DCIT, New Delhi V. Sh. U.K. Bose, Lucknow

ITA 3155/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0422 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 19-01-2011
• Assessment Year: 1996-1997
• Appeal Filed On: 24-06-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Assessee Lawyers: J J MEHROTRA
• Section: 10

Judgement Text

3155-280-20 10-UK 1 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H NEW DELHI) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI K. G. BANSAL, ACCOUNTANT MEMBER I.T.A. NO.3155/D/2010 ASSESSMENT YEAR: 1996-97 DY. C.I.T., VS. SHRI U.K. BOSE, CEN. CIRCLE-6, 1, KAPOORTHALA COMPLEX, NEW DELHI ALIGANJ, LUCKNOW CROSS OBJECTION NO.280/D/2010 (I.T.A. NO.3155/D/2010) ASSESSMENT YEAR : 1996-97 SHRI U.K. BOSE, VS. ASSTT. C.I.T., 1, KAPOORTHALA COMPLEX, CEN. CIRCLE-6, ALIGANJ, LUCKNOW NEW DELHI (APPELLANT) (RESPONDENT) GIR/PAN NO.701U APPELLANT BY : SHRI AMRENDRA KUMAR, SR. DR RESPONDENT BY: SHRI J.J. MEHROTRA, CA ORDER PER K.G. BANSAL: AM: THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE AS SESSEE ARISE OUT OF THE ORDER OF CIT(A)-I, NEW DELHI, PASSED ON 13.04.201 0 IN APPEAL NO.176/06- 07. THE REVENUE HAS CHALLENGED THE ORDER IN RESPECT OF (I) ALLOWING CLAIM U/S 10 (13A) SUBJECT TO VERIFICATION; (II) DIRECTING THE ASSESS ING OFFICER TO REVALUE THE PERQUISITE FROM RENT FREE ACCOMMODATION; AND (III) DELETIN G `5,81,175/- FROM PERQUISITE AS FOREIGN TRAVELING EXPENSES INCURRED BY THE EMP LOYER-COMPANY. ON 3155-280-20 10-UK 2 THE OTHER HAND, THE ASSESSEE HAS SUPPORTED THE ORDER OF THE L EARNED CIT(A) IN RESPECT OF (I) GRANTING CLAIM U/S 10(13A); (II) DELETI NG THE ADDITION OF `5,81,175/-. 2. IN RESPECT OF FIRST TWO GROUNDS OF THE REVENUE, IT IS MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE IS ENJOYING RENT-FREE ACCOM MODATION. THEREFORE, NO DEDUCTION IS PERMISSIBLE U/S 10(13A). IT I S FURTHER MENTIONED THAT THE ACCOMMODATION PROVIDED TO THE ASSESSEE WAS TAKEN ON RENT B Y M/S SAHARA INDIA FIRM FROM REAR ADMIRAL S.S. KHANNA. M/S SAHARA INDIA F IRM IS NOT THE EMPLOYER OF THE ASSESSEE. THEREFORE, THE RENT OF THREE MONTHS WAS TAKEN AS INCOME FROM OTHER SOURCES. IT IS ALSO MENTIONED THAT THE ASSESSEE WAS PROV IDED RENT-FREE ACCOMMODATION BY THE EMPLOYER BY TAKING A HOUSE ON RENT FREE FROM DR. DURGA GANJU @ RS.15,000/- PER MONTH FROM 15.06.1995. THE P ERQUISITE VALUE WAS WORKED OUT AT `1,62,740/-, BEING 50% OF THE SALARY SIN CE FAIR RENT OF THE PROPERTY EXCEED 10% OF THE SALARY, BUT IT WAS LESS THAN 50% OF TH E SALARY. 