Viswanatha Iyer, J.
1. The two questions referred by the Appellate Tribunal, Cochin Bench, for decision arise under the following circumstances.
2. The assessee-company exports shrimps and other seafoods to New York on consignment basis and had appointed M/s. Atlanta Trading Corporation, New York (hereinafter called 'Atlanta'), as their sole selling agents and exclusive consignees and distributors of their products in America. To expand their business the assessee-company required financial assistance from Atlanta, but the latter could not help. They enquired of their Swiss friends, M/s. Lada Trading Corporation, Geneva (hereinafter called 'Lada'), whether they could advance a loan to the assessee. The latter agreed to advance 1,10,000 U.S. Dollars charging intcrestat 9%. The assessee-company agreed to this, but later on Lada was not willing to advance the loan directly to the assessee-company and it insisted that it can lend the money only to Atlanta, So Atlanta proposed to the assessee that it would take up the loan from its Swiss friends and in turn grant a loan to the assessee on the same terms and conditions agreed to by the Lada. This was agreed to by the assessee and the transaction was gone through. The loan amount was received in two instalments and was repayable also by instalments. Initially the appellant used to make payments towards interest and return of capital through the Chartered Bank Ltd., Cochin, to Atlanta, New York, directly. However, in November, 1963, Atlanta wrote to the assessee thus:
'Our Swiss friends are complaining that funds paid by you on your obligation to them, take three weeks before they receive the funds in Switzerland, and a substantial part of the delay is caused by the banks remitting the money to New York, where it is considerably delayed before being forwarded to Switzerland. Could you please talk to your banks and see if arrangements can be made that when you pay them the funds should immediately be remitted directly from India to Switzerland, preferably by banker's draft ?'
3. The assessee-company agreed to this and they made arrangements with the Chartered Bank Ltd., Cochin, for direct remittances of the amounts to Discount Bank (Overseas) Ltd., Geneva, for credit of Atlanta, and from there Lada received the remittances. During the previous year relevant to the assessment year 1968-69, a sum of Rs. 70,711 was paid in this manner by the assessee as interest on this loan. For the accounting year relevant to the assessment year 1969-70 the interest payment in the above manner amounted to Rs. 8,478. In the individual assessment made against the assessee for the above assessment years, these amounts were allowed to bededucted in the computation of their total income, in view of the fact that the assessee may be treated as an agent of the non-resident under Section 163 of the Income-tax Act, 1961 (hereinafter called 'the Act'), and assessed as such. Subsequently, an order under Section 163 of the Act was passed, to treat the assessee-company as an agent of the nonresident, Atlanta, and proceedings were initiated to assess the income accrued to the said concern. In the said proceedings the assessee pleaded that there was no taxable income because Atlanta had to pay the entire amount to Lada for the loan it obtained from the latter and that no profit accrued to it. That plea of the assessee was accepted by the Income-tax Officer and a nil assessment order was passed. Though the Commissioner of Income-tax took steps under Section 263 of the Act to revise and set aside the nil assessment, he later on dropped the proceedings. Some time after the nil assessment order was passed, the Income-tax Officer initiated steps to pass another order under Section 163 of the Act to treat the assessee-company as the agent of the non-resident, Lada, on the ground that really the loan was from, and interest payment was to, Lada. The plea of the assessee in that proceeding was that the assessee cannot be treated as an agent of Lada as they had no direct or indirect dealing with the latter. The Income-tax Officer referred to the evidence available and took the view that the loan was from, and interest payment was to, Lada, and, therefore, passed for the assessment year 1968-69 an order under Section 163 of the Act treating the assessee as an agent of the non-resident, Lada.
4. For the accounting year relevant to the assessment year 1969-70 also, originally the Income-tax Officer had, treating the assessee as an agent of Atlanta, made a nil assessment. After the nil assessment, the Income-tax Officer passed a subsequent order under Section 163 of the Act treating the assessee as an agent of Lada. There is only one difference for the assessment year 1969-70. There was no prior order under Section 163 of the Act treating the assessee as an agent of Atlanta.
