ACIT, New Delhi V. Mr. Pierre Le Roux, (Air France), New Delhi

ITA 2739/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9912 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 20-08-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 04-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K RAINA
• Assessee Lawyers: SALIL AGGARWAL CONTD PAGE
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I DELHI BEFORE SHRI K.G. BANSAL AND SHRI GEORGE MATHA N ITA NO. 2737(DEL)/2009 ASSESSMENT YEAR: 2004-05 ASSTT. COMMISSIONER OF MR. J EROME SUDAN, INCOME-TAX, CIRCLE 42(1), VS. (AIR FRA NCE) 7, ATMA RAM MANSION, NEW DELHI. CONNAUGHT PLACE, NEW DELHI. ITA NO. 2738(DEL)/2009 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF MR. J EROME SUDAN, INCOME-TAX, CIRCLE 42(1), VS. (AIR FRA NCE) 7, ATMA RAM MANSION, NEW DELHI. CONNAUGHT PLACE, NEW DELHI. ITA NO. 2739(DEL)/2009 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF MR. P IERRE LE ROUX, INCOME-TAX, CIRCLE 42(1), VS. (AIR FRA NCE) 7, ATMA RAM MANSION, NEW DELHI. CONNAUGHT PLACE, NEW DELHI. ITA NO. 2740(DEL)/2009 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF MR. T HERRY MARTIN, INCOME-TAX, CIRCLE 42(1), VS. (AIR FRA NCE) 7, ATMA RAM MANSION, NEW DELHI. CONNAUGHT PLACE, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.K.RAINA, DR RESPONDENT BY : SH RI SALIL AGGARWAL, ADVOCATE CONTD. PAGE 2 ITA NOS. 2737 TO 2740(DEL)/2009 2 ORDER PER K.G. BANSAL : AM THE AFORESAID TWO APPEALS IN THE CASE OF MR. JEROME SUDAN, ONE APPEAL IN THE CASE OF MR. PIERRE LE ROUX AND O NE APPEAL IN THE CASE OF MR. THERRY MARTIN WERE ARGUED IN A CONSOLI DATED MANNER BY THE LEARNED DR AND THE LD. COUNSEL FOR THE ASSESSEE AS THE FACTS AND GROUNDS OF APPEAL WERE COMMON. THEREFORE, WE FIND IT CONVENIENT TO PASS A CONSOLIDATED ORDER. THE APPEALS WERE D ISCUSSED WITH REFERENCE TO THE FACTS IN ITA NO. 2737(DEL)/2009 FOR ASSESSMENT YEAR 2004-05 IN THE CASE OF MR. JEROME SUDAN. THEREFORE, THE FACTS OF THIS CASE ARE DISCUSSED IN DETAIL. ITA NO. 2737(DEL)/2009-A.Y. 2004-05- MR. JEROME S UDAN 2. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSE SSEE POINTED OUT THAT ALL THE GROUNDS STOOD COVERED BY VARIOUS ORDERS OF THE TRIBUNAL. THE CASE OF THE LD. DR WAS BASED UPON THE ORDER OF THE AO. HE ALSO WANTED SOME MORE TIME TO STUDY THE ORDER OF THE TRI BUNAL, BUT SUCH A REQUEST WAS REJECTED AS ALL THE GROUNDS INVOLVED ARE CO VERED MATTERS ONLY. ITA NOS. 2737 TO 2740(DEL)/2009 3 3. GROUND NO. 1(A) IS TO THE EFFECT THAT THE LE ARNED CIT(APPEALS) ERRED IN DELETING THE ADDITION BY HOLDING