TaxTMI 
TaxTMI 
2008 (11) TMI 285
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....cheque to the credit of the Central Government if the employer bears the tax payable on behalf of the employees, the AO was of the view that it was difficult for any person of ordinary prudence to accept the view point that this perquisite was not provided by monetary payment. Since the major part of tax was paid by the employer, the refund claimed by the assessee amounting to Rs. 1,37,797 was a disguised perquisite in the hands of the assessee. Besides, in the statement of taxable income attached with the return of income, the assessee has worked out the value of company leased accommodation @ 10 per cent of the salary. While arriving at salary for this purpose, the assessee had not taken into account the tax paid by the employer. By not doing so the assessee had declared less income and consequently had paid less tax. Therefore, the AO issued notice under s. 148 of the Act to the assessee on 18th July, 2005 in response to which the assessee vide letter dt. 2nd Sept., 2005 stated that the return filed under s. 139(1) of the Act might be treated as having filed in response to notice under s. 148 of the Act. Thereafter, the AO issued notice under s. 143(2) of the Act in order to ass....
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....Ward on M/s Sojitz Corporation to which the employer company had been merged. None attended on behalf of the employer company nor was any submissions made in writing. The AO again issued notice dt. 14th Dec., 2006 through registered post requiring the assessee to intimate the amount, which had been received by him or paid on his behalf on account of social security. The assessee was required to furnish the said information latest by 20th Dec., 2006, but in response to this letter also, none attended nor was any written submissions made. The AO, therefore, estimated perquisite value of social security @ 8 per cent of the salary. However, the learned Authorised Representative of the assessee placed reliance on the decisions of the Tribunal in the cases of Jt. CIT vs. T. Adachi (2006) 100 TTJ (Del) 332 and Gallotti Raoul vs. Asstt. CIT (1997) 61 ITD 453 (Bom) and Bombay High Court in the case of Bank of Baroda vs. H.C. Shrivastava (2002) 175 CTR (Bom) 663 : (2002) 256 ITR 385 (Bom) in support of the contention that the social security was not taxable in the hands of the assessee. The AO, therefore, in the absence of any details estimated 8 per cent of basic salary of Rs. 56,48,694 as ....
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.... rate as applicable for the financial year 2002-03 as per s. 195A of the Act at Rs. 1,03,06,115. The assessee claimed exemption under s. 10(10CC) at Rs. 4,37,445 in respect of tax paid by the employer on the value of non-monetary perquisites. The employer provided non-monetary perquisites on account of accommodation, furniture and motor car and chauffeur free of cost. The assessee did not give details of tax paid by employer on perquisites not provided by way of monetary payments given to assessee for the purposes of deduction claimed under s. 10(10CC). The AO, therefore, computed tax payable on non-monetary perquisites of Rs. 9,86,400 (rent-free accommodation Rs. 6,00,000 + furniture hire charges Rs. 3,60,000 + motor car and chauffeur Rs. 26,400) at Rs. 2,83,416 as against Rs. 4,37,445 claimed by the assessee. The AO also disallowed the amount of refund granted at Rs. 1,37,797 treating the same as disguised perquisites. 7. The assessee aggrieved by the assessment order filed appeal before CIT(A) who deleted all the additions. The Revenue being aggrieved by the order of CIT(A) has filed appeal before the Tribunal agitating deletion of additions mentioned in the following grounds o....
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....t amount to monetary payments within the meaning of s. 10(10CC) of the Act. 10. We have heard both the parties and perused the material available on record. In the case before us there is no dispute that the employer had made payment of tax on behalf of the assessee. No doubt, the tax paid by the employer on salary paid to the employee constitutes perquisite within the meaning of s. 17(2)(iv) of the Act, as held by Hon'ble Delhi High Court in the case of T.P.S. Scott & Ors. vs. CIT (1999) 153 CTR (Del) 429 : (1998) 232 ITR 475 (Del) but for the purposes of determination of perquisites whether it will be included in salary or not will depend on definition of term "salary" within the meaning of provisions of Explanation to r. 3 of IT Rules, 1962. Prior to 1st April, 2001 for the purpose of computing income chargeable under the head 'Salaries', the value of perquisites not provided by way of monetary payment to an assessee was determined as per the Rules existing at the relevant point of time. Prior to 1st April, 2001, the term 'salary' was defined in Expln. 1 as under: "Explanation 1.: 'Salary' includes the pay, allowances, bonus, or commission payable monthly or otherwise, but doe....