5. These orders which are appealable under Section 246 of the Act were challenged before the Appellate Assistant Commissioner. He took the view that there is no evidence on record to show that when Lada advanced the loan to Atlanta it knew that it was to be utilised for remittances to India by way of accommodating the appellant financially and that there is nothing on the evidence to show that any payment was made by the assessee directly or indirectly to Lada. Hence, the orders of the Income-tax Officer were set aside by the Appellate Assistant Commissioner. The matter was taken up in second appeal before the Tribunal. The Tribunal was of the view that the requirements of Section 163(1)(d) have been satisfied to treat the assessee as an agent of the non-resident, Lada. The Tribunal was also of the view that there is clinching evidence in the form of an affidavitfiled by the assessee in these proceedings which supplied the connecting link between the assessee and Lada for passing an order under Section 163 of the Act. The Appellate Assistant Commissioner's conclusion on this point was, therefore, not accepted by the Tribunal. But the Tribunal confirmed the Appellate Assistant Commissioner's order for the assessment year 1968-69 on another ground, that is to say, that the earlier order passed by the Income-tax Officer treating the assessee as an agent of Atlanta for the same income and for the same year is a bar for passing another order to treat the assessee as an agent of Lada for the same income and for the same year. A similar order was not there for the year 1969-70 and so, for the latter assessment year, the Appellate Assistant Commissioner's order was set aside and that of the Income-tax Officer restored. Both the department and the assessee asked for reference, and a consolidated statement of facts for the two assessment years, viz., 1968-69 and 1969-70, was drawn up by the Tribunal and the following two questions are referred for an answer to this court:
'(1) Whether the Tribunal rightly confirmed the cancellation of the order passed in respect of assessment year 1968-69 under Section 163 of the Income-tax Act, 1961, treating the assessee as agent of Lada Trading Corporation, Geneva, Switzerland
(2) Whether the Tribunal rightly confirmed the order passed in respect of assessment year 1969-70 under Section 163 of the Income-tax Act, 1961, treating the assessee as agent of Lada Trading Corporation ?'
6. It may also be mentioned that the questions are so worded taking into account the request of the assessee that the questions may be framed in such a manner as to encompass the right to challenge the correctness of the finding on the factual aspect that the loan is from Lada and the payment of interest is also to that concern. The relevant portion of the statement of facts on this aspect is as follows :
'The question whether the loan is from Lada Trading Corporation is only a factual aspect of the cardinal question whether the order under Section 163 is proper or not. In the appeal, we decided the factual aspect against the assessee and the legal aspect in its favour. So, we frame the question for both the years in such a manner as to encompass the correctness of our finding on the factual aspect also. To enable the High Court to examine the correctness of the finding of fact, necessary documents produced before the Tribunal are hereto annexed, marked annexures 'A-5', 'A-6', 'A-7' & 'A-8', and form part of the statement of the case.'
7. It is better to consider the factual aspect first. That relates to the correctness of the finding that Lada was in receipt of income from or through the assessee directly or indirectly. That the assessee borrowed money from a non-resident and interest accrued and was paid to a non-resident are admitted. Therefore, income is deemed to accrue or arise in India for the purposes of income-tax as stated in Section 9(1), Clause (i) of the Act. The said clause is in the following terms :
'9. (1) Income deemed to accrue or arise in India.--The following incomes shall be deemed to accrue or arise in India- (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through or from any money lent at interest and brought into India in cash or in kind or through the transfer of a capital asset situate in India.'
8. That the assessee for the purpose of this income will be treated as an agent under Section 163 of the Act and will thereby be 'a representative assessee' is also clear from Section 160(1), Clause (i) of the Act. That clause runs as follows;
'160. (1) For the purposes of this Act, 'representative assessee means- (i) in respect of the income of a non-resident specified in Clause (i) of Sub-section (1) of Section 9, the agent of the non-resident, including a person who is treated as an agent under Section 163.'
9. That this income of the assessee is subject to the same duties, responsibilities and liabilities as if it is his income and shall be liable to assessment in his own name in respect of that income is also evident from Section 161 of the Act. The only limitation for the assessment of tax under the latter Section is that it shall be levied and recovered in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him (see Section 161 of the Act). That being so, the question is whether Lada is in receipt of any income directly or indirectly from or through the assessee. That the assessee borrowed 1,10,000 U.S. Dollars is admitted. That Atlanta had no funjds to advance is not in dispute. That they contacted their Swiss friends, Lada, to find out whether it can advance the amount required by the assessee is admitted. That Lada originally agreed but subsequently expressed its unwillingness to advance the amount direct to the assessee is not in dispute. That the amount advanced by Atlanta is the amount received from Lada is also not in dispute. When Lada complained against the difficulty of collecting the interest through the bankers at New York, the assessee and Atlanta arranged remittances through Atlanta's bankers at Geneva is also admitted by the assessee. According to the assessee, these links are not sufficient to connect them directly or indirectly with Lada in respect of this loan transaction and this submission found favour with the Appellate Assistant Commissioner. But the Tribunal took these facts along with a statement made by the assesseein their letter dated February 12, 1969, to the Income-tax Officer, wherein they mentioned that 'Atlanta had arranged this loan for us from their Swiss friends, Lada, paying interest at 9% per annum', and found that a connection is established. We feel that the Tribunal is correct in their conclusion. The letter of Atlanta Trading Corporation