DCIT 19(3), MUMBAI V. MANMOHAN KUMAR JAIN SANKHLA, MUMBAI

ITA 1622/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1367 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-05-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 28-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Salary income; Notional interest

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.1622 /MUM/2013 ASSESSMENT YEARS: 2006-07 DCIT-19(3), ROOM NO.305, 3 RD FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-400012 / VS. SHRI MANMOHAN KUMAR JAIN SANKHLA, C/O- CA(INDIA) TECHNOLOGIES PVT. LTD. B-1, 02 ND FLOOR, NSE PLAZA BKC RD. BANDRA(EAST), MUMBAI-400051 ( / REVENUE) ( ! ' /ASSESSEE) PAN. NO. BEMPS6792E / REVENUE BY SHRI SUMAN KUMAR-DR ! ' / ASSESSEE BY NONE # $ % ' & / DATE OF HEARING : 22/12/2016 % ' & / DATE OF ORDER: 22/12/2016 ITA NO.1622/MUM/2013 SHRI MANMOHAN KUMAR JAIN SANKHLA 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 11/12/2012 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, ON THE GROUND THAT THE FIRST APPELLATE AUTHORITY ERRED IN DELETING THE ADDITION OF RS.17,88,919/-, ON ACCOUNT OF HYPOT HETICAL TAXES, RELYING UPON THE DECISION FROM HON'BLE BOMBA Y HIGH COURT IN THE CASE OF JAIDEV H. RAJA IGNORING THE FA CT AS IN THE CASE OF JAIDEV H. RAJA, THE TAX WAS BORNE BY THE EM PLOYEE HIMSELF, WHEREAS, IN THE PRESENT APPEAL EMPLOYER HA S PAID THE TAXES ON BEHALF OF THE EMPLOYEE I.E. THE ASSESSEE. 2. DURING HEARING OF THIS APPEAL, NONE WAS PRESENT FOR THE ASSESSEE IN SPITE OF THE FACT THAT ON VARIOUS D ATES THE REGISTERED AD NOTICE WAS SENT AND NOBODY BOTHERED T O APPEAR FOR THE APPEAL, THEREFORE, WE HAVE NO OPTION BUT TO PROCEED EX- PARTE, QUA THE ASSESSEE AND TEND TO DISPOSE OF THIS APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. ON THE O THER HAND, THE LD. DR, SHRI SUMAN KUMAR, DEFENDED THE ADDITION MADE BY THE ASSESSING OFFICER AND ADVANCED ARGUMENTS, WH ICH IS IDENTICAL TO THE GROUND RAISED. 2.1. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACT S, IN BRIEF, ARE THAT THE ASSESSEE WAS WORKING IN INDIA, DURING FINANCIAL YEAR 2005-06, ON DEPUTATION FROM COMPUTER ASSOCIATE S INC.(CA INC). THE ASSESSEE WAS NOT A ORDINARILY RE SIDENT AS PER ITA NO.1622/MUM/2013 SHRI MANMOHAN KUMAR JAIN SANKHLA 3 SECTION 6(6) OF THE INCOME TAX ACT, 1961 (HEREINAFT ER THE ACT) FOR THE RELEVANT YEAR. THE ASSESSEE FOR ASSESSMENT YEAR 2006- 07, DECLARED TOTAL INCOME OF RS.1,14,38,557/- IN HI S RETURN ON 31/10/2006 BY CLAIMING THAT HYPOTHETICAL TAXES AMOU NTING TO RS.17,88,919/- DOES NOT CONSTITUTE INCOME, TAXABLE IN INDIA, THEREFORE, THE SAME WAS OFFERED OF TAX IN THE RETUR N OF INCOME. THE ASSESSMENT WAS FRAMED U/S 143(1), RESULTING INT O REFUND OF RS.69,260/-. NOTICE U/S 143(2) OF THE ACT WAS I SSUED TO THE ASSESSEE. IT IS NOTED THAT CA INC. HAD A TAX EQUALI ZATION POLICY, UNDER WHICH IT EFFECTIVELY BEARS THE ASSESSEES ADD ITIONAL TAX LIABILITY AROSE DUE TO HIS OVERSEAS ASSIGNMENT. AS PER THE TAX EQUALIZATION POLICY, THE SALARY ENTITLEMENT IS REDU CED BY THE AMOUNT OF HYPOTHETICAL TAXES. THE HYPOTHETICAL TAX AMOUNT IS DETERMINED BASED ON HOME COUNTRY LIABILITY. SINCE, THE EMPLOYEE WAS NOT ENTITLED TO SALARY, TO THE EXTENT OF HYPOTHETICAL TAX, HE HAS NOT VESTED RIGHT ON SUCH P ART OF THE SALARY. ACCORDINGLY, THE ASSESSEE OFFERED HIS SALA RY INCOME, NET