TMI Blog2002 (11) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for the last 10 years and worked out the tax liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 tax liability was initially worked out at Rs. 44, 32,27,983 against the actual deposit of Rs. 52,79,76,749 we draw your honour's kind attention to the assessee's letter dated 21-12-1998 addressed to Joint Commissioner of Income-tax, Range-23, Mayur Bhavan, New Delhi a copy of which is once again enclosed herewith for facility of reference and for your kind perusal (Annexure III). The net position of the two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his 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 assessee, the Deputy Commissioner rejected the contention of the assessee that the matter was concluded by the letter dated 24-12-1998 issued by the Joint Commissioner, Range-23, New Delhi by holding that the jurisdiction over the implementation of section 201(1) and 201(1A) vested with the Assessing Officer, TDS Circle 23(1), New Delhi and none else. Accordingly, he accepted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate 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 dated24-12-1998issued by JCIT, who had concurrent jurisdiction over the assessee. It had also challenged the tax and interest liability created by the DCIT on account of excess valuation of certain perquisites and grossing up of tax rate. In reply, the department had strongly opposed the contentions of the assessee and had also filed affidavits deposing that JCIT, Range-23 had not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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)(b) was passed conferring or assigning powers/functions of Assessing Officer over the JCIT, Range-23. Accordingly, it was submitted that JCIT, Range-23 had no jurisdiction to pass an order under section 201(1)/201(1A). Hence, the order passed by the DCIT, TDS Circle 23(1) was a valid order. 12. Proceeding further, it was contended by him that letter dated 24-121998 issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 department had filed two affidavits before the Hon'ble High Court at Delhi in the course of proceedings of writ petition filed by assessee wherein it has been clearly deposed that no notification under section 120(4)(b) was issued conferring jurisdiction on JCIT, Range-23 for passing an order under section 201. In such a situation, the affidavits filed by the department have to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded 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 in favour of either party. According to him, all correspondences to JCIT were made under section 144A as and when required by him from time to time. All the computations regarding tax and interest liability were made at the behest of JCIT himself. It was only after verification of these details that letter dated24-12-1998was issued accepting the returns and workings furnished by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment 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. Section 144A find its place in Chapter XIV- Procedure for assessment. This chapter relates to the assessment of income of the assessee and the matters relating to TDS are covered under a different Chapter - XVH - Collection and Recovery of Tax. The powers to implement the provisions under these chapters are conferred independently on certain income-tax authorities. The provisions like s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 that there cannot be any estoppel against statute. Reference can be made to the judgment of Hon'ble Delhi High Court in the case of Tube Fabrico (I) Ltd. v. CIT[1994] 210 ITR 1035. The authorities constituted under the Act are to implement the provisions of the Act and cannot go against such provisions. Reference can be made to the recent judgment of the Hon'ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough 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 Department and that too, considering the maximum marginal rate of 30 per cent. Reliance was placed on the judgment of Madras High Court in the case of CITV. Simpson Co. Ltd [1998] 230 ITR 794. Reliance was also placed on section 17(2)(iv) along with the decision of Delhi High Court in the case of Frank Beaten v. CIT (1985] 156 ITR 16. Hence, according to him, grossing up done by JCIT is illegal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 concluded by her that assessee was liable to pay tax in accordance with the provisions of section 195A. 25. Rival submissions of the parties have been carefully considered in the light of material placed on record End the case law referred to by the parties. There is no dispute to the legal position that various allowances paid by the assessee to its expatriate staff outsideIndiaare taxable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave 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 other arrangement, the tax chargeable on any income referred to in the foregoing provisions of this Chapter is to be borne by the person by whom the income is payable, then, for the purposes of deduction of tax under those provisions such income shall be increased to such amount as would, after deduction of tax thereon at the rates in force for the financial year in which such income is payable, be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts 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 of survey wherein it was answered in response to Question No. 27 as under: "I think my employer Mitsubhishi Corporation pay tax on behalf of me." All these circumstances taken together leads to the only conclusion that there was an arrangement to pay the tax of its expatriate employees within the meaning of section 195A. Accordingly, we reject the contention of the learned counsel of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. 16,000)." In view of the above example, it is clear that revenue has determined the excess tax liability which had also resulted in charging of excess interest under section 201(1A). Interest of justice demands that tax and interest liability should be recomputed correctly in accordance with law. In view of the above discussion, the order of the CIT(A) is set aside on the issue of computation of tax and interest liability and the matter is restored to the file of the Assessing Officer for fresh computation of the liability of the tax and interest thereon. All the details of the income of expatriate employees are already on record. The Assessing Officer is, therefore, directed to recomputed the tax and interest liability after enhancing the income in accordance with section 195A. 30. The next issue relates to the valuation of perquisite on account of rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 was owned by the employer or taken on rent by the employer for the proper application of rule 3 of the Income-tax Rules, and in our view, in both the situations, rule 3(a)(iii) will apply as there are no limiting expressions found in rule 3 to make it applicable only in the case of a property, let out by an employer to its employee of the property owned by the employer and in the absence of any restriction found in rule 3, we are of the opinion that the provisions of rule 3 would cover both the situations and rule 3 has strictly to be followed in determining the value of the perquisite." The above observations which have become the law of the land clearly supports the stand of the revenue. 33. Reliance placed by the learned counsel for the assessee on the second proviso to Rule 3(a)(iii)(A) is misplaced. Firstly, this proviso does not speak of actual rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able 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 leviable under the law. In view of such finding it was held that the penalty levied was not in accordance with law and consequently, the AAC cancelled the penalty. On appeal by the department, the Tribunal was of the view that it had no option except to uphold the order of AAC since it had no power of enhancement. The order of the Tribunal was also upheld by the High Court. However, the Supreme Court reversed the order of High Court and held that AAC had the power of enhancement and, therefore, the Tribunal in such cases had the power to remand the matter to the Assessing Officer for recomputing the penalty in accordance with law. From the above discussion, it appears that in that case the revenue was in appeal before the Tribunal and the subject-matter of appeal was the levy of penalty and, therefore, it could exercise its powers with reference to such subject-matter. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mt. 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 Tribunal relied upon by the assessee is distinguishable on facts. 37. After considering the rival submissions, we are of the view that this issue is squarely covered by the decision of the Tribunal in the case of Raymond Woollen Mills Ltd., which was followed by Delhi Bench in the case of Sahara Airlines. It is to be noted that the Tribunal had decided the issue after considering two judgments of Supreme Court in the case of State ofGujaratv. Patel Raghavnath AIR 1969 SC 1297 and Gurbux Singh's case. Therefore, all the submissions of the learned CIT DR are to be rejected. As far as omission of section 231 is concerned, it has no relevance since that section was for recovery of the tax or interest levied by the Assessing Officer for which demand notice had already been issued or for which assessee was deemed to be in default. Section 231 could be applied only if any t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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 the Tribunal also shows that assessment years involved were 1978-79 to 1986-87. The Tribunal had held that orders upto assessment year 1985-86 were time-barred. In our opinion, assessment year 1985-86 could not have been declared as time-barred unless period of four years was counted from the end of the financial year. If the period of four years is counted from the end of the assessment year, then order for assessment year 1985-86 would have been in time. Considering the facts of the case on the basis of which decision was taken by the Tribunal in the case of Raymond Woollen Mills, we are of the view that period of limitation of 4 years was declared by the Tribunal to be counted from the end of the financial year. We hold accordingly." In view of the above discussion, it is held that impugned orders under section 201/201(1A) pertaining to financial years 1988-89 to 1994- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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