THAT THE TAX BORNE BY THE EMPLOYER OF THE ASSESSEE WAS IN THE NATURE OF NON-MO NETARY PERQUISITE, EXEMPT U/S 10(10CC) OF THE INCOME-TAX ACT, 1961. THE GROU ND STANDS COVERED BY THE ORDER OF SPECIAL BENCH OF DELHI TRIBUNAL IN T HE CASE OF RBF RIG CORPORATION VS. ACIT (2008) 297 ITR (AT) 2 28. THE FINDINGS OF THE TRIBUNAL ARE CONTAINED IN PARAGRAPHS 73, 74 AND 75, WHICH ARE REPRODUCED BELOW FOR READY REFERENCE:- IT IS CLEAR FROM THE ABOVE THAT TAXES PAID BY THE EMPLOYER ON BEHALF OF THE EMPLOYEE WERE TREAT ED AS A PERQUISITE COVERED BY SUB-CLAUSE (IV) OF CLAUSE (2) OF SECTION 17OF THE INCOME-TAX ACT AND, THEREFORE, INCLUDIBLE IN THE SALARY. THERE IS NO DISPUTE THAT PAYMENT OF TAXES MADE BY THE EMPLOYER ON BEHALF OF THE EMPLOYEE IS A PERQUISITE AND PART OF THE INCOME ASSESSABLE UN DER THE HEAD SALARY IF SECTION 10(10CC) WAS NOT BROUGHT ON THE STATUTE BOOK. IT IS ALSO A BENEFIT OR AMENITY ENJOYED BY THE EMPLOYEE BUT IT IS NOT A MONETARY PAYMENT TO TH E EMPLOYEE. IT IS A PAYMENT BY THE EMPLOYER WHICH DISCHAR GES AN OBLIGATION OF THE EMPLOYEE, WHICH OTHERWISE WOUL D HAVE BEEN DISCHARGED BY THE EMPLOYEE. SUCH PAYMENTS OF TAXES, THEREFORE, ARE FULLY COVERED BY THE ABOVE SUB- CLAUSE (IV). ITA NOS. 2737 TO 2740(DEL)/2009 4 THE DECISION OF CIT VS. AMERICAN CONSULTING CORPORATION (1980) 123 ITR 513 (ORISSA), NOT ED ABOVE ALSO SUPPORTS THE VIEW THAT TAXES PAID ON BEHA LF OF THE ASSESSEE IS A PERQUISITE OR A BENEFIT, BUT NO T INCOME FROM BUSINESS. IT COULD NOT BE TAXED EXCEPT UND ER CLAUSE (IV) OF SECTION 28 WHICH PROVIDED THAT A BENEFIT OR PERQUISITE WAS LIABLE TO BE CHARGED TO TAX. IT IS NOT MONEY, WHICH IS PAID TO THE ASSESSEE WHEN TAXES ARE PAID ON HIS BEHALF. IT IS DISCHARG E OF HIS OBLIGATION. THE PAYMENT FULLY FITS IN THE JACKET OF SUB-CLAUSE (IV) OF SECTION 17(2) OF THE ACT. IT MAY BE A M ONETARY GAIN OR MONETARY BENEFIT OR A MONETARY ALLOWANCE BUT DEFINITELY IT IS NOT A MONETARY PAYMENT TO THE ASSESSEE. W HAT IS EXCLUDED IN THE CLAUSE IS THE PERQUISITE IN TH E SHAPE OF A MONETARY PAYMENT TO THE ASSESSEE. IF IT IS A P AYMENT TO A THIRD PERSON LIKE PAYMENT OF TAXES TO THE GOVERNM ENT, THEN SUCH PAYMENT OF TAXES CANNOT BE EXCLUDED UNDER SECTION 10(10CC). THE CIRCULAR OF THE BOARD AND PROVISIO N OF SUB- SECTION (1A) OF SECTION 192, SECTIONS 40(A)( V), 195A FULLY SUPPORT THE CLAIM OF THE ASSESSEE. WE, THEREFO RE, HOLD THAT THE TAXES PAID BY THE EMPLOYER ON BEHALF OF THE EMPLOYEE IS A PERQUISITE WITHIN THE MEANING OF SECTION 17( 2) OF THE INCOME-TAX ACT, WHICH IS NOT PROVIDED BY WAY OF MONETARY PAYMENT. THEREFORE, THERE