OFF HYPOTHETICAL TAX IN HIS RETURN OF INCOME. H OWEVER, THE LD. ASSESSING OFFICER, TO KEEP THE MATTER ALIVE, AD DED THE, HYPOTHETICAL TAX, IGNORING THE DECISION OF THE TRIB UNAL IN THE CASE OF ROY MARSHAL (ITA NO.2038/MUM/2006) ORDER DA TED 15/10/2008 BY OBSERVING THAT THIS DECISION OF THE T RIBUNAL WAS CHALLENGED BEFORE THE HON'BLE HIGH COURT, WHICH IS STILL PENDING. ON APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TA X (APPEAL), THE FACTUAL MATRIX WAS CONSIDERED AND SIN CE, THE HON'BLE HIGH COURT HAD DECIDED THE ISSUE IN THE CAS E OF ROY ITA NO.1622/MUM/2013 SHRI MANMOHAN KUMAR JAIN SANKHLA 4 MARSHAL (SUPRA), THEREFORE, THE ISSUE WAS DECIDED I N FAVOUR OF THE ASSESSEE AND DELETED THE ADDITION. THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT O RDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, UNDER THE FACTS AVAILAB LE ON RECORD, THERE IS NO DISPUTE TO THE FACT THAT THE TR IBUNAL VIDE ORDER DATED 15/10/2008, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE WHOLE CASE OF THE LD. ASSESSING OFFIC ER AS WELL AS THE CONTENTION OF THE LD. DR IS THAT THE CASE OF RO Y MARSHAL WAS TAKEN IN APPEAL BEFORE THE HON'BLE HIGH COURT. HOWEVER, WE FIND THAT THE HON'BLE HIGH COURT AFFIRMED THE DE CISION OF THE TRIBUNAL AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 25/09/2012 (ITA NO.87 OF 2000). TH E RELEVANT PORTION OF THE SAME IS REPRODUCED HEREUNDER FOR REA DY REFERENCE:- ACCORDING TO THE REVENUE THE FOLLOWING QUESTIONS O F LAW ARISE OUT OF THE ORDER OF THE ITAT DATED 30/03/1999 A) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT TAX BORNE BY THE EMPLOYEE IS NOT PART OF THE PAY? B) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT NOTIONAL INTEREST ON INTE REST FREE DEPOSIT MADE FOR ACCOMMODATION IS NOT PART OF PERQUISITE OF THE ASSE SSEE? 2) THE ASSESSMENT YEAR INVOLVED HEREIN IS AY 1994- 1995. ITA NO.1622/MUM/2013 SHRI MANMOHAN KUMAR JAIN SANKHLA 5 3) THE RESPONDENT-ASSESSEE A RESIDENT BUT NOT ORDIN ARILY RESIDENT INDIVIDUAL WAS AN EMPLOYEE OF COCA-COLA INC. USA AN D HAD INCOME UNDER THE HEAD SALALRIES. UNDER THE TAX EQ UALIZATION POLICY FRAMED BY THE SAID COMPANY, THE ASSESSEE'S T AX LIABILITY ARISING OUT OF HIS FOREIGN ASSIGNMENT WAS TO BE BOR NE BY THE COMPANY BUT RESTRICTED ONLY TO THE EXTENT OF LIABIL ITY ARISING OUT OF SUCH FOREIGN ASSIGNMENT. AS THE ASSESSEE HAD FOREIG N ASSIGNMENT IN INDIA DURING THE ASSESSMENT YEAR IN QUESTION, TH E COMPANY UNDER ITS TAX EQUALIZATION POLICY WAS LIABLE TO REI MBURSE THE TAX PAYABLE ON TOTAL SALARY WHICH THE ASSESSEE WAS ENTI TLED TO RECEIVE IN INDIA. 4) IN THE ASSESSMENT YEAR IN QUESTION THE ASSESSEE HAD RETURNED INCOME OF RS.1.13 CRORES AND PAID TAX THERE ON THE SAID INCOME AT RS.50.00 LAKHS. SINCE THE ASSESSEE HAD RECEIVED RS. 77.00 LAKHS IN INDIA AND THE TAX PAYABLE THEREON WAS RS.35.00 LAKH S WHICH WAS TO BE REIMBURSED BY THE EMPLOYER, THE ASSESSEE HAD INCLUDED RS.35.00 LAKHS TO THE SALARY INCOME OF RS.77.00 LAK HS AND OFFERED RS.113.00 LAKHS (ROUND FIGURE) TO TAX. THOUGH TAX O N RS.113.00 LAKHS AT RS.50.00 LAKHS WAS PAID, THE ASSESSEE CLAI MED THAT OUT OF RS.50.00 LAKHS ONLY RS.35.00 LAKHS WAS INCLUDIBLE I N THE TOTAL INCOME AND NOT THE BALANCE AMOUNT OF RS.15.00 LAKHS . THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE AS SESSEE, CIT(A) UPHELD THE DECISION OF THE ASSESSING OFFICER. 