2010 Supreme(SC) 532

2010 (5) Supreme 537
SUPREME COURT OF INDIA
D.K. Jain and C.K. Prasad, JJ.
M/s. Kanchanganga Sea Foods Ltd. — Appellants
versus
Commissioner of Income Tax — Respondent
Civil Appeal Nos. 3844-3847 of 2003
Decided on : 7-07-2010

Headnote:Income Tax Act-Sections 201(1)- Appellant a company engaged in sale and export of sea food to exploit the fishing rights,entered into an agreement chartering two fishing vessels with a non-resident company incorporated in Hong Kong- Assessee after paying the dues arranged customs clearance for the export of the fish and the trawlers, which were used for fishing, carried the fish to destination chosen by non-resident company-The trawlers reported back to Chennai Port after delivering fishes to the destination and commenced another voyage- The assessee did not deduct the tax from non-resident company - Notice under Section 201(1) of the Income Tax Act was issued to it to show cause as to why it should not be deemed to be an assessee in default in relation to tax deductible but not deducted- The assessee filed objection contending that non-resident company did not carry out activities or operations in India which have the effect of resulting in accrual of income in India and hence it was not obliged to make any deduction-Validity-A plain reading of Section 5(2) shows that total income of non-resident company includes all income from whatever source derived received or deemed to be received in India- It also includes such income which either accrues, arises or deem to accrue or arise to a non-resident company in India- Instantly chartered vessels with the entire catch were brought to Indian Port, the catch were certified for human consumption, valued, and after customs and port clearance non-resident company received 85% of the catch- So long the catch was not apportioned the entire catch was the property of the assessee and not of non-resident company as the latter did not have any control over the catch- It is after the non-resident company was given share of its 85% of the catch it did come within its control- It is trite to say that to constitute income the recipient must have control over it- Thus the non-resident company effectively received the charter-fee in India-Hence receipt of 85% of the catch was in India and this being the first receipt in the eye of law and being in India would be chargeable to tax-Hence held that income earned by non-resident company was chargeable to tax under Section 5(2) of Income Tax Act- Assessee held liable to deduct tax under Section 195 of the Income Tax Act on the payment made to non-resident company and admittedly it having not deducted and deposited was rightly held to be in default under Section 201 of Income Tax Act. (Paras 14 to 19)

       Facts of the Case :

       Appellant a company engaged in sale and export of sea food to exploit the fishing rights,entered into an agreement chartering two fishing vessels with. a non-resident company incorporated in Hong Kong. Assessee after paying the dues arranged Customs clearance for the export of the fish and the Trawlers, which were used for fishing, carried the fish to destination chosen by non-resident company.The Trawlers reported back to Chennai Port after delivering fishes to the destination and commenced another voyage. The assessee did not deduct the tax from non-resident company - Notice under Section 201(1) of the Income Tax Act was issued to it to show cause as to why it should not be deemed to be an assessee in default in relation to tax deductible but not deducted. The assessee filed objection contending that non-resident company did not carry out activities or operations in India which have the effect of resulting in accrual of income in India and hence it was not obliged to make any deduction.

       Findings of the Court :

       A plain reading of Section 5(2) shows that total income of non-resident company includes all income from whatever source derived received or deemed to be received in India. It also includes such income which either accrues, arises or deem to accrue or arise to a non-resident company in India. Instantly chartered vessels with the entire catch were brought to Indian Port, the catch were certified for human consumption, valued, and after customs and port clearance non-resident company received 85% of the catch. So long the catch was not apportioned the entire catch was the property of the assessee and not of non-resident company as the latter did not have any control over the catch. It is after the non-resident company was given share of its 85% of the catch it did come within its control. It is trite to say that to constitute income the recipient must have control over it. Thus the non-resident company effectively received the charter-fee in India.Hence receipt of 85% of the catch was in India and this being the first receipt in the eye of law and being in India would be chargeable to tax.Hence held that income earned by non-resident company was chargeable to tax under Section 5(2) of Income Tax Act. Assessee held liable to deduct tax under Section 195 of +the Income Tax Act on the payment made to non-resident company and admittedly it having not deducted and deposited was rightly held to be in default under Section 201 of Income Tax Act.

       Result : Appeals Dismissed.