IS NO REASON NOT T O EXCLUDE SUCH PAYMENT OF TAXES FROM THE TOTAL INCOME OF TH E ASSESSEE. IN OTHER WORDS, TAXES PAID BY THE EMPLOYER CAN BE ADDED ITA NOS. 2737 TO 2740(DEL)/2009 5 ONLY ONCE IN THE SALARY OF THE EMPLOYEE. THER EAFTER, TAX ON SUCH PERQUISITE IS NOT TO BE ADDED AGAIN. WE , THEREFORE, FIND SUBSTANCE IN THE CONTENTION ADVANCED ON BEHAL F OF LEARNED COUNSEL FOR THE ASSESSEES AND THE INTE RVENERS. THE QUESTION REFERRED TO US IS ANSWERED IN FAVOUR OF THE ASSESSEE. THE APPEALS OF THE ASSESSEES AND THE INTERVENERS ARE ALLOWED ON THIS ISSUE. THUS, IT WAS HELD THAT THE PAYMENT OF TAX IS A NON-MONETARY PERQUISITE, BEING COVERED U/S 17(2)(IV) OF THE ACT. RESPEC TFULLY FOLLOWING THIS ORDER, IT IS HELD THAT THERE WAS NO ERROR IN T HE ORDER OF THE LEARNED CIT(APPEALS), WHICH REQUIRES CORRECTION FROM U S. ACCORDINGLY, THIS GROUND IS DISMISSED. 4. GROUND NO. 1(B) IS TO THE EFFECT THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEA LS) ERRED IN HOLDING THAT THE TAX BORNE BY THE EMPLOYER OF THE ASS ESSEE WAS TO BE EXCLUDED FROM SALARY, DEFINED IN RULE 3 OF THE INCOME -TAX RULES, 1962, FOR THE PURPOSE OF VALUATION OF PERQUISITE ON ACCOUNT OF RENT-FREE ACCOMMODATION. THIS GROUND ALSO WAS STATED T O BE COVERED Y THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT VS. MAKOTE HOSHIZAKI (2009) 27 SOT 191, AND THE DEFINITION OF THE TERMS SAL ARY FURNISHED IN RULE 3. ITA NOS. 2737 TO 2740(DEL)/2009 6 CLAUSE (VI) OF THE EXPLANATION OF RULE 3 DEFINE S THE AFORESAID TERMS AND ITS SUB-CLAUSE (D) EXCLUDES THE VALUE OF PERQUISITES SPECIFIED IN SUB-SECTION (2) OF SECTION 17 OF THE INCOME-TAX ACT FROM ITS AMBIT. AS MENTIONED IN GROUND NO. 1(A), THE TAX BORNE B Y THE EMPLOYER HAS BEEN HELD TO BE NON-MONETARY PERQUISITE COVERED U/S 17(2)(IV). THEREFORE, IT IS HELD THAT THIS PERQUISITE HAS TO BE EXCLUDED FROM THE SALARY FOR VALUING THE PERQUISITE ON ACCOUNT OF RENT-FREE ACCOMMODATION. INCIDENTALLY, IT MAY ALSO BE MENTIONED THAT THE ISSUE STANDS COVERED IN PARAGRAPH 11 OF THE ORDER OF THE TRIBUNAL IN THE CASE OF MAKOTE HOSHIZAKI (SUPRA). THIS PARAGRAPH IS REPRODUCED BELOW FOR READY REFERENCE:- THUS, ON THE COMPARISON OF DEFINITION OF THE W ORD SALARY BEFORE AND AFTER 1.4.2001, IT IS CLEAR THAT FOR THE PURPOSE OF DETERMINATION OF PERQUISITE VALUE OF RENT-FREE ACCOMMODATION WITH EFFECT FROM 1.4.2001, AS PROVIDES IN SUB-CLAUSES (D) & (E) OF CLAUSE (VI), THE TERM SALARY WILL NOT INCLUDE THE VALUE OF PERQUISITES AS SPECI FIED UNDER SECTION 17(2) OF THE ACT OR ANY PAYMENT OR E XPENDITURE SPECIFICALLY EXCLUDED UNDER