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....nder r. 3 of the IT Rules, 1962. Thus, prior to 1st April, 2001 as per the decision of Hon'ble Bombay High Court, the term "salary" included the perquisites under s. 17(2)(iv) of the Act. The ratio of the decision rendered by Hon'ble Bombay High Court is still applicable to the extent it has been held that the definition given in r. 3 is co-extensive with the definition given in s. 17 except so far as there is an express exclusion therefrom of the kinds of payments mentioned. Since sub-cl. (d) of cl. (vi) of Explanation to r. 3 specifically excludes perquisites specified in s. 17(2) of the Act from salary for the purposes of computation of perquisites, in our considered opinion, in principle the salary will not include the tax paid by the employer for the purpose of determination of perquisite value of rent-free accommodation under r. 3 of the IT Rules, 1962. 12. The perquisite value of rent-free accommodation is to be determined as per r. 3 of IT Rules, 1962. With effect from 1st April, 2001, under r. 3 of IT Rules, 1962, for the purpose of computing the income chargeable under the head "Salaries", the value of residential accommodation provided by the employer during the previou....
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....ind that the assessee received salary of Rs. 56,48,694 from M/s Nissho Iwai Corporation India. while working out taxable income, the assessee had taken Rs. 5,64,869 as perquisite value on account of rent-free accommodation being 10 per cent of the basic salary of Rs. 56,48,694. In the instant case the employer had paid rent of Rs. 6,00,000 per annum for the accommodation given to assessee free of cost. Therefore, the perquisite value of rent-free accommodation will be Rs. 6,00,000 as against Rs. 5,64,869 taken by the assessee. Though the AO computed salary of Rs. 90,95,755 (wrongly taken at 10 per cent as against 20 per cent for Delhi under amended rules) by including tax paid by the employer and worked out 10 per cent of such salary at Rs. 9,09,575 as perquisite value of rent-free accommodation but since the actual rent paid by the employer was less than 10 per cent of the salary, he adopted the actual rent paid at Rs. 6,00,000 as value of rent-free accommodation in place of Rs. 5,64,869 adopted by the assessee. Thus no tax element is included in the value of perquisite of Rs. 6,00,000 on account of rent-free accommodation. The contention of assessee would have been correct, had t....
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....ial year 2002-03 at Rs. 2,83,416. He allowed exemption under s. 10(10CC) of the Act amounting to Rs. 2,83,416 as against Rs. 4,37,445 claimed by the assessee. 15. On appeal, the learned CIT(A) observed that s. 10(10CC) of the Act provided that the tax paid by the employer on income in the nature of perquisite, not provided by way of monetary payment, within the meaning of s. 17(2) of the Act shall not be included in the total income. In the case of the assessee the perquisites on account of rent-free furnished accommodation and motor car and chauffeur were perquisites not provided by way of monetary payment and therefore, eligible for exemption under s. 10(10CC) of the Act. He accordingly allowed the claim of the assessee for exemption under s. 10(10CC) of the Act at Rs. 4,37,445. 16. Before us, the learned senior Departmental Representative supported the order of the AO, On the other hand, the learned Authorised Representative of the assessee submitted that perquisites under s. 17(2) of the Act will not be considered as part of the salary for the purpose of determination of various perquisites under r. 3 of IT Rules, 1962. He placed reliance on the decision of Special Bench in t....
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....ems of non-monetary perquisites exemption under s. 10(10CC) of the IT Act will be available. Hence, in principle, we agree with the AO, that tax on non-monetary perquisites of Rs. 9,86,400 will be allowed as deduction under s. 10(10CC) of the Act. We accordingly set aside the order of learned CIT(A) and restore the order of the AO, subject to verification of tax actually payable on non-monetary perquisites. We order accordingly. 18. The next issue for consideration relates to deleting the addition of Rs. 4,51,895 on account of social security. The AO from the return of income found that the assessee had not declared the perquisite, value on account of social security. During the course of assessment proceedings it was submitted by the learned Authorised Representative of the assessee that as per employment letter, no social security was provided to the assessee. However, the AO noted that as per law in Japan all citizens of their country in Tokyo are covered by social security. The AO issued letter to general manager of employer company to intimate whether any type of social security was provided to the assessee during the financial year 2002-03 relevant to asst. yr. 2003-04. The ....
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....ned again to see whether any refund out of social security was received by the assessee during the year under consideration. Accordingly, we set aside this issue to the file of the AO with the directions to re-examine the matter. The assessee is directed to provide necessary evidence regarding the payment of social security, if any, to The assessee and employer's contribution to social security. The AO will decide the-issue after affording a proper opportunity to the assessee of being heard. 21. The last issue for consideration relates to enhancement of perquisite value of tax borne by the employer amounting to Rs. 2,23,960. Before the learned CIT(A) the assessee has taken, a ground that the AO has erred in law and on facts in grossing up the tax borne by the employer at Rs. 32,19,126 as against actual amount of Rs. 29,95,166. This has resulted in computation of enhanced perquisite of Rs. 2,23,960. The learned CIT(A) held that the value of perquisite on account of tax borne had to be computed on the basis of discussion made in the order and the relief allowed and hence the ground raised was consequential in nature. 22. Before us, it was agreed by both the parties that this ground....