TaxTMI 
TaxTMI 
2002 (11) TMI 262
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....expatriate staff at two places i.e., inIndiaas well as inJapan. The tax was duly deducted at source from the salary paid inIndiato such staff and the same was paid to the Central Government. However, tax on salary paid to such staff inJapanwas paid by the assessee on tax on tax basis i.e., by grossing up method. 3. A survey under section 133A was carried out on 24-1-1998 at the premises of the assessee at New Delhi under the authorization issued by Jt. Commissioner of Income-tax (in short Joint Commissioner) Range-23, New Delhi in the course of which statements of S / Shri Tario Katoh (GM), Y. Saito (AGM) and Naoki Saito (DGM) were recorded. Shri Y, Saito, in his statement, stated that his employer was paying tax on his behalf. Subsequently, the assessee of its own appeared before Joint Commissioner, Range-23 alongwith the details of salary paid to its Japanese staff relating to financial years 1988-89 to 1997-98. According to the assessee, it was advised that certain allowances like hardship allowance, separation allowance, GM allowance, medical allowance etc. paid outsideIndiato the Japanese staff were taxable inIndia. Accordingly, assessee agreed to pay tax on such allowances....
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....23(1) again issued a letter dated1-2-2000asking the assessee to substantiate the amount of tax and the interest paid by documentary evidence. The assessee vide letter dated7-2-2000submitted that all the revised returns filed by the assessee had already been verified and accepted by the JCIT, Range-23 and, therefore, the matter should be closed. Some further correspondence took place between the assessee and DCIT. The assessee vide letter dated6-3-2000submitted as under: "3. What was stated in paras3 to 5of our letter dated7-2-2000is reiterated, Documentary evidence by way of salaries in respect of the personnel employed inIndiayear-wise have been submitted along with a forwarding letter dated4-3-1999(received by your predecessor on5-3-1999). We presume that the same would be on your record. However, we may have no objection to once again enclose photocopies of the certificates. In this regard we may submit that the copies of these papers are being requisitioned from the assessee's Head Office atTokyo,Japan. These shall be submitted as soon as these are received here for which time of a fortnight be allowed. 4. As regards the clarification sought by your honour as to how the t....
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....x Liability (including interest) calculated on tax on Basis on special allowances equal to the amount of Tax for the financial years 1988-89 to 1994-95 101,376,941 Add: Tax (including interest) on Golf & Other perquisites 13,189,188 ----------- Total &nb....
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.... expatriates for the financial years 1988-89 to 1994-95 and if all the same had to be grossed up, it was to be grossed up in the financial year 1998-99 for such the maximum rate of tax was 30 per cent. However, with a view to settle the matter amicably and to buy peace of mind the assessee agreed to pay tax at the rate of 40 per cent which was leviable in March, 1995. This was also on the specific direction of the then Learned Joint Commissioner of Income-tax, Range-23,New Delhi. This specific direction by the then Ld. Joint Commissioner of Income-tax, Range 23, New Delhi is clearly evidence from the letters dated 18-12-1998 and 21-12-1998 filed by the assessee." The Deputy Commissioner vide letter dated 15-3-2000 further asked the assessee to furnish details of the perquisite and the basis of the calculation of its value for which the sum of Rs. 11,45,66,129 was added in Annexure 4 mentioned above and also furnish evidence to prove that value of rent-free accommodation was wrongly calculated in excess by Rs. 2,98,17,363. According to the Assessing Officer, no further evidence was furnished by the assessee. 7. After considering the details and replies furnished by the assesse....
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....iled before the Hon'ble Delhi High Court in the matter of the Writ Petition CPW 1823/2000 in the case of the appellant. Under these circumstances the order dated30-3-2000of the DCIT TDS 23(1) is the only order under section 201 of the Act. Appeal on Grounds 1 to 5 are dismissed." On merits, It was held by him (i) that assessee should have paid the tax by grossing up the rate of tax applicable to the respective years and there was no sanctity under the law to adopt the rate of tax at 40 per cent; (ii) that in the absence of any detail, the contention of the assessee that actual rent paid should be taken as value of the rent-free accommodation could not be accepted; (iii) that charging of interest under section 201(1A) was consequential and the plea of good and reasonable cause was irrelevant for deciding the issue. Aggrieved by the same, the assessee has preferred these appeals before the Tribunal. 9. At this stage, it would be appropriate to mention that assessee had also filed writ petition on17-4-2000before the Hon'ble Delhi High Court challenging the jurisdiction of DCIT to re-open the matter which, according to the assessee, had already been concluded by letter dated24-12....