2.1 THE LEARNED CIT(A) CONSIDERED THE FACTS OF THE CASE IN CLUDING THE SUBMISSION OF THE ASSESSEE. IT WAS FOUND THAT IN THE RELEVANT YEAR, HE OCCUPIED TWO PREMISES,- (I) PROPERTY TAKEN ON RENT FROM REAR ADMIRAL S.S. KHANNA UPTO 30.06.1995; AND (II) PROPERTY TAKEN ON RENT FROM DR. DURGA GANJU, WHICH WAS PROVIDED AS RENT-FREE ACCOMMODATION BY THE EMPLOYER, THE RENT PAID BEING `15,00 0/- PER MONTH. THUS, IN THE FIRST THREE MONTHS, THE ASSESSEE WAS NOT GRANTED THE BENEFIT OF RENT-FREE ACCOMMODATION. HE STAYED IN THE PROPERTY RENTED BY M/S SAHARA INDIA FOR WHICH DUE DEDUCTION WAS MADE FROM THE SALARY. HOWEVER, W.E.F. 1 5.06.1995, THE EMPLOYER PROVIDED HIM RENT-FREE ACCOMMODATION. ON THESE FA CTS, THE LEARNED CIT(A) CAME TO THE CONCLUSION THAT THE ASSESSEE WAS ENTITL ED TO DEDUCTION U/S 10(13A) FROM 01.04.1995 TO 15.06.1995. THEREFORE, HE A LLOWED SUCH DEDUCTION BUT DIRECTED THE ASSESSING OFFICER TO QUANTIFY THE AMOUNT AFT ER VERIFICATION OF FACTS AND 3155-280-20 10-UK 3 FIGURES INCLUDING THE FACT THAT RENT WAS DEDUCTED FROM T HE SALARY. COMING TO THE POSITION AFTER 15.06.1995, IT WAS DIRECTED THAT THE PERQ UISITE OF RENT FREE ACCOMMODATION MAY BE COMPUTED AGAIN BY TAKING THE DEFIN ITION OF SALARY TO BE THE ONE AS PROVIDED IN RULE 3(A). 3. IN RESPECT OF THESE ISSUES, THE ONLY OBJECTION MADE BY THE LEARNED DR IS THAT THERE IS NO FACT ON RECORD TO SHOW THAT THE ASSESSEE PAID RENT FOR THE PREMISES OCCUPIED BY HIM UPTO 15.06.1995. THE LEARNED COUNSEL, IN REPLY REFERRED TO PAGE NOS.1 & 2 OF THE PAPER BOOK, BEING THE SUBMISSIONS MADE TO THE ASSESSING OFFICER ON 08.10.2001. IT IS MENTIONED THAT THE NAME AND ADDRES S OF THE LANDLORD IS ENCLOSED, WHICH CONTAINS THE DETAILS OF RENT PAID. THE D ETAILS SHOW THAT FOR THE PERIOD 22.03.1995 TO 15.06.1995, THE ASSESSEE STAYED IN T HE ACCOMMODATION RENTED BY SAHARA INDIA FIRM FROM S.S. KHANNA, FOR WHICH RENT WAS PAID @`4,500/- PER MONTH BY IT. HOWEVER, THERE IS NO FURTHER DETAIL TO S HOW THAT THE AMOUNT WAS PAID BY THE ASSESSEE TO SAHARA INDIA FIRM. 3.1 HAVING CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED CIT(A) WHEN HE HELD THAT THE CLAIM OF THE ASSESSEE MAY BE ALLOWED U/S 10(13A) SUBJECT TO VERIFICATION OF F IGURES AND SUBMISSION OF EVIDENCE BY THE ASSESSEE TO THE EFFECT THAT RENT WAS DEDUCTED FR OM THE SALARY. 3.2 WE ALSO DO NOT FIND ANY ERROR IN HIS ORDER WHEN HE D IRECTED THE ASSESSING OFFICER TO REVALUE THE PERQUISITE IN RESPECT OF RENT FREE ACC OMMODATION BY ADOPTING THE DEFINITION OF SALARY AS PROVIDED IN RULE 3(A), WHIC H HAS BEEN PROVIDED SPECIFICALLY FOR THE PURPOSE OF COMPUTING PERQUISITE ON ACCOUNT OF RENT FREE ACCOMMODATION. 3155-280-20 10-UK 4 3.3 THE RESULT OF THE DISCUSSION IS THAT THE ORDER OF TH E LEARNED CIT(A) STANDS AS IT IS AND THE GROUND NO.2 STANDS DISMISSED. 