ADIT, Dehradun V. M/s. B.G. Intl. Ltd. A/A. of Mr. Satish Pai, Dehradun

ITA 5410/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58585 (ITAT-DELHI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-02-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 02-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI. BEFORE SHRI I.P. BANSAL AND SHRI K.G. BANSAL I.T.A. NO.5409(DEL)/2011 ASSESSMENT YEAR: 2008-09 ASSISTANT DIRECTOR OF INCOME B.G. INTERNATIONAL LTD., TAX, INTERNATIONAL TAXATION, VS. AS AGE NT OF MR. GARRY STOKER, DEHRADUN. C/O NANGIA & CO., 75/7, RAJPUR ROAD, DEHRADUN. I.T.A. NO.5410(DEL)/2011 ASSESSMENT YEAR: 2008-09 ASSISTANT DIRECTOR OF INCOME B.G. INTERNATIONAL LTD., TAX, INTERNATIONAL TAXATION, VS. AS AGE NT OF MR. SATISH PAI, DEHRADUN. C/O NANGIA & CO., 75/7, RAJPUR ROAD, DEHRADUN. I.T.A. NO.5411(DEL)/2011 ASSESSMENT YEAR: 2008-09 ASSISTANT DIRECTOR OF INCOME B.G. INTERNATIONAL LTD., TAX, INTERNATIONAL TAXATION, VS. AS AGE NT OF MR. ROBERT RICHARDSON, DEHRADUN. C/O NANGIA & CO., 75/7, RAJPUR ROAD, DEHRADUN. (APPLICANT) (RESPONDENT) APPELLANT BY : SHRI J.P. CHANDRAKAR, SR. D .R. RESPONDENT BY : SHRI AMIT ARORA, C.A. DATE OF HEARIN G: 02.02.2012 DATE OF PRONOUN CEMENT: 02.02.2012. ORDER PER K.G. BANSAL : A.M THESE THREE APPEALS OF THE REVENUE INVOLVE A COMMO N GROUND AS TO WHETHER TAX PAID BY A COMPANY ON BEHALF OF ITS E MPLOYEE CONSTITUTES A ITA NOS. 5409, 5410 & 5411(DEL)/2011 2 PERQUISITE, NOT PROVIDED BY WAY OF MONETARY PAYME NT, AS UNDERSTOOD IN SECTION 17(2). HOWEVER, FOR THE SAKE OF READY RE FERENCE, THE THREE SUBSTANTIVE GROUNDS TAKEN IN THE CASE OF THE ASSE SSEE-COMPANY AS AGENT OF MR. GARRY STOKER, ARE REPRODUCED HEREUNDER:- (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHET HER IN THE CASE OF EMPLOYEE RECEIVING A TAX-FREE SALARY, AS PER AGREEMENT, THE TAXES PAID BY EMPL OYER CONSTITUTED A MONETARY PAYMENT THAT WAS PART AND PARCEL OF SALARY. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETH ER IN THE LD. CIT(A) HAD ERRED IN ALLOWING EXEMPTION U/S 10(10CC), WHERE THE FACTS CLEARLY ESTABLIS H THAT THE TAX PAID BY THE COMPANY M/S B.G. INTERNATIONAL LIMITED FOR A.Y. 2008-09 WAS PART AND PARCEL SALARY OF MR. SATISH PAI, MR. GARRY STOKER AND MR. ROBERT RICHARDSON AND, THEREFORE, THIS PAYMENT ON BEHALF OF THE ASSESSEE CONSTITUTED A MONETARY PAYMENT FALLING OUTSIDE THE PURVIEW OF SECTION 10(10CC) OF THE INCOME TAX ACT. (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETH ER IN THE LD. CIT(A) HAS ERRED IN FOLLOWING THE DEC ISION OF SPECIAL BENCH OF ITAT, WHICH IS PERVERSE AND DISREGARDED THE CLEAR CUT PROVISIONS OF SECTION 1 7(2) READ WITH SECTION 10(10CC) AND CORROBORATED BY SECTION 195 R.W.S. 198 OF THE I.T. ACT, 1961 AND AGAINST WHICH DEPARTMENT IS IN APPEAL BEFORE THE HONBLE HIGH COURT OF UTTRAKHAND. ITA NOS. 5409, 5410 & 5411(DEL)/2011 3 1.1 THE LD. CIT(APPEALS) DISPOSED OFF THE APPEAL B Y RETURNING THE FOLLOWING FINDING: GROUND NOS. 1 TO 4 CHALLENGE THE ACTION OF AO I N DENYING RELIEF U/S 10(10CC) OF THE ACT. THIS ISSUE IS SQUARELY COVER ED IN FAVOUR OF THE APPELLANT THROUGH THE JUDGMENT OF HONBLE ITAT (SB ) IN THE CASE OF RBF RIG CORPORATION LLC VS. ACIT [109 ITD 141]. T HE RELEVANT EXTRACT FROM THIS ORDER MAY BE REPRODUCED AS UND ER:- SECTION 10(10CC) OF THE INCOME TAX ACT, 1961-PERQU ISITE, NOT PROVIDED BY MONETARY PAYMENT- ASSESSMENT YEAR 20 04-05- WHETHER PAYMENT OF TAX ON BEHALF OF EMPLOYEE AT OPTION OF EMPLOYER IS A NON-MONETARY PERQUISITE FULLY COVE RED BY SUB- CLAUSE (IV) OF CLAUSE (2) OF SECTION 17 AND, THUS, EXEMPT UNDER SECTION 10(10CC) AND IS NOT LIABLE TO BE INCLUDED IN TOTAL INCOME OF EMPLOYEE- HELD, YES-WHETHER TAXES PAID BY EMPLOYER CAN BE ADDED ONLY ONCE IN SALARY OF EM PLOYEE AND THEREAFTER, TAX ON SUCH PERQUISITE IS NOT TO BE A DDED AGAIN- HELD, YES. 2. IT IS THE COMMON POSITION OF THE RIVAL PARTIE S THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF RBF RIG CORPORATION LLC (RBFRC) VS. ACIT, (2007) 109 ITD 141 (DEL). THE FINDINGS ARE CONTAI NED IN PARAGRAPH NO. 17.1, WHICH IS REPRODUCED BELOW:- 17.1 IT IS NOT MONEY, WHICH IS PAID TO THE ASSES SEE WHEN TAXES ARE PAID ON HIS BEHALF. IT IS DISCHARGE OF HIS OBLI GATION. THE PAYMENT FULLY FITS IN THE JACKET OF SUB-CL. (IV) OF S. 17(2) OF THE ACT. IT MAY BE A MONETARY GAIN OR MONETARY BENEFIT OR A MONETARY ALLOWANCE BUT DEFINITELY IT IS NOT A MONET ARY PAYMENT TO THE ASSESSEE. WHAT IS EXCLUDED IN THE CLAUSE IS THE PERQUISITE ITA NOS. 5409, 5410 & 5411(DEL)/2011 4 IS IN THE SHAPE OF A MONETARY PAYMENT TO THE ASSESS EE. IF IT IS A PAYMENT TO A THIRD PERSON LIKE PAYMENT OF TAXES TO THE GOVERNMENT, THEN SUCH PAYMENT OF TAXES CANNOT BE EX CLUDED UNDER CL. 10(10CC). THE CIRCULAR OF THE BOARD AND P ROVISION OF SUB-S. (1A) OF S. 192, S. 40(A)(V) AND S. 195A FULL Y SUPPORT THE CLAIM OF THE ASSESSEE. WE, THEREFORE, HOLD THAT THE TAXES PAID BY THE EMPLOYER ON BEHALF OF THE EMPLOYEE IS A PERQUIS ITE WITHIN THE MEANING OF S. 17(2) OF THE IT ACT, WHICH IS NOT PROVIDED BY WAY OF MONETARY PAYMENT. THEREFORE, THERE IS NO REA SON NOT TO EXCLUDE SUCH PAYMENT OF TAXES FROM THE TOTAL INCOME OF THE ASSESSEE. IN OTHER WORDS, TAXES PAID BY THE EMPLOYE R CAN BE ADDED ONLY ONCE IN THE SALARY OF THE EMPLOYEE. THER EAFTER, TAX ON SUCH PERQUISITE IS NOT TO BE ADDED AGAIN. WE, TH EREFORE, FIND SUBSTANCE IN THE CONTENTION ADVANCED ON BEHALF OF L EARNED COUNSEL FOR THE ASSESSEES AND THE INTERVENERS. THE QUESTION REFERRED TO US IS ANSWERED IN FAVOUR OF THE ASSESSE E. THE APPEALS OF THE ASSESSEES AND INTERVENERS ARE ALLOWED ON THI S ISSUE. 2.1 HOWEVER, THE CASE OF THE LD. SENIOR DR IS THA T PAYMENT OF TAX BY A COMPANY ON BEHALF OF ITS EMPLOYEE AT ITS OPTIO N AMOUNTS TO CASH PAYMENT OF SALARY TO THE EMPLOYEE FOR THE REASO N THAT PAYMENT OF TAX IS THE OBLIGATION OF THE EMPLOYEE AND NOT THAT OF THE COMPANY. THIS INFERENCE CAN BE CLEARLY DRAWN FROM THE PROVISIONS CONTAI NED IN SECTION 195A READ WITH SECTION 198. THEREFORE, THE DECISION OF THE TRIBUNAL DOES NOT REPRESENT THE CORRECT ENUNCIATION OF THE LAW IN THE MATTER. THE REVENUE HAS FILED APPEAL BEFORE THE HONBLE HIGH COURT OF UTT RAKHAND IN THE AFORESAID CASE OF RBF RIG CORPORATION LLC. ITA NOS. 5409, 5410 & 5411(DEL)/2011 5 3. WE HAVE CONSIDERED THE FACTS OF THE CASE A ND SUBMISSIONS MADE BEFORE US. THE DECISION IN THE CASE OF RBF RIG CORPORATION LLC (SUPRA) HAS BEEN RENDERED BY THE SPECIAL BENCH OF THE TRI BUNAL. THEREFORE, IT IS A BINDING PRECEDENT AS FAR AS THE DIVISION BENCH IS CONCERNED. THIS DECISION HAS BEEN FOLLOWED BY THE DIVISION BENCH OF THE TR IBUNAL IN THE CASE OF TRANSOCEAN DISCOVERER VS. ACIT, (2011) 44 SOT 248 (DEL) AND IN THE CASE OF THE ASSESSEE AND ANOTHER FOR ASSESSMENT Y EAR 2006-07 DATED 12.10.2009, A COPY OF WHICH HAS BEEN PLACED BEFOR E US. FOLLOWING THESE PRECEDENTS, THE QUESTIONS ARE DECIDED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 4. IN THE RESULT, ALL THE APPEALS ARE DISMISSED. SD/- SD/- (I.P. BANSAL)) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA- COPY OF THE ORDER FORWARDED TO:- B.G.INTERNATIONAL LTD. AS AGENT OF MR. GARRY STOKER , MR. SATISH PAI & MR. ROBERT RICHARDSON, DEHRADUN. ADIT, INTERNATIONAL TAXATION, DEHRADUN. CIT(A) CIT, THE D.R., ITAT, NEW DELHI. ASSISTANT REGISTRAR.