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....01/201(1A). Further, the letter dated24-12-1998issued by the JCIT could not be considered as an order under section 201(1). It was argued by her that an Assessing Officer is one, who is vested with the relevant jurisdiction under section 120(1) or 120(2) as well as JCIT or Joint Director, who are directed under section 120(4)(b) to exercise or perform all or any of the powers and functions conferred on or assign to an Assessing Officer in this Act. In this connection, she drew our attention to section 2(7A). Proceeding further, it was forcefully submitted that no such order under section 120(4)(b) was passed conferring the powers and functions on JCIT which are actually vested with Assessing Officer. She also drew our attention to the affidavit filed by the department in August, 2000 before the Hon'ble High Court of Delhi in connection with the writ petition filed by the assessee wherein it was deposed clearly that JCIT Range-23 had no jurisdiction to pass an order under section 201(1)/201(1A) in the case of an assessee and no such order was passed by him. Further, it was averred in the affidavit filed in October, 2000 before the Hon'ble High Court that no order under section 120(4....
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....or implementing the provisions of the Income-tax Act, 1961. Clause (7A) of section 2 defines the words "Assessing Officer". The perusal of this clause shows that all the authorities mentioned in section 119 are not vested with the powers of an Assessing Officer. According to this clause, the Assessing Officer means DCIT or ACIT or Asstt. Director or Deputy Director or ITO, who are vested with the relevant jurisdiction under section 120(1) or 120(2). It also includes JCIT or Jt. Director, who is directed under section 120(4)(b) to perform the powers/functions of an Assessing Officer. It clearly shows that general orders issued under section 120(1) or 120(2) do not cover the JCIT. JCIT can exercise the powers/functions of an Assessing Officer only if he is specifically directed under section 120(4)(b) to exercise such powers/functions. There is no material before us on the basis of which it can be said that JCIT, Range-23 had concurrent jurisdiction to pass an order under section 201. It is well settled legal position that the onus to prove the existence of a fact is upon a person, who asserts the existence of such fact and not on the person who denies the existence of such fact. The....
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....and yet paid the determined amount on 24-12-1998. To repeat, the direction was that the JCIT having asked the assessee to prepare statements working the quantum of default had asked the Assessing Officer to accept them as such. The default, being of the order of Rs. 52.79 crores, worked out at the instance of the JCIT himself had to be paid immediately before the assessee could be handed over the communication dated 24-12-1998 and consequently the assessee could not be deemed in default after full payment was made." To elaborate his arguments, he submitted that proceedings under section 201 were pending since such proceedings commence from the day the returns under section 206 are filed and culminate when final order under section 201 is passed. According to him, the words "any proceedings in which an assessment is pending" used by the Legislature in section 144A are wide enough to cover even the assessment proceedings relating to TDS returns and not necessarily restricted to returns under section 139. It was further submitted that such direction may be at the instance of the assessee or the Assessing Officer or suo motu where the facts are complex and capable of being twisted i....
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.... confined to its own facts for the purpose of order under section 201 and the same cannot be extended to word "assessment" under section 144A. She also referred to the judgment in ITO v. Delhi Development Authority [2001] 252 ITR 772 wherein the Hon'ble Supreme Court refused to deal with the meaning of the word "assessment". According to her, section 144A is meant for proceedings of assessment determining the income and tax thereon while section 201 is a proceeding relating to collection and recovery of the tax in advance under a different chapter and, therefore, the term "assessment" in section 144A cannot be extended to include the proceeding under section 201. It was also submitted that no direction can be issued which are contrary to law. Further, the JCIT cannot arrogate to itself the powers to make an assessment. Reliance was placed on the decision of Rajasthan High Court reported as 204 ITR 807 (Sic). 19. After considering the submissions of the parties, we are unable to accept the contention of the learned counsel for the assessee. Firstly, because it is the settled legal position that provisions of a section are to be construed in the context in which these are enacted.....
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....nd not to the Assessing Officer. Section 144A in clear terms provides for issue of directions for the guidance of the Assessing Officer. Hence, such directions have to be issued to the Assessing Officer and consequently, any communication addressed to assessee cannot be considered as direction under section 144A. Accordingly, we hold that letter dated24-12-1998addressed to assessee does not tantamount to direction under section 144A and consequently, the contents of this letter is not binding on Assessing Officer. 22. It had also been contended by the learned counsel for the assessee that the letter dated24-12-1998was issued as a result of mutual agreement between JCIT and assessee to resolve the dispute forever and to avoid the future litigation. It was submitted by him that though legally the assessee was not liable to pay such huge demand yet it agreed to pay the same which was worked out in consultation with JCIT and the same had been accepted by it also. Therefore, both the parties were bound by the agreement and consequently, neither of the parties could get away from such agreement. We are unable to accept such contention of the assessee's counsel. It is well settled-law ....
