ACIT, New Delhi V. Sh. Pankaj Shah, Gurgaon

ITA 3732/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2186 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 03-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK K SAROHA
• Assessee Lawyers: MANJU BHARDWAJ
• Keywords: TDS
• Section: 143(3); 192; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B NEW DELHI BEFORE SHRI DEEPAK R SHAH, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER I.TA. NO. 3732/DEL./09 ASSTT. YEAR 2004-05 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 46 (1), NEW DELHI. VS. SHRI PANKAJ SHAH, C/O E.I. DUPONT (I) PVT. LTD. CYBER GOERGAON TOWER, C-7 TH FLOOR, SECTOR 25, PHASE-III, GURGAON. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHOK K. SAROHA, DR RESPONDENT BY : MISS MANJU BHARDWAJ, CA ORDER PER DEEPAK R SHAH, ACCOUNTANT MEMBER THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 18.5.2009 IN AN APPEAL AGAINST ASSESSMENT ORD ER FRAMED U/S 143(3) OF THE INCOME TAX ACT 1961 (THE ACT). THE REVENUE HAS RAIS ED FOLLOWING GROUNDS BEFORE US - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE TAX BORNE BY T HE EMPLOYER U/S 192 (1) IS A NON-MONETARY PERQUISITE, TAX ON WHICH IS E XEMPT FROM TAX U/S 10 (10CC) & NOT REQUIRED TO BE GROSSED UP U/S 195A OF THE I.T. ACT. 2. HOLDING THAT THE CALCULATION MADE BY THE ASSESSI NG OFFICER FOR THE EXEMPTION U/S 10(10CC) OF THE I.T. ACT, WAS WRONG, THEREBY DELETING THE ADDITIONS RIGHTLY MADE BY THE ASSESSING OFFICER . ITA NOS. 3732/DEL/09 2 3. HOLDING THAT THAT AMOUNT OF REFUND DUE ON ACCOUN T OF EXCESS TAX PAID BY THE EMPLOYER IS JUST LIKE EXCESS PAYMENT OF SALA RY BY THE EMPLOYER WHICH WAS NOT DUE OR RECEIVABLE FROM THE EMPLOYER B Y THE EMPLOYEE. 4. DELETING THE ADDITION ON ACCOUNT OF PERQUISITE A S AO HAS RIGHTLY HELD THAT THE EXCESS PAYMENT OF TAXES MADE BY THE EMPLOY ER IS NOTHING BUT PERQUISITE AND TAXABLE U/S 17(2) (IV) OF THE I.T. A CT, 1961. 2. FACTS OF THE CASE ARE THAT SHRI PANKAJ SHAH WAS AN EMPLOYEE OF LIAISON OFFICE OF DUPONT FAR EAST INC. US, AND WAS BEING PAID SALARY AND OTHER ALLOWANCES AS PER THE AGREEMENT AND THE TAXES WERE TO BE BORNE BY THE COMPANY. THE TAX OF RS. 42,45,726/- PAID BY THE COM PANY AND CONSIDERED A NON-MONETARY BENEFIT BY THE ASSESSEE WAS TREATED AS MONETARY BENEFIT BY THE AO AND GROSSED UP, RESULTING IN AN ADDITION OF RS. 21,10,887/-. ALSO REFUND DUE OF RS. 8,98,899/- BASED ON THE RETURN OF INCOME AND INTEREST THEREON WAS CONSIDERED AS A PERQUISITE AND ADDED TO THE INCOME OF THE ASSESSEE BY THE AO. 3. BEFORE LD. CIT (A) IT WAS SUBMITTED THAT THE ISSUE, WHETHER TAX BORNE BY THE EMPLOYER IS A MONETARY OR A NON-MONETARY BENEFI T AND WHETHER OR NOT IT IS TO BE CONSIDERED FOR COMPUTATION OF EXEMPTION U/S. 10 (10CC) OF THE IT ACT AND CONSEQUENTIAL GROSSING UP, IS COVERED IN ASSESSEES FAVOUR BY THE DECISION OF DELHI ITAT IN THE CASE OF RBF RIG CORPORATION, LIC (RBFRC) VS. ACIT (297 ITR 228). AS REGARDS THE ISSUE OF TAXABILITY OF REFUND OF TAX AND INTEREST AS DISGUISED PERQUISITE, IT HAS BEEN SUBMITTED THAT AS THE LIAB ILITY TO PAY THE TAX WAS OF THE COMPANY, EXCESS TAX DEPOSITED AS TDS OR SELF ASSESS MENT TAX IS REFUNDABLE TO THE COMPANY, THEREFORE IT CANNOT BE CONSIDERED AS I NCOME OF THE ASSESSEE. 