4. IN RESPECT OF GROUND NO.3, IT IS MENTIONED IN THE ASS ESSMENT ORDER THAT IN SPITE OF REPEATED OPPORTUNITIES, THE ASSESSEE COULD NOT ESTAB LISH ANY LINK BETWEEN THE BUSINESS OF THE EMPLOYER COMPANY AND THE FOREIGN TOUR S. SUCH TOURS WERE ALSO TAKEN IN THE PAST. NO PRUDENT BUSINESSMAN WOULD ALLOW REPEATED FOREIGN TOURS MERELY ON TELEPHONIC CONVERSATION AS NO RECORD WHATSOEVER IS AVAILABLE. THEREFORE, THE AMOUNT WAS TAKEN TO BE EXPENDITURE INCURRED BY THE EMP LOYER ON PERSONAL TOURS OF THE ASSESSEE. IT WAS HELD TO BE THE PERQUISITE AND THUS , ADDITION OF `5,81,175/- WAS MADE TO THE INCOME. 4.1 THE LEARNED CIT(A) DELETED THIS ADDITION BY REFERRING T O THE ORDERS IN THE CASE OF THE EMPLOYER-COMPANY MADE IN EARLIER YEARS AND THE ORD ER OF THE ITAT IN THE CASE OF ASSESSEE FOR ASSESSMENT YEAR 1995-96, IN WHICH THE ADDITION WAS DELETED BY MENTIONING THAT SINCE THE EXPENDITURE HAD BEEN CONSIDERED IN THE HANDS OF EMPLOYER-COMPANY AND 90% THEREOF HAS BEEN ALLOWED, THE SAME CANNOT BE TREATED AS PERQUISITE IN THE HANDS OF ASSESSEE. EVEN DISALL OWANCE OF 10% OF THE EXPENDITURE IN THE HANDS OF THE EMPLOYER CANNOT CONSTITUTE PERQUISITE WHO HAD UNDERTAKEN VISITS TO FOREIGN COUNTRIES AND THAT TOO IN THE HANDS OF CEO. 4.2 BEFORE US, THE LEARNED DR REFERRED TO THE FINDINGS OF TH E ASSESSING OFFICER AND THE LEARNED CIT(A). IT WAS SUBMITTED THAT 10% OF T HE EXPENDITURE HAD BEEN DISALLOWED IN THE HANDS OF EMPLOYER-COMPANY. IN REPLY, THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE IS THE CEO OF SAHARA INDIA AIR LINES LIMITED. THE TRIBUNAL IN THE ORDER FOR ASSESSMENT YEAR 1995-96, HELD T HAT THE EXPENDITURE DOES 3155-280-20 10-UK 5 NOT AMOUNT TO PERQUISITE. THEREFORE, IT IS ARGUED THAT N O ADDITION SHOULD HAVE BEEN MADE ON THIS GROUND. 4.3 HAVING CONSIDERED SUBMISSIONS FROM BOTH SIDES, WE ARE OF THE VIEW THAT THE ISSUE STANDS COVERED BY THE ORDER OF THE TRIBUNAL FOR ASS ESSMENT YEAR 1995-96. BEING THE DECISION OF CO-ORDINATE BENCH, IT HAS TO BE FOL LOWED AS A MATTER CONSISTENCY. THE RELEVANT PARAGRAPH IS REPRODUCED BELOW: - WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AV AILABLE ON RECORD. THERE IS NO DISPUTE THAT THE EXPENDITURE WAS INCURRED BY THE EMPLOYER M/S SAHARA INDIA AIRLINES LTD. FOR ITS BUS INESS PURPOSES AND THE ASSESSING OFFICER HAS TREATED 10 PER CENT OF THE TO TAL FOREIGN TRAVEL EXPENDITURE FOR NON-BUSINESS PURPOSES. THE REASONS FOR DISALLOWANCE AS MENTIONED IN THE ORDER SEEMS TO BE THAT /TH E ALLOWANCE HAVE NOT BEEN QUANTIFIED BY THE AUDITORS UNDER RULE 6D IN RESPECT OF FOREIGN TRAVEL IN THE TAX AUDIT REPORT. WE AL SO FIND THAT THERE IS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE W AS PAID THE FOREIGN TRAVELLING EXPENSES IN TERMS OF HIS APPOINTMENT. THEREFORE, IN THE ABSENCE OF ANY CONTRACTUAL AGREEMENT BETWEEN THE EMPLOYER AND THE EMPLOYEE, THE