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....e staff by treating the same as special allowances only in the financial year 1998-99 in order to avoid litigation and to buy peace with the department. Therefore, at the most, liability to pay the tax accrued only in financial year 1998-99 and consequently, the provisions of section 195A regarding grossing up could be applied as per the rate of tax in force in financial year 1998-99. Even though the maximum marginal rate of tax was 30 per cent in this year, the assessee agreed for computing its liability for grossing up under the provisions of section 195A by treating the maximum marginal rate at 40 per cent at the behest of JCIT. According to him, if the agreement was not acceptable to the department, then no liability could be saddled upon the assessee on this account since it has not been established by the revenue that assessee had any agreement/arrangement to pay the tax of the employees in respect of such allowances paid outsideIndiato its expatriate staff. Alternatively, if any liability is to be saddled upon the assessee then the liability to pay the tax on the special allowance can be said to accrue only in the year 1998-99 on the basis of the arrangement with the Departm....
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....on the Rajasthan High Court judgment in CIT v. Hermann & Breaun [1995] 216 ITR 226, Kerala High Court judgment 237 ITR 112 (sic), Delhi High Court judgment 115 ITR 382 (sic) and 193 ITR 439 at 450-51 (sic). She further submitted that section 195A is a statutory recognition to the established principle that if the tax is paid by the employer, then for the tax purpose the salary income is to be increased to such amount as would after deduction be equal to the net amount paid. According to her, the payment of salary outsideIndiafree of tax was itself an arrangement and there need not be any special agreement in writing. The Legislature has used both the words "agreement" or "arrangement" and, therefore, the interpretation which would render the word "arrangement" as meaningless cannot be accepted. Further, it was submitted that assessee has not proved that there was no such arrangement or agreement. She relied on Delhi High Court decision in the case of CIT v. Motor General Finance Ltd. [2002] 254 ITR 449 for the proposition that if the assessee does not disclose the facts within his knowledge then the adverse inference could be drawn. In view of these submissions, it has been conclud....
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....es paid by the assessee outsideIndiato its expatriate staff for the services rendered inIndiawere clearly taxable under section 9(1)(ii). If the assessee was well aware of the decision of Gujarat High Court then it must also have been aware of the insertion of Explanation to section 9(1)(ii). Since this explanation was inserted by Finance Act, 1983, it is unbelievable that assessee might not have known about such enactment even in 1989 particularly when it had all the infrastructure to know about the legal decisions. Therefore, we reject the contention of the learned counsel for the assessee that assessee was under bona fide belief that such allowances were not taxable. 26. As far as application of section 195A is concerned, we find that these provisions are substantive provisions which determines the liability of the employer to pay the tax of its employees on enhanced amount of income. Therefore, these provisions must be construed strictly and the onus would be on the revenue to prove that the conditions for its applicability are satisfied. For the benefit of this order, the provisions of section 195A are reproduced as under: "Section 195(A) : Whereunder an agreement or oth....
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....aff and consequently, tax on such portion of income remained to be taxed. The payment of tax and interest amounting to Rs. 52.79 crores and odd related to such allowances only. This shows that there was arrangement between the assessee and its expatriate staff to the effect that tax on remuneration paid by assessee shall be borne by the assessee. This is further corroborated by the statement of facts furnished by the assessee before the CIT(A) along with grounds of appeal. The relevant portion of the same is reproduced as under : "The rotating staff receives salary at two places viz., salary received inIndiain Indian Rupees and salary received inJapan. Salary paid inIndiais subject to tax deduction at source and is paid after deducting tax at the prescribed rates in force. Tax on salary paid inJapanis paid by the employer and thus tax is paid on tax on tax basis." The last sentence of the above portion clearly shows that tax on salary paid inJapanwas paid on tax on tax basis i.e. by grossing up. What is true to salary must be true to the allowances paid by the assessee. This is further corroborated by the statement of Mr. 'Y'. Saito (expatriate employee) recorded at the time ....
