Employer-borne tax in salary can be grossed up on a multiple-stage basis; section 10(10CC) does not exclude it.

Employer-borne tax under an employment agreement was treated as part of salary, and multiple-stage grossing up was accepted as the correct method for computing taxable salary income. The analysis distinguished presumptive business income cases and reasoned that, for salary, the employer's undertaking covered the employee's tax liability itself. Section 10(10CC) was read as applying only to a non-monetary perquisite, so tax paid by the employer on behalf of the employee remained a monetary payment forming part of salary.

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Issues: Whether tax borne by the employer under the employment agreement had to be grossed up on a multiple-stage basis while computing salary income, and whether section 10(10CC) excluded such tax payment from the employee's taxable income.

Analysis: The employment agreement expressly provided that income-tax and other government obligations related to work in India would be borne by the employer. The Court distinguished authorities dealing with presumptive business income and held that, in the context of salary income, the employer's undertaking covered the employee's tax liability itself. It also held that section 10(10CC) applies only to a perquisite not provided by way of monetary payment, whereas tax paid by the employer on behalf of the employee is a monetary payment and forms part of salary. The Court, therefore, accepted multiple-stage grossing up as the correct method for computing the taxable salary.

Conclusion: The multiple-stage grossing up method was upheld, and the assessee's challenge to the addition of employer-borne tax in salary income failed.

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