dated 13th November, 1963, quoted earlier clearly shows that the assossec and Atlanta were agreed that it is the obligation of the assessee to repay the loan advanced by the Lada Trading Corporation and that no difficulty should be caused to the latter in collecting the interest. There are enough materials in this case to show that Lada knew about the ultimate destination of this loan of 1,10,000 U.S. Dollars to the assessee and the assessee's undertaking. They knew that their lending of money at interest and bringing of the money to India are integral parts of one composite transaction. If not, why should they complain about the assesseo's banks remitting the money to New York where it was considerably delayed before being forwarded to Switzerland Why should the assessec take steps to send the remittances direct to Switzerland It is not necessary that there should be a direct acknowledgment from Lada of the receipt of the payment of interest. Section 163(1)(c) requires only that the non-resident should receive income directly or indirectly from or through any person in India. The matters referred to above clearly establish that Lada received income from the assessee, indirectly at any rate, though not directly. The expression 'directly or indirectly' does occur in many provisions of the Act. Sometimes a circuitous way may be designed to escape from the charging provisions of the Act and normally in fiscal mutters unless the statute empowers the authorities to look into the substance of the matter the form of the transaction alone may be decisive, and income may escape assessment. So power is sometimes given to find out the substance as well, and the expression 'indirectly' connotes that. When a power is given to find out whether anybody is benefited indirectly it is open to the authorities or the court to look at the real nature of the transaction and determine the tax liability. In this case that is what has been done by the Tribunal when they found that the assessee is to be treated as the agent of Lada in respect of this income. Therefore, the Tribunal's finding, that the assessee can be treated as an agent of Lada, a non-resident for the purpose of the income received by the latter and as such is a 'representative assessee' within the meaning of Sections 160 - 163 of the Act, is reasonably possible on the evidence adduced and, hence, cannot be said to be be incorrect.
10. The second aspect of the questions relates to the correctness of the Tribunal's view that the prior order treating the assessee as agent of Atlanta is a bar to treat the assessee as agent of Lada in respect of the same income for the same year. No doubt, the assessment in respect of theincome coming under Section 9 of the Act is made on the assessee. But it is only a 'representative assessee' within the meaning of Sections 160 - 163 of the Act. It is open to the department to assess the non-resident itself in respect of this income. When the department has any doubt as to the person who is or will be deemed to be in receipt of the income, protective or alternative assessments are permitted. This is a well-established method of assessment in the income-tax law. In Lalji Haridas v. Income-tax Officer, : 43ITR387(SC) , the law has been stated thus by the Supreme Court at page 392 :
'In cases where it appears to the income-tax authorities that certainincome has been received during the relevant assessment year but it is notclear who has received that income and, prima facie, it appears that theincome may have been received either by A or B or by both together, itwould be open to the relevant income-tax authorities to determine the saidquestion by taking appropriate proceedings both against A and B...'
11. This is quite sensible because the revenue has to be protected against bar oflimitation. If the income-tax authorities are precluded from making a protective or an alternative assessment, then by the time the disputes are overthe real assessment would be barred. But while a protective assessment ispermissible, a protective recovery is not allowed. It is one thing to say thatthe authorities are merely making an assessment and leaving it as a paperassessment until the matter is decided one way or the other and anotherthing to say that at one and the same lime they could not only maketwo assessments in respect of one set of dues but proceed to realise both.This is the view held in Jagannath Hanumanbux v. Income-tax Officer, : 31ITR603(Cal) . Thisbeing the position the authorities could have made alternative assessmentsin respect of this income on Atlanta Trading Corporation and Lada TradingCorporation. The assessee here can be treated as a 'representativeassessee' of both the non-residents, and assessed separately in the respectiverepresentative capacities. In respect of the same income it is permissiblefor the authorities to initiate proceedings against the assessee treating himas the representative of Lada Trading Corporation as well. The finality ofthe order of assessment in one representative capacity is not a bar to theinitiation of steps against the assessee in another such capacity. The representative capacities are different. Further, it is seen from the statement ofthe case that steps under Sections 147 and 148 of the Act have been initiated against the assessee for reassessment. So, even though the prior orderhas become final since proceedings under Sections 147 and 148 of the Acthave been taken in respect of this income, it is perfectly within the powersof the Income-tax Officer to pass an order treating the assessee as agent ofLada Trading Corporation. In this view also there is no bar for treatingthe same person as a 'representative assessee' of Lada Trading Corpora-tion in respect of the same income for the same year. The Tribunal is not right in their view that the prior order is a bar.
12. In the result, the two questions referred for decision are answered as follows. On the first question our answer is that the Tribunal is not right in confirming the cancellation of the order passed in respect Of the assessment year 1968-69 under Section 163 of the Income-tax Act, 1961, treating the assessee as agent of Lada Trading Corporation, Geneva, Switzerland. On the second question our answer is that the Tribunal is right in confirming the order passed in respect of the assessment year 1969-70 under the same section treating the assessee as the agent of Lada Trading Corporation. Thus, both the questions are answered in favour of the department and against the assessee. The parties shall bear their costs.
13. A copy of our decision will be forwarded in each reference to the Income-tax Appellate Tribunal, Cochin Bench, as required by law.