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....; 40 11,200 x --- x 100 = 7466 60 The sum of Rs. 11,200 was enhanced by Rs. 7,466 and the total tax liability of Rs. 18,666 was determined by the Assessing Officer. That means the total gross salary of the employee should have been Rs. 1,02,666 (Rs. 84,000 + Rs. 18,666) but the tax of Rs. 1,02,666 as per rate in force amounted to Rs. 16,800 only. If this sum is deducted from the gross salary mentioned above then the net salary should have been Rs. 85,866 (Rs. 1,02,666 - Rs. 16,800) while the net salary paid was Rs. 84,000 only. In fact, net salary of Rs. 84,000 was against gross salary of Rs. 1 lac since tax of Rs. 1 lac was Rs. 16,000 only. Thus, according to this example, there was excess grossing up by Rs. 2,666 (Rs. 18,666 minus Rs. 16,0....
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.... of the Madras High Court in K.S. Sundaram's case which was affirmed by the Supreme Court. It has been held in that judgment that Rule 3 is mandatory for valuing the perquisite regarding rent-free accommodation. It has been further held that actual rent paid cannot be the basis for valuing the perquisite. For the benefit of this order, the relevant portion of the judgment of the Madras High Court is extracted below : "Rule 3 of the Income-tax Rules, provides that the value of the property shall be determined in accordance with the rules and the expression, "shall" used in rule 3 clearly indicates that the rule 3 should be applied in the cases covered by the said rules. The Appellate Tribunal placed reliance on the expression, 'ordinarily' in rule 3(a)(ii)(A) to come to the conclusion that the rule is only directory in nature and, therefore, the rule has no application where a house was taken on lease by the employer and provided to the employee free of rent. In our opinion, the view of the Appellate Tribunal is clearly erroneous in law" "The object of the rule is to determine the value of the perquisite in all situations. It is an immaterial consideration whether the building....
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....tion that tax perquisite is the part of gross salary. She also relied on the Supreme Court judgment in the case of CITV. Assam Travels Shipping Service [1993] 199 ITR 1 for the proposition that the Tribunal has the power to remand in such case. We are unable to accept this contention of the learnedCIT DR. There is no doubt that the Tribunal has the power to remand the matters to the file of Assessing Officer but such powers are to be exercised vis-a-vis subject-matter of the appeal filed by the appellant as held by the larger bench of the Supreme Court in the case of Hukamchand Mills Ltd. v. CIT [1967] 63 ITR 232 wherein it has been clearly held that the powers of the Tribunal are restricted to the subject-matter of appeal and further there is no power of enhancement. The judgment of Supreme Court in the aforesaid case relied upon by the learned DR is distinguishable on facts of the case and has to be understood in the context in which the judgment was delivered. In that case, the penalty under section 271(1)(a) was levied by Assessing Officer which was challenged by the assessee before the AAC but found that penalty levied by Assessing Officer was much less than the penalty leviab....
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....posed such contention by arguing that no period of limitation has been prescribed by the Legislature for passing order under section 201 and consequently, such order could be passed at any time. Reliance was also placed on the judgment of Calcutta High Court in the case of British Airways v. CIT [1992] 193 ITR 439 and in the case of CIT v. Blackwood Hodge (India) (P.) Ltd. [1971] 81 ITR 807 (Cal.). She further submitted that section 231, which was interpreted by the courts as laying down a time limit, has been omitted from the statute book from1-4-1989. According to her, such omission shows the intention of the Legislature that no time limit is required. It was also submitted that it is a well settled legal position that nothing can be read into the provisions where such provisions are clear and unambiguous. Reliance was placed on Supreme Court as 254 ITR 154 and Smt. Tarulata Shyam v. CIT [1977] 108 ITR 345. It was alternatively submitted that period of 4 years should be counted from the end of the year in which necessary details were filed by the assessee. Since all the details were filed in 1998, the impugned order was in time. It was also submitted that the decision of the Trib....
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....her the period of four years was to be counted from the end of the assessment year or the financial year, since the order of the Tribunal in Raymond Woollen Mills states in para 11 as four years from the end of the assessment year. We have gone through the said decision of the Tribunal very carefully to resolve this dispute. The confusion had arisen because of two different dates from the orders under section 201(1A) mentioned in para 2 and para 11 of the order inasmuch as the date in para 2 was mentioned as21-5-1990while the date in para 11 was mentioned as25-1-1990. The learned counsel for the assessee vide order dated 27-4-2002 has stated that on inspection of the record it was found that the correct date of the orders under section 201(1A) in that case was 25-1-1990. To substantiate the same, he has filed the copies of such orders. The copy of the said letter along with copies of such letters were given to the learned CIT DR for comments but no reply has been received so far, even after two months. Hence, there is no reason for not accepting the correct date of the orders under section 201(1A) in the case of Raymond Woollen Mills as25-1-1990. The perusal of the said order of th....