5) ON FURTHER APPEAL, THE ITAT IN PARAGRAPH 11 OF I TS ORDER HAS RECORDED A FINDING THAT THE TOTAL SALARY RECEIVED B Y THE ASSESSEE IN INDIA WAS RS.77.00 LAKHS ON WHICH THE TAX PAYABLE A T THE MAXIMUM RATE OF 44.8% COMES TO RS.35.00 LAKHS. SINC E THE ITA NO.1622/MUM/2013 SHRI MANMOHAN KUMAR JAIN SANKHLA 6 ASSESSEE UNDER THE TAX EQUALIZATION POLICY WAS ENTI TLED TO GET REIMBURSEMENT OF THE TAX PAYABLE ON THE AMOUNT OF R S.77.00 LACS, THE ASSESSEE WAS JUSTIFIED IN COMPUTING THE SALARY INCOME AT RS.113.00 LAKHS (RS.77.00 LACS PLUS RS.35.00 LACS) WHICH ALMOST TALLIES WITH THE INCOME DECLARED BY THE ASSESSEE. T HE TRIBUNAL HAS FURTHER RECORDED THAT THOUGH THE ASSESSEE HAD PAID TAX AMOUNTING TO RS.50.00 LAKHS, THE ASSESSEE WAS ENTITLED TO REI MBURSEMENT OF TAX AMOUNTING TO RS.35.00 LAKHS AND THEBALANCE RS.1 5.00 LAKHS WAS BORNE OUT OF THE SALARY INCOME RECEIVED BY THE ASSESSEE IN INDIA. THE TRIBUNAL HAS RECORDED A FINDING THAT THE CONFUSION HAS ARISEN, BECAUSE, THE ASSESSEE IN HIS COMPUTATION HA D ADDED RS.50.00 LAKHS AS INCOME AND DEDUCTED RS.15.00 LAKH S FROM THE INCOME, WHEN IN FACT THE SAID AMOUNT OF RS.15.00 LA KHS WAS NOT RECEIVED FROM THE COMPANY BUT PAID OUT OF THE SALAR Y AMOUNT RECEIVED IN INDIA. IN OTHER WORDS, THOUGH THE ASSES SEE HAD PAID TAX OF RS.50.00 LAKHS, SINCE THE ASSESSES WAS ENTITLED TO REIMBURSEMENT OF RS.35.00 LAKHS FROM THE COMPANY, T HE SALARY INCOME (RS.77.00 LAKHS) RECEIVED BY THE ASSESSES HA D TO BE ENHANCED BY RS.35.00 LAKHS ONLY AND NOT THE BALANCE RS.15.00 LAKHS WHICH IS PAID BY THE ASSESSES FROM THE SALARY INCOME. IN THESE CIRCUMSTANCES, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE TAX AMOUNTING TO RS.15.00 LAKHS PAID BY THE ASSESSE E FROM THE SALARY INCOME (NOT REIMBURSED BY THE COMPANY) COULD NOT BE ADDED TO THAT INCOME OF THE ASSESSEE. ACCORDINGLY T HE FIRST QUESTION CANNOT BE ENTERTAINED. 6) AS REGARDS THE SECOND QUESTION IS CONCERNED, THE TRIBUNAL HAS ALLOWED THE CLAIM OF THE ASSESEE BY FOLLOWING THE D ECISION OF THIS ITA NO.1622/MUM/2013 SHRI MANMOHAN KUMAR JAIN SANKHLA 7 COURT IN THE CASE OF M.A.E. PAES REPORTED IN 230 IT R 60. ACCORDINGLY, THE SECOND QUESTION CANNOT BE ENTERTAI NED. 7) THE APPEAL IS ACCORDINGLY DISMISSED WITH NO ORDE R AS TO COSTS. THE HON'BLE HIGH COURT DULY CONSIDERED THE QUESTION , AROSE FROM THE ORDER OF THE TRIBUNAL AND FINALLY DE CIDED IN FAVOUR OF THE ASSESSEE, BY AFFIRMING THE DECISION O F THE TRIBUNAL. THE WHOLE CASE OF THE REVENUE, BEFORE US , IS THAT THE MATTER IS PENDING BEFORE THE HON'BLE HIGH COURT . SINCE, THE HIGH COURT HAS AFFIRMED THE DECISION OF THE TRI BUNAL, AND IN FAVOUR OF THE ASSESSEE, THEREFORE, WE FIND NO IN FIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL). IT IS AFFIRMED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. DR AT THE CONCLUSION OF THE HEARING ON 22/12/2016. SD/- SD/- ( ASHWANI TANEJA ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER # $ MUMBAI; ' DATED :22/12/2016 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. )*+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. / / # 0' ( )* ) / THE CIT, MUMBAI. 4. / / # 0' / CIT(A)- , MUMBAI 5. 23 -' , / )*& ) 4 , # $ / DR, ITA NO.1622/MUM/2013 SHRI MANMOHAN KUMAR JAIN SANKHLA 8 ITAT, MUMBAI 6. 5 6$ / GUARD FILE. / BY ORDER, .2*' -' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI