IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH `H' : NEW DELHI)
BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER
AND
SHRI C.M. GARG, JUDICIAL MEMBER
ITA No.4684/Del./2011
(ASSESSMENT YEAR : 2008-09)
ADIT, International Taxation, vs. M/s. Transocean Offshore Deepwater
Dehradun. Drilling Inc.
as agent of Mr. Ritchie Ian Robert,
Lake Boulevard Road,
Hiranandani, Business Park, Powai,
Mumbai 400 076.
(PAN : AABCT7361B)
ITA No.4685/Del./2011
(ASSESSMENT YEAR : 2008-09)
ADIT, International Taxation, vs. M/s. Transocean Offshore Deepwater
Dehradun. Drilling Inc.
as agent of Mr. Daviderson Collin,
Lake Boulevard Road,
Hiranandani, Business Park, Powai,
Mumbai 400 076.
(PAN : AABCT7361B)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri Amit Arora, CA
REVENUE BY : Shri Sanjeev Sharma, CIT DR
ORDER
PER B.C. MEENA, ACCOUNTANT MEMBER :
2 ITA No.4684 & 4685/Del./2011
Both these appeals emanate from the order of CIT (Appeals)-II,
Dehradun both dated 01.08.2011.
2. The grounds of appeal in both these appeals are same. The grounds of
appeal in ITA No.4684/Del/2011 is reproduced as under :-
"1. On Facts and circumstances of the case, whether in the case of
employee receiving a 'tax-free' salary, as per agreement, the taxes paid by
employer constituted a monetary constituted a monetary payment that was
part and parcel of salary.
2. On Facts and circumstances of the case, whether in the Ld. CIT(A)
had erred in allowing exemption u/s 10 (10CC), where the facts clearly
establish that the tax paid by the Company M/s Transocean Offshore
Deepwater Drilling Inc. for A.Y 2008-09 was part and parcel salary of Mr.
Ritchie Ian Robert and Mr. Daviderson Collin and therefore, this payment
on behalf of the assessee constituted a monetary payment falling outside
the purview of section I O( I OCC) of the Income -Tax Act.
3. On Facts and circumstances of the case, whether in the Ld. CIT (A)
has erred in follow the decision of Special Bench of ITAT, which is
perverse and disregarded the clear cut provisions of section 17(2) read with
section 10 (10CC) and corroborated by section 195A r.w.s J 98 of the I.T
Act, 1961 and against which department is in appeal before the Hon'ble
High Court of Uttarakhand.
4. The appellant prays for leave to add, amend, modify or alter any
grounds of appeal at the time of before t hearing of the appeal."
3. The issue involved in both these appeals is whether in the case of an
employee receiving a tax free salary, as per agreement, the taxes paid by
employer constituted a monetary payment that was part and parcel of salary
and whether the CIT (A) was justified in allowing the exemption u/s
10(10CC) of the Act where the tax paid by the Company, M/s. Transocean
Offshore Deepwater Drilling Inc. was part and parcel salary and such
3 ITA No.4684 & 4685/Del./2011
payments constitutes a perquisite within the meaning u/s 17(2) of the Act and
the same covers under the purview of section 10(10CC) of the Act.
4. At the outset of the hearing, ld. AR submitted that this issue has been
decided by Special Bench of ITAT and subsequently, this order of Special
Bench has been confirmed by the Hon'ble jurisdictional High Court in the
assessee's own case. Therefore, it is a covered issue in favour of the assessee.
5. We have heard both the sides on the issue. In the case of Director of
Income Tax (International Taxation), New Delhi vs. Sedco Forex
International Drilling Inc. & Ors. where the assessee company was also one
of the respondents in ITA No.27 of 2010 in the case of Director, Income Tax
(International Taxation), New Delhi vs. Transocean Offshore Deepwater
Drilling Inc. Ventures Ltd. and Ors., the Hon'ble jurisdictional High Court
held as under :-
"5. The facts, to which there is no dispute, are that the employer paid
salaries/remunerations to its employees. In addition to that, the employer
paid to the Income Tax Department, the amount of tax payable by the
employees on the salaries /remunerations that the employees received.
