ITO, New Delhi V. M/s. C.J. International Hotels Ltd., New Delhi

ITA 4133/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2170 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 17-12-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 19-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: H K LAL
• Keywords: TDS
• Section: 201(1); 201; 192

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 4133/DEL/2009 ASSESSMENT YEAR : 2004-05 INCOME-TAX OFFICER, WARD 49(3), FARIDABAD. VS. C.J. INTERNATIONAL HOTELS LTD., 8-WINDSOR PLACE, JANPATH, NEW DELHI. PAN : AAACC0174E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI H.K. LAL, SR. DR REVENUE BY : SHRI TARANDEEP SINGH, AR ORDER PER I.P. BANSAL, JUDICIAL MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST THE ORDER OF THE CIT (A) DATED 28 TH JULY, 2009 FOR ASSESSMENT YEAR 2004-05. GROUNDS O F APPEAL READ AS UNDER:- 1. THE LD. CIT (A) HAS ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THAT THE ASSESSEE WAS NOT AN ASSESSEE IN D EFAULT FOR SHORT/NON DEDUCTION OF TAX AT SOURCE ON ACCOUNT OF BANQUET AND RESTAURANT TIPS COLLECTED AND PAID BY IT TO ITS EMPLOYEES. SHE HAS FAILED TO APPRECIATE THAT THIS PAYMENT WAS MADE TO THE EMPLOYEES ON ACCOUNT OF SERVICES RENDERED BY TH EM TO THE ASSESSEE IN THE COURSE OF EMPLOYMENT WITH IT DU RING THE RELEVANT PERIOD ONLY. 2. THE LD. CIT (A) HAS ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THAT THE PAYMENT OF BANQUET AND RESTAURANT TIPS TO THE EMPLOYEES OF THE ASSESSEE IN ITS CAPACITY AS EMPLOY ER WERE NOT PROFITS IN LIEU OF SALARY WITHIN THE MEANING OF SECTION ITA NO.4133/DEL/2009 2 17(3)(II) OF THE INCOME TAX ACT, 1961 WITHOUT APPRE CIATING THE FACTS THAT PAYMENTS BEING ON ACCOUNT OF RENDERING O F SERVICES BY THE EMPLOYEES DURING THE RELEVANT PERIOD CLEARLY PARTAKES THE CHARACTER OF SALARY. 3. THE LD. CIT (A) HAS ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THAT THE PAYMENT OF BANQUET AND RESTAURANT TIPS PAID TO THE EMPLOYEES BY THE ASSESSEE DURING THE COURSE OF EMPLOYMENT FOR SERVICES RENDERED BY THEM IS NOT LIA BLE FOR TDS UNDER SECTION 192 OF THE IT ACT. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 2. THE ASSESSEE IS RUNNING A FIVE-STAR HOTEL AT 8 W INDSOR PLACE, JANPATH, NEW DELHI, IN THE NAME AND STYLE OF LE MERIDIAN. A SURVEY WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 5 TH OCTOBER, 2006. DURING THE COURSE OF SURVEY, IT WAS NOTICED THAT THE ASSESSEE WAS DISBURSING TIP S RECEIVED FROM ITS GUESTS VISITING ITS RESTAURANT TO THE EMPLOYEES. ACCORDIN G TO THE REVENUE THE ASSESSEE WAS REQUIRED TO DEDUCT TAX THEREON. HOWEVER, IT IS THE CASE OF THE ASSESSEE THAT NO TAX WAS DEDUCTIBLE AND FOR THIS CONTENTION RELIA NCE WAS PLACED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF NEHRU PLACE HOTELS 1 73 TAXMANN 88 (DEL) IN WHICH IT HAS BEEN HELD THAT SIMILAR TIPS DISBURSED AMONGS T EMPLOYEES REQUIRES NO DEDUCTION OF TAX. LD. CIT (A), FOLLOWING THE SAID DECISION OF ITAT IN THE CASE OF NEHRU PLACE HOTELS (SUPRA) HAS DELETED THE LEVY OF TDS AND ITS INTEREST U/S 201(1) AND 201(1A). THE DEPARTMENT IS AGGRIEVED, H ENCE, IN APPEAL. 3. LD. DR AFTER NARRATING THE FACTS RELIED UPON THE ORDER OF THE AO. AS AGAINST THAT THE LD. AR OF THE ASSESSEE HAS PLACED BEFORE US THE COPY OF THE ORDER PASSED BY ITAT IN THE CASE OF NEHRU PLACE HOT ELS VS. ITO (SUPRA) AND CONTENDED THAT THE ISSUE IS COVERED IN FAVOUR OF TH E ASSESSEE BY THE AFOREMENTIONED DECISION OF THE TRIBUNAL AND, THEREF ORE, THE CIT (A) WAS RIGHT IN HOLDING THAT NO TAX WAS DEDUCTIBLE AND, THEREFORE, THE ORDER OF THE CIT (A) DELETING THE DEMAND RAISED ON ACCOUNT OF SECTION 20 1(1) AND 201(1A) SHOULD BE UPHELD. ITA NO.4133/DEL/2009 3 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. IN THE AFOREMENTIONED D ECISION IT HAS BEEN HELD THAT THE EMPLOYEES HAD RECEIVED THE PAYMENTS FROM THE CU STOMERS AS TIPS AND THE ASSESSEE HAD ACTED ONLY AS A CONDUIT PIPE FOR PASSI NG THOSE AMOUNTS ON TO THE EMPLOYEES. ONLY THE PAYMENTS RECEIVED BY THE EMPLO YEES FROM THE EMPLOYER FOR SERVICES RENDERED TO THE EMPLOYER COULD BE CONSIDER ED AS PROFIT IN LIEU OF SALARY. THEREFORE, TIPS COULD NOT BE CONSIDERED AS PART OF SALARY. IT WAS FURTHER HELD THAT IN ANY CASE ON THE FACTS OF THE CASE IT WAS NOT REA SONABLE TO FORM A BONA FIDE BELIEF BY ANY EMPLOYER THAT THE TIPS WERE NOT PART OF THE SALARY PAID BY THEM AND ON THAT GROUND ALSO THE ASSESSEE COULD NOT BE TREAT ED TO BE IN DEFAULT FOR NOT DEDUCTING THE TAX AT SOURCE. THE ASSESSEE NEED NOT BE HELD LIABLE FOR PAYMENT OF TAX AND CONSEQUENTLY INTEREST U/S 201(1) AND 201 (1A) FOR NOT DEDUCTING TAX ON TIPS PAID TO THE EMPLOYEES BY THE CUSTOMERS. THERE FORE, RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISION, WE FIND NO MERIT IN TH E DEPARTMENTAL APPEAL AND THE SAME IS DISMISSED. 5. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. . 6. THE ORDER PRONOUNCED IN THE OPEN COURT ON 17.12. 2009. SD/ SD/- [SHAMIM YAHYA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 17.12.2009. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES