TaxTMI 
TaxTMI 
2017 (2) TMI 913
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.... decision, it was submitted is no longer good law in view of the decision of the Apex Court in the case of ITC Ltd. vs CIT 286 CTR 126 (SC) which has been followed by the ITAT in the case of the assessee itself. Filing a copy of the aforesaid order dated 12.07.2016 in ITA No. 401/Del/2015 for 2011-12 AY it was submitted the order of AO u/s 201(1)/201(1A) had been quashed by the ITAT. A prayer for a similar order in the present appeals was prayed for. 3. Considering the decision of the Apex Court in ITC Ltd. (cited supra), the Ld.Sr.DR relied upon the impugned order. No contrary decision either on fact or law was cited for the benefit of the Bench to take a contrary view. The facts and circumstances were stated to be identical in all these years. 4. We have heard the rival submissions and perused the material available on record. The relevant facts of the case are that the assessee company is engaged in the business of chain of hotels (The Oberoi Group). Survey operation u/s 133A of the Income Tax Act, 1961 was carried out at the business premises of the assessee company at Hotel -The Oberoi, Dr.Zakir Hussain Marg, New Delhi. During the survey proceedings, it was noticed that the ....
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.... the amount of tips distributed." Reliance was placed on Sun-n-Shade Hotel P Ltd. v. State of Maharashtra (1969) 23 STC 507 (Bom); The Rambagh Palace Hotel vs The Rajasthan Hotel Worker's Union (1976) 4 SCC 817 (SC); The Central Bank of India v. Their Workmen (I960) 47 AIR 12 (SC); Quality Inn Southern Star v The Regional Director, Employees State; Insurance Corporation [2008] 2 SCC 549; v) Nehru Place Hotels Ltd v Income Tax Officer, Ward 50(2), New Delhi 173 Taxman 88; HUDA and Anr v. Babeswar Kanhar and Anr I SCC 191; vii) CIT v Nestle India Ltd (2000) 243 ITR 435 (Del)". 4.1. Not convinced with the explanation offered referring to section 15, 16 and 17 of the Income tax Act, 1961, the AO concluded that TIPS (which is an acronym and stands for "To Insure Prompt Services") distribution etc. is merely a form of remuneration to the employee in this work. He was of the view that since TIPS are paid to the employees in lieu of rendering prompt services for their employer hence these accrued to the employees for services rendered as employees for their employer. He was of the view that the meaning itself clarified that they arose due to the relation of employer and employee and c....
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.... to tax evasion. 'Tips' whether paid in cash or through card is in every way an additional income of the employee. The employee receives this income by virtue of employment. Hence the claim of the employer that it receives tips from customers in capacity is not correct presentation of facts. 4.12. The various case laws quoted by the appellant does not apply strictly to the present case as in the present appeal, it is evident that the hotel management is involved in collection and disbursement of tips. Thus the appellant is making payment over and above the quantum of salary, directly or indirectly to the employee by way of 'Tips'. This would thus constitute salary or 'in lieu thereof' paid by the appellant to the employees. 4.13. It is relevant to reiterate that under the Income Tax Act, 1961, every person having taxable income, has to pay tax. The tax on total income is collected by different means. TDS is one of the methods of collection of Tax. In the given case since the tips constitute income in the hands of the recipients i.e. the employees, it is the liability of the employer i.e. the appellant to deduct TDS on the same and remit it in the Govt. account within a ....
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....and paid by way of a credit card by a customer, since such tip goes into the account of the employer after which it is distributed to the employees, the receipt of such money from the employer would, according to the High Court, amount to "salary" within the extended definition contained in Section 17 of the Act. For arriving at this interpretation, the High Court relied upon the decision of this Court in Karamchari Union v. Union of India [2000] 243 1TR 143/109 Taxman 1 , while distinguishing the judgments of this Court in Rambagh Palace Hotel v. Raj ay than Hotel Workers' Union [1976] 4 SCC 817 and Quality Inn Southern Starv. Regional Director, ESI Corpn. [2008] 2 SCC 549. After distinguishing the said judgments, the High Court concluded that the receipt of the tips constitute income at the hands of the recipients and was chargeable to the income tax under the head "salary" under Section 15 of the Act. Accordingly, it was held that it was obligatory upon the assessees to deduct taxes at source from such payments under Section 192 of the Act. 4.4. This decision was challenged in appeal before the Apex Court and considering the submissions of the assessee and the Revenue, the ....
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....n 15 as it is not contemplated in the contract of employment. 4.4.4. The reliance placed upon section 17(3)(ii) also, it was found could not be countenanced for the simple reason that section 17(3) it was held uses two different expressions employer in sub-clause (ii) and "persons" in sub-clause (iii). It was noted that obviously person is wider them employer but even in the said sub-clause "person" has a reference to either a future employer or a past employer. Therefore, it was noted the scheme u/s 17 must be by an employer whether future or past. When sub-clause (ii) it was noted uses the expression "employer" it used the expression in the same sense as used in section 15 as the opening line of Section 17 itself states that for the purpose of section 15 salary includes profits in lieu of salary. The word it was noted necessarily brings a contract of employment express or implied and thus on account of the said reasoning the arguments of the Revenue were found to be without merit. 4.4.5 The distinction drawn by the Revenue from the decisions of the Apex Court in the case of RamBagh Palace Hotel case and Quality Inn Southern Star (cited supra) that these were rendered considerin....