PROVISO TO SUB-CLAUS E (III) OF CLAUSE (2) OR PROVISO TO CLAUSE (2) OF SECTION 17. NO DOUBT THE ASSESSING OFFICER RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF H.D. DENNIS (S UPRA) HAS ITA NOS. 2737 TO 2740(DEL)/2009 7 HELD THAT THE DEFINITION GIVEN IN RULE 3 IS A CO-EXTENSIVE WITH THE DEFINITION GIVEN IN SECTION 17 EXCEPT THERE WAS AN EXPRESS EXCLUSION THEREFROM OF KINDS OF PAYMEN TS MENTIONED. THIS DECISION WAS RENDERED ON 6.4.19 81. HOWEVER, SUB-CLAUSE (D) OF CLAUSE (VI) OF THE EXP LANATION APPLICABLE WITH EFFECT FROM 1.4.2001 SPECIFICALL Y EXCLUDES THE PERQUISITES SPECIFIED UNDER SECTION 17(2) OF THE ACT TO BE INCLUDES IN THE SALARY FOR THE PURPOSE OF DETER MINATION OF PERQUISITE VALUE UNDER RULE 3 OF THE INCOME-TAX RULES, 1962. THUS, PRIOR TO 1.4.2001 AS PER THE DECISION OF HONBLE BOMBAY HIGH COURT, THE TERM SALARY INCLUDED TH E PERQUISITES UNDER SECTION 17(2)(IV) OF THE ACT. THE RATIO OF THE DECISION RENDERED BY HONBLE BOMBAY HIGH COU RT IS STILL APPLICABLE TO THE EXTENT IT HAS BEEN HELD THAT T HE DEFINITION GIVEN IN RULE 3 IS CO-EXTENSIVE WITH THE DEFINI TION GIVEN IN SECTION 17 EXCEPT SO FAR AS THERE IS AN EX PRESS EXCLUSION THEREFROM OF THE KINDS OF PAYMENTS MENTIONED. S INCE SUB- CLAUSE (D) OF CLAUSE (VI) OF EXPLANATION TO RULE 3 SPECIFICALLY EXCLUDES PERQUISITES SPECIFIED IN SECTION 17(2) OF THE ACT FROM SALARY FOR THE PURPOSES COMPUTATION OF PERQ UISITES, IN OUR CONSIDERED OPINION, IN PRINCIPLE THE SALARY WILL NOT INCLUDE THE TAX PAID BY THE EMPLOYER FOR THE P URPOSE OF DETERMINATION OF PERQUISITE VALUE OF RENT-FREE AC COMMODATION UNDER RULE 3 OF THE INCOME-TAX RULES, 1962. ITA NOS. 2737 TO 2740(DEL)/2009 8 5. GROUND NO. 1(C) IS TO THE EFFECT THAT THE LEA RNED CIT(APPEALS) ERRED IN HOLDING THAT THE EMPLOYERS CONTRIBUTIO N TO SOCIAL SECURITY ON BEHALF OF THE ASSESSEE AND HYPO TAX IS NOT T AXABLE IN THE HANDS OF THE ASSESSEE. THIS GROUND WAS STATED TO BE COVERED BY THE ORDER OF B BENCH OF MUMBAI TRIBUNAL IN THE CASE OF GALLOTTI RAOUL VS. ACIT (1997) 61 ITD 453, IN WHICH IT WAS HELD THAT THE ASSESSEE HAD NO DOMAIN OVER THE SOCIAL SECURITY CHARGES PAID BY THE EMPLOYER AND THE SOCIAL SECURITY ORGANIZATION HAD OVER-RIDING CH ARGE OVER THE CONTRIBUTIONS, WHICH WAS TO BE USED BY THE O RGANIZATION TO TAKE CARE OF FRENCH NATIONAL IN THE TIMES OF VARIOUS CALAMI TIES. WHILE THERE COULD BE SOME ARGUMENT THAT EVEN THE ASSESSEE WOULD BE A BENEFICIARY IN THE CONTINGENCIES FOR WHICH THE SOCIAL SECURITY OR GANIZATION WORKS, YET, THE JUDICIAL DISCIPLINE DEMANDS THAT THE DECISION OF A COORDINATE BENCH OUGHT TO BE FOLLOWED. THEREFORE, RESPECTFULLY FOLLOWING THIS ORDER, IT IS HELD THAT THERE WAS NO ERROR IN THE ORDER OF TH E LEARNED CIT(APPEALS) IN THIS MATTER ALSO. THUS, THIS GROUND IS ALSO DISMISSED. 