Income Tax Appellate Tribunal - Delhi
B.G. Intl. Ltd. A/A. Of Mr. Robert ... vs Department Of Income Tax on 2 February, 2012
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 agent 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 agent 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 agent 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 Hearing: 02.02.2012
Date of Pronouncement: 02.02.2012.
ORDER
PER K.G. BANSAL : A.M These three appeals of the revenue involve a common ground as to whether tax paid by a company on behalf of its employee constitutes a 2 ITA Nos. 5409, 5410 & 5411(Del)/2011 perquisite, not provided by way of monetary payment, as understood in section 17(2). However, for the sake of ready reference, the three substantive grounds taken in the case of the assessee-company as agent of Mr. Garry Stoker, are reproduced hereunder:-
(i) "On the 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 payment that was part and parcel of salary.
(ii) On the 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 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, whether in the ld. CIT(A) has erred in following 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 195 r.w.s. 198 of the I.T. Act, 1961 and against which department is in appeal before the Hon'ble High Court of Uttrakhand."3 ITA Nos. 5409, 5410 & 5411(Del)/2011
1.1 The ld. CIT(Appeals) disposed off the appeal by returning the following finding:
"Ground nos. 1 to 4 challenge the action of AO in denying relief u/s 10(10CC) of the Act. This issue is squarely covered in favour of the appellant through the judgment of Hon'ble ITAT (SB) in the case of RBF Rig Corporation LLC Vs. ACIT [109 ITD 141]. The relevant extract from this order may be reproduced as under:-
"Section 10(10CC) of the Income Tax Act, 1961-Perquisite, not provided by monetary payment- Assessment Year 2004-05- Whether payment of tax on behalf of employee at option of employer is a non-monetary perquisite fully covered 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 employee and thereafter, tax on such perquisite is not to be added again- Held, yes."
2. It is the common position of the rival parties 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 contained in paragraph no. 17.1, which is reproduced below:-
"17.1 It is not money, which is paid to the assessee when taxes are paid on his behalf. It is discharge of his obligation. 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 monetary payment to the assessee. What is excluded in the clause is the perquisite 4 ITA Nos. 5409, 5410 & 5411(Del)/2011 is in the shape of a monetary payment to the assessee. If it is a payment to a third person like payment of taxes to the Government, then such payment of taxes cannot be excluded under cl. 10(10CC). The circular of the Board and provision of sub-s. (1A) of s. 192, s. 40(a)(v) and s. 195A fully support the claim of the assessee. We, therefore, hold that the taxes paid by the employer on behalf of the employee is a perquisite within the meaning of s. 17(2) of the IT Act, which is not provided by way of monetary payment. Therefore, there is no reason not to exclude such payment of taxes from the total income of the assessee. In other words, taxes paid by the employer can be added only once in the salary of the employee. Thereafter, tax on such perquisite is not to be added again. We, therefore, find substance in the contention advanced on behalf of learned counsel for the assessees and the interveners. The question referred to us is answered in favour of the assessee. The appeals of the assessees and interveners are allowed on this issue."
2.1 However, the case of the ld. senior DR is that payment of tax by a company on behalf of its employee at its option amounts to cash payment of salary to the employee for the reason 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 contained 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 Hon'ble High Court of Uttrakhand in the aforesaid case of RBF Rig Corporation LLC.
5 ITA Nos. 5409, 5410 & 5411(Del)/2011
3. We have considered the facts of the case and submissions made before us. The decision in the case of RBF Rig Corporation LLC (supra) has been rendered by the Special Bench of the Tribunal. 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 Tribunal in the case of Transocean Discoverer Vs. ACIT, (2011) 44 SOT 248 (Del) and in the case of the assessee and Another for assessment year 2006-07 dated 12.10.2009, a copy of which has been placed before 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.