4. WHEREAS LD. CIT (A) HELD :- I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE B Y THE ASSESSEE AND HAVE ALSO GONE THROUGH THE ORDERS OF THE ITAT, DELH I RELIED UPON BY THE ITA NOS. 3732/DEL/09 3 ASSESSEE IN SUPPORT OF HIS SUBMISSIONS I FIND THAT THE ISSUE OF GROSSING UP OF TAX BORNE BY THE EMPLOYER IS SQUARELY COVERED BY TH E DECISION OF RBF RIG CORPN. LIC (RBFRC) V. ACIT 109 ITD 141 (DELHI) (SB) WHEREIN IT HAS BEEN HELD THAT :- I) TAXES PAID ON BEHALF OF EMPLOYEE AT THE OPTION O F EMPLOYER IS A NON-MONETARY REQUISITE FULLY COVERED BY SUB-CLAUSE (IV) OF CLAUSE (2) OF SECTION 17 AND, THUS EXEMPT U/S. 10- (10C) A ND IS NOT LIABLE TO BE INCLUDED IN TOTAL INCOME OF EMPLOYEE. II) TAXES PAID BY EMPLOYER CAN BE ADDED ONLY ONCE I N SALARY OF EMPLOYEE AND THEREAFTER, TAX ON SUCH PERQUISITE IS NOT TO BE ADDED AGAIN. IN VIEW OF THE ABOVE DECISION OF DELHI ITAT, THE AD DITION OF RS. 21,10,887/- MADE BY THE AO ON ACCOUNT OF CALCULATION OF EXEMPTI ON U/S 10 (10CC) AND CONSEQUENTIAL GROSSING UP ARE DELETED. AS REGARDS THE OTHER ISSUE, I.E. TAXABILITY OF REF UND OF TAX BORNE BY THE EMPLOYER AND INTEREST THEREON AS DISGUISED PERQUISI TE IN THE HANDS OF THE ASSESSEE, I FIND THAT IN THE CASE OF SATORU TANKA V . ACIT (ITA NO. 715 TO 717/DEL/07), THE SAME ISSUE HAS BEEN DECIDED IN ASS ESSEES FAVOUR. IN THE ORDER DATED 11.2.09 IN THE CASE OF SATORU TANKA, IN WHOSE CASE REFUND OF EXCESS TAX PAID BY THE EMPLOYER WAS TAXED IN THE HANDS OF THE ASSESSEE AS A PERQUISITE, THE ITAT DELHI, HAS GIVEN THE FOLLOWING JUDGMENT :- IN THE LIGHT OF LEGAL POSITION AND FACTS OF THE PR ESENT CASE, NO DOUBT IS LEFT IN OUR MIND THAT EXCESS AMOUNT OF TAX DEPOSITED WIT H THE CENTRAL GOVERNMENT BY THE EMPLOYER, OVER AND ABOVE THE AMOU NT DUE, AND REFUNDED TO THE ASSESSEE, COULD NOT BE TREATED EITH ER SALARY OR TAXABLE PERQUISITE IN THE HANDS OF THE ASSESSEE. IF ADVERTENTLY, ON ACCOUNT OF MIS-CALCULATION ETC. AMOUNT IN EXCESS WAS PAID TO THE CENTRAL GOVERNMENT, THE EXCESS AMOUNT C OULD BY NO STRETCH OF IMAGINATION BELONG TO THE ASSESSEE. IT WOULD CONTIN UE TO BELONG TO THE EMPLOYER, WHO HAD A LEGAL RIGHT TO TAKE BACK THE AM OUNT PAID IN EXCESS. THE MERE FACT THAT AS PER THE MACHINERY OF THE I.T. ACT, THE CREDIT OF THE AMOUNT PAID WAS GIVEN AND EXCESS AMOUNT WAS REFUNDE D TO THE ASSESSEE, IN OUR CONSIDERED OPINION, WOULD NOT MAKE ANY MATERIAL DIFFERENCE TO THE RIGHT TO RETAIN THE AMOUNT OF REF UND AND INTEREST BUT WAS OBLIGED TO RETURN IT TO THE RIGHTFUL OWNER. IT WAS JUST LIKE EXCESS PAYMENT OF SALARY, WHICH WAS NOT DUE OR RECEIVABLE FROM THE EM PLOYER BY THE EMPLOYEE. THUS AS THE AMOUNT WAS REFUNDABLE TO THE EMPLOYER, THE SAME CANNOT BE TREATED AS TAXABLE INCOME IN THE HANDS OF THE ASSESSEE. IT IS THE CLAIM OF THE ASSESSEE THAT EXCESS AMOUNT WAS IN FAC T RETURNED TO THE EMPLOYER. A CONFIRMATION TO THE ABOVE EFFECT HAS BE EN PLACED ON RECORD. THE REVENUE AUTHORITIES IN OUR CONSIDERED OPINION A RE NOT JUSTIFIED IN REJECTING CONFIRMATION WITHOUT MAKING VERIFICATION FROM THE EMPLOYER. ITA NOS. 3732/DEL/09 4 HOWEVER, EVEN IF IT IS ACCEPTED THAT AMOUNT HAS NO T YET BEEN RETURNED, IT WOULD NOT MAKE ANY MATERIAL DIFFERENCE TO THE NATURE OF THE RECEIPT OR TO THE OBLIGATION TO RETURN THE AMOUNT. IN VIEW OF THE ABOVE DECISION OF THE HONBLE DELHI ITAT, THE ADDITION OF RS. 8,98,899/- MADE BY THE AO ON ACCOUNT OF REFUND OF T AX AND INTEREST THEREON IS DELETED. 5. WHEREAS LD. DR RELIED UPON ASSESSMENT ORDER, LD. COUNSEL FOR ASSESSEE REITERATED THE SUBMISSION MADE BEFORE COMMISSIONER (A) AND HIS FINDING THEREON. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS. SINCE LD. COMMISSIONER HAS FOLLOWED THE DECISION OF SPECIAL BENCH OF THE TRIBU NAL AND SINCE NO CONTRARY DECISION HAS BEEN CITED, THERE IS NO INFIRMITY IN T HE ORDER OF LD. COMMISSIONER (A). 7. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.12.2009 [RAJPAL YADAV] [DEEPAK.R. SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER VEENA DATED : 18.12.2009 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, D EPUTY REGISTRAR, ITAT