6. IN GROUND NO. 2, IT IS MENTIONED THAT THE LE ARNED CIT(APPEALS) MERELY RELIED ON THE DECISION OF HONBLE TRIBU NAL IN THE CASE OF RBF RIG CORPORATION (SUPRA) AND DID NOT DECIDE TH E POINTS RAISED BY THE ITA NOS. 2737 TO 2740(DEL)/2009 9 AO. WE ARE OF THE VIEW THAT THE LEARNED CIT(APPE ALS) WAS BOUND TO FOLLOW THE ORDER OF THE TRIBUNAL IN THE MATTER, W HICH WAS ON THE IDENTICAL POINT OF LAW. THEREFORE, THERE IS NO FORCE IN THIS GROUND ALSO. ITA NO. 2738(DEL)/2009- A.Y. 2006-07- MR. JERONE SUDAN. 7. THE GROUNDS IN THIS APPEAL ARE IDENTICAL WIT H THE GROUNDS IN ITA NO. 2737(DEL)/2009 (SUPRA). THEREFORE, THE ORDER FOR THAT YEAR IS MADE APPLICABLE TO THIS YEAR ALSO. ITA NO. 2739(DEL)/2009- A.Y. 2006-07- MR. PIERRE LE ROUX. 8. IN THIS CASE, THE REVENUE HAS TAKEN ONLY TW O GROUNDS, NAMELY, THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(APPEALS) ERRED IN HOLDING THAT THE TAX BO RNE BY THE EMPLOYER OF THE ASSESSEE- (I) IS INCOME IN THE NATURE OF NON-MO NETARY PERQUISITE, EXEMPT FROM TAX U/S 10(10CC) OF THE ACT, AND (II) IS TO BE EXCLUDED FROM SALARY UNDER RULE 3 FOR VALUATION OF PERQUISITE ON AC COUNT OF RENT-FREE ACCOMMODATION. THUS, THERE IS NO GROUND REGAR DING EXCLUSION OF CONTRIBUTION MADE BY THE EMPLOYER TO SOCIAL SECU RITY ORGANIZATION. GROUND NO. 2 IS SIMILAR TO GROUND NO. 2 IN IT A NO. 2738(DEL)/2009 (SUPRA). ALL THESE MATTERS HAVE BEEN DECIDED AGAINST THE REVENUE IN THE CASE OF MR. JEROME SUDAN IN ITA NO. 2738(DEL )/2009 (SUPRA). THE ITA NOS. 2737 TO 2740(DEL)/2009 10 FINDINGS OF THAT ORDER ARE MADE APPLICABLE IN RESPECT OF THIS APPEAL ALSO. ITA NO. 2740(DEL)/2009 A.Y. 2006-07- MR. THERRY MARTIN 9. THE GROUNDS TAKEN IN THIS APPEAL ARE IDENTICAL WITH THE GROUNDS TAKEN IN ITA NO. 2739(DEL)/2009 (SUPRA) IN THE CASE OF MR. PIERRE LE ROUX. THEREFORE, ORDER MADE IN THAT CASE IS APPLICABL E TO THIS APPEAL ALSO. 10. IN THE RESULT, ALL THE FOUR APPEALS OF THE REVENUE ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 20 TH AUGUST, 2009 SOON AFTER THE COMPLETION OF THE HEARING. SD/- SD/- (GEORGE MATHAN) ( K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 20TH AUGUST, 2009. SP SATIA COPY OF THE ORDER FORWARDED TO: MR. JEROME SUDAN, MR. PIERRE LE ROUX & MR. THER RY MARTIN, AIR FRANCE, NEW DELHI. ACIT, CIRCLE 42(1), NEW DELHI. CIT(A) CIT, NEW DELHI. THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.