The department contended that the employees are obliged to pay tax on
the amount of such income tax paid by the employer on account of the
employees to the Income Tax Department. The employees contended that
the same being perquisite within the meaning of Section 17(2) of the
Income Tax Act (hereinafter referred to as the Act), the same is exempted
in view of Section 10 (10CC) of the Act. This dispute went before the
Tribunal. The Tribunal dealt with the issue by looking into Section 10
(10CC) of the Act, Section 17(2) of the Act and a Full Bench Judgment
of the Tribunal, rendered in the case of RBF Rig Corporation LIC
(RBFRC) versus Asstt. CIT, Dehradun, reported in (2007) 297 ITR 228.
There is no dispute that in RBF Rig Corporation case, a substantial
question of law was decided. Despite decision of such an important
question of law, the Income Tax Department did not take the matter
higher up. However, by presenting these appeals, the department has
4 ITA No.4684 & 4685/Del./2011
questioned, in fact, the validity of the law declared by the Tribunal in
RBF Rig Corporation case.
6. Section 200 of the Companies Act, 1956 prohibits companies
from paying to any officer or employee thereof any remuneration free of
income tax. Tax free remuneration is one thing and payment of
remuneration as well as tax payable thereon is another thing.
7. In that background, Section 10 (10CC) of the Income Tax Act,
1956 provides that in the case of an employee, being an individual
deriving income in the nature of a perquisite not provided for by way of
monetary payment, within the meaning of clause (2) of Section 17 of the
Act, the tax on such income actually paid by his employer, at the option
of the employer, on behalf of such employee, notwithstanding anything
contained in Section 200 of the Companies Act, 1956 shall be excluded
in computing total income of a previous year of such an employee.
Therefore, despite prohibition contemplated in the Companies Act for
payment of tax free remuneration to an employee, Section 10(10CC) of
the Act has provided that notwithstanding anything contained in the
Companies Act, an employee shall be entitled to exclude his income by
way of remuneration/salary provided the same is not a monetary payment
to him and is also provided as perquisite in clause (2) of Section 17 of the
Act and thereby has acknowledged that remuneration plus tax payable
thereon is permissible..
8. Tax paid on account of the employee is certainly a monetary
payment, but the only difference is that the same is not paid to the
employee, but on his account to the Income Tax Department. The only
question is, whether such a payment has been considered as perquisite in
clause (2) of Section 17 of the Act. Section 17 (2) provides as follows :-
"Perquisite includes . . . . . any sum paid by the employer in
respect of any obligation which, but for such payment, would have
been payable by the assessee . . . . ."
9. According to Section 17(2) of the Act, perquisite includes many a
things, including the one mentioned above. It includes value of rent-free
accommodation, the value of any concession in the matter of rent, value
of any benefit or amenity granted or provided free of cost, any sum
payable by the employer on account of provident fund or on account of
superannuation fund or towards the value of any other benefits, etc.
Therefore, one of the perquisites, as mentioned in Section 17 (2) of the
Act is any sum paid by the employer in respect of any of the obligation,
which but for such payment, would have been payable by the assessee,
i.e. the employee.
10. There is no dispute that the employer has entered into agreements
with the employees and thereby has taken over an obligation to pay
income tax payable by the employees. If the employer was not obliged to
5 ITA No.4684 & 4685/Del./2011
pay such income tax, the same would have been payable by the
employees in question. Such payment, as has been provided in Section 10
(10CC) is notwithstanding anything contained in Section 200 of the
Companies Act, 1956. Therefore, the payment of tax to the Income Tax
Department on account of salaries/remunerations of the employees not by
way of monetary payment to the employees concerned, but for or on their
account to the Income Tax Department and the same being one of the
perquisites included in Clause (2) of Section 17 of the Act, such payment
was to be excluded from the income of the employees. The same, having
been directed to be done by the Tribunal, while we answer the question as
above in favour of the assessee, refuse to interfere with the judgments
and orders of the Tribunal assailed in these appeals."
The facts of the case remains the same, therefore, respectfully following the
order of the Hon'ble jurisdictional High Court, we dismiss the revenue's
appeal.
6. In the result, both the appeals of the revenue stand dismissed.
Order pronounced in open court on this 24th day of April, 2014.
Sd/- sd/-
(C.M. GARG) (B.C. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the 24th day of April, 2014
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A), Dehradun.
5.CIT(ITAT), New Delhi.
AR, ITAT
NEW DELHI.
|
