
THE COMMISSIONER OF INCOME TAX, A.P. 
AUGUST 17, 1999 
B 
[D.P. WADHWA AND M.B. SHAH, JJ.] 
Income Tax Act, 1961: 
Sections 195(/), (2) & (3), 197, 190, 191, 194-B to 194-K, 4, 5 and 
C 14-Tax deducted at source-Payments on account of erection and 
commissioning of machinery and equipment in India by non-resident 
companies under a contract entered into with the assessee-Payments made 
without tax deducted at source-Obligation on the assessee in such 
circumstances under Section 197-Held, assessee responsible for deducting 
D tax in respect of the sums so paid-These deductions are subject to Section 
195(2) or 195(3) or Section 197-What is deducted is the amount specified 
in Sections 194-B to 194-K without there being any actual assessment-The 
income is to be computed on the basis of various provisions of the Act 
including provisions for the computation of the business income, if the payment 
is trade receipt-Non-resident-Trading receipt in the hands of such non-
E resident. 
Section 195(/), (2) & (3) and Section 197-0bject of-Held, these 
Sections leave no doubt that the expression '"any other sum chargeable 
under the provisions of this Act" would mean "sum" on which income tax 
is leviable-The sum may be income or income hidden or embedded therein-
F 
The said provision is for tentative deductions of income tax thereon subject 
to regular assessment. 
Words and Phrases-"Any other sum chargeable under the provisions 
of this Act"-Meaning of-Jn the context of Section 195(/) of the Income Tax 
G Act, 1961. 
·· 
Appellant-assessee made certain payments to non-residents against 
the purchase of machinery and equipment and also against the work executed 
by the non-residents in India for erecting and commissioning machinery and 
equipment. The payments were made to the non-resident companies for the 
H financial years 1966-67 to 1972-73 without deducting tax at source under 
504 
THE TRANSMISSION CORPORATION OF A.P. LTD. 11. C.l.T. 
505 
Section 195 of the Income Tax Act, 1961. Owing to such failure, the Income A 
Tax Officer passed orders determining the tax which was deductible at 
source under Section 195 which the appellant-assessee was required to pay. 
On appeal, the Appellate Assistant Commissioner held that the expression 
"any other sum chargeable under the provisions of this Act" occurring in 
Section 195 did not include trade receipt and that Section 195 applies only B 
to cases where the sums paid were "pure income profits". The appeal filed 
before the Income Tax Appellate Tribunal by the Revenue was also dismissed. 
However. Tribunal referred the question to the High Court under Section 
256(1). High Court allowed the reference in favour of the Revenue. Hence 
these appeals by the assessee. 
Assessee contended that under Section 5 of the Act, what was taxable 
was pure income or profit and not the gross sum which would include the 
cost of materials and other expenses and hence Section 195 would not be 
applicable. 
Dismissing the appeals, the Court 
HELD: 1.1. In view of Section 190 of the Income Tax Act, 1961, before 
a regular assessment is made, tax on income shall be payable by deduction 
or collection at source or by advance payment in accordance with the other 
provisions. Sections 194-A, 194-B, 194-BB, 194-C reveal the intention of 
c 
D 
the legislature to enforce tax deduction at source even in respect of gross E 
sums, the whole of which do not represent income chargeable under the Act. 
Similar provisions are made in Section 194-D, Section 194-E, Section 194-
EE, Section 194-F, Section 194-G, Section 194-H, Section 194-1, Section 
194-J and Section 194-K which cast an obligation to deduct tax on the person 
responsible for paying such sum which may not represent income. In all 
these cases, what is deducted is the amount specified in the said Sections F 
without there being any actual assessment. (512-C, G-H; 513-A) 
1.2. The scheme of Section 195(1 ), (2) and (3) and Section 197 leaves 
no doubt that the expression "any other sum chargeable under the provisions 
of this Act" would mean, "sum" on which income tax is leviable. The G 
consideration would be-whether payment of sum to a non-resident is 
chargeable to tax under the provisions of the Act or not. That sum may be 
income or income hidden or otherwise embedded therein. If so, tax is required 
to be deducted on the said sum. What would be the income is to be computed 
on the b

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