EXPENDITURE INCURRED BY THE EMPLOYER FO R ITS OWN BUSINESS PURPOSE CANNOT BE TREATED IN THE HANDS OF T HE EMPLOYEE AS PERQUISITE. THE ASSESSING OFFICER HAD DISALLOW ED 10 PER CENT OF THE FOREIGN TRAVEL EXPENSES FOR NON-BUSINESS PURPOS ES. HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENGG. CO. VS. CIT 253 ITR 949 (GUJ.) HELD THAT THE DIRECTORS OF THE A SSESSEE COMPANY WERE ENTITLED TO USE THE VEHICLES FOR THEIR PERSONAL USE IN ACCORDANCE WITH THE TERMS AND CONDITIONS ON WHICH THEY WERE APPOINTED AND PERQUISITES GIVEN TO THEM FORMED PART OF TH EIR REMUNERATION UNDER EXPLANATION TO SECTION 198 OF THE COM PANIES ACT, 1956 FOR THE PURPOSE OF DETERMINING THEIR REMUNERATION UND ER SECTION 309 OF THE ACT. IT IS NOT A CASE WHERE FOREIGN TRAVEL WA S PERMITTED AS PERQUISITES. SINCE THE FOREIGN TRAVEL HAD BEEN CONDUCTED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS OF HIS EMPLOYER AND T HAT HAS BEEN ALLOWE4D BY THE ASSESSING OFFICER TO THE EXTENT OF 90 P ER CENT, THE EXPENDITURE INCURRED BY THE EMPLOYER COMPANY CANNOT BE TREATED AS PERQUISITE IN THE HANDS OF THE EMPLOYEE. IN THIS CASE T HE ASSESSING OFFICER HAS GONE TO INVESTIGATE THE CASE AS IF HE WAS MAKI NG THE ASSESSMENT OF THE EMPLOYER AND NOT OF THE EMPLOYEE. SINCE TH E 3155-280-20 10-UK 6 EXPENDITURE HAD BEEN CONSIDERED IN THE HANDS OF THE EMPLOYER A ND NOT OF THE EMPLOYEE. SINCE THE EXPENDITURE HAD BEEN CONSIDERED IN THE HANDS OF THE EMPLOYER COMPANY AND HAS BEEN ALLOWED AS EXPENDITURE TO THE EXTENT OF 90%, THE SAME CANNOT BE TREATED AS PERQUISITE IN THE HANDS OF THE ASSESSEE. FURTHER /THE DISA LLOWANCE OF 10% OF FOREIGN TRAVEL EXPENDITURE IN HANDS OF EMPLOYER CAN NOT CONSTITUTE PERQUISITES IN THE HANDS EMPLOYEES WHO HAD UND ERTAKEN VISITS TO FOREIGN COUNTRIES AND THAT TOO IN THE HANDS OF ITS CEO. THEREFORE, IN OUR CONSIDERED VIEW THE AUTHORITIES BELOW WERE N OT JUSTIFIED IN HOLDING THE AMOUNT OF `8,72,175/- AS PERQ UISITE OF THE ASSESSEE. WE, THEREFORE, DELETE THIS ADDITION. 4.4 IN VIEW OF THE AFORESAID DECISION, THE ORDER OF THE LEA RNED CIT(A) IS UPHELD. 5. THE CROSS OBJECTION OF THE ASSESSEE IS IN SUPPORT OF T HE ORDER OF THE LEARNED CIT(A), WHICH HAS BEEN UPHELD BY US IN RESPECT OF THE GRO UNDS TAKEN BY THE REVENUE. 6. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND T HE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 18.02.2011. SD/- SD/- ( RAJPAL YADAV ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER DT. 18/02/2011 NS COPY FORWARDED TO:- 1. DY. CIT, CENTRAL CIRCLE-6, NEW DELHI. 3155-280-20 10-UK 7 2. SHRI U.K. BOSE, 1, KAPOORTHALA COMPLEX, ALIGANJ, LUCKN OW. 3. THE CIT 4. THE CIT (A), NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY BY ORDER (ITAT, NEW DELHI).