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2009 (8) TMI 844

..... arma for the Appellant. Kishore B. for the Respondent. ORDER Per Bench 1. These bunch of 79 numbers of appeals have been filed by the above-mentioned agent of different assessees, against the order dated 27-2-2009 passed by the ld. CIT(A) in the matter of an assessment made by the Assessing Officer under section 143(3) of the Income-tax Act, 1961 ( the Act ) for the assessment year 2006-07. 2. The grounds of appeal raised by the assessees through their agent are as under :- Based upon the facts and circumstances of the case, the Appellant respectfully submits that the Commissioner of Income-tax, Appeals-I, Dehradun has erred in :- 1.In holding the order of the Dy. Director of Income-tax, International Taxation, Dehradun (hereinafter referred to as Assessing Officer ) that the appellant was not entitled to exemption under section 10(10CC) of the Income-tax Act, 1961 in respect of tax perquisite (tax borne by the employer on behalf of the employee). 2.In holding that section 10(10CC) was applicable only in respect of perquisites which need to be valued as per Rule 3 of the Income-tax Rules, 1962. 3.In holding that exemption under section 10(10CC) of the Income-tax Act, 1961 was not a .....

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..... yment also needs to be valued to be described in terms of money or rupees. The ld. CIT(A), thus, concluded as under :- 9. To conclude, since the birth of the provisions of section 10(10CC) in itself is an evidence of the said section being introduced in the wake of hardships faced by the employees due to amendment of Rule 3 by the Income-tax (Twenty-second Amdt.) Rules with effect from 1-4-2001, there is no question that a legislative linkage could ever be attributed or established between section 17(2)(iv ) and section 10(10CC) of the Act. It is, therefore, held that the tax perquisite against which exemption has been claimed in the grounds of appeal is not eligible for exemption under the provisions of section 10(10CC) of the Act. 6. Still aggrieved, the assessees are in appeal before us. 7. In the course of hearing of this appeal, the ld. counsel for the assessees has submitted that the ld. CIT(A) has affirmed the action of the Assessing Officer in rejecting the assessees claim of exemption under section 10(10CC) in respect of tax paid by the employer, in total disregard to the decision of Special Bench of Tribunal in the case of RBF RIG Corpn., LIC (supra) and the ld. CIT(A) to .....

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..... ITD 141 (Delhi) (SB) wherein the Special Bench had unequivocally held that tax borne by the employer on the salary paid to the employee constituted perquisite in the hands of the employee; that such perquisite was non-monetary payment since the tax was directly paid to the Government not to the employee and, as a corollary, the tax paid by the employer can only once be added to the salary of the employee and not subject to multiple grossing up. The CIT(A), vide order dated 27-2-2009, affirmed the decision of the Assessing Officer, in total disregard to the aforesaid decision, held that since the amount of tax is describable in terms of money only such tax cannot be said to be non-monetary benefit and, therefore, exemption under section 10(10CC) was not available to the assessee. In reaching the aforesaid decision, the CIT(A) has totally lost sight of the fact that the Special Bench of the Tribunal in the case of RBF RIG Corpn. (supra) had come to a categorical finding that tax borne by the employer constituted non-monetary benefit in the hands of the employee and therefore such tax cannot be subject to multiple grossing up. It would be appreciated that the aforesaid action of the C .....

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..... an Assistant Collector or Collector is adverse to the interests of the revenue, the immediately higher administrative authority has the power to have the matter satisfactorily resolved by taking up the issue to the Appellate Collector or the Appellate Tribunal as the case may be. In the light of these amended provisions, there can be no justification for any Assistant Collector or Collector refusing to follow the order of the Appellate Collector or the Appellate Tribunal, as the case may be, even where he may have some reservations on its correctness. He has to follow the order of the higher appellate authority. This may instantly cause some prejudice to the revenue but the remedy is also in the hands of the same officer. He has only to bring the matter to the notice of the Board or the Collector so as to enable appropriate proceedings being taken under section 35E(1) or (2) to keep the interests of the department alive. If the officer s view is the correct one, it will no doubt be finally upheld and the revenue will get the duty, though after some delay which such procedure would entail. Your Honour s kind attention is also invited to the decision of the Supreme Court in Asstt. C .....

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..... n in this regard is also invited to the decision of the Amritsar Bench of the Tribunal in the case of Kawaljit Singh Gill v. Asstt. CIT 101 TTJ (p. 538) wherein the Tribunal (at pages 546-547) held that the CIT(A) is subordinate to the Tribunal in judicial hierarchy and, therefore, bound to follow the order of the Tribunal. It was further held that the CIT(A) had failed to observe judicial discipline by disregarding the decision of the higher judicial authorities which ultimately lead to unnecessary litigation and, therefore, the assessee was held to be entitled to cost of appeal in terms of section 254(2B) of the Act. It is, thus, the humble prayer of the assessees that the assessees have been subjected to unnecessary litigation and cost of appeals totalling to approximately Rs. 28 lakhs only because of the refusal of the CIT(A) to follow the order of the Special Bench of the Tribunal. Such action of the CIT(A) is in gross violation of the principles of judicial discipline and hierarchy which needs to be deplored upon and the assessee should be entitled to refund of the appeal fees. 8. The ld. D.R., on the other hand, submitted that the Assessing Officer as well as the ld. CIT(A) .....

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..... . In the circumstances, the assessee in the case of RBF RIG Corpn. (RBFRC) as agent of Alnasser Rahim (8 cases) approached the President of the Income-tax Appellate Tribunal (Appellate Tribunal) with request that the question of operation of provision of section 10(10CC) be referred to and considered by a Larger Bench. The President referred the matter to a Regular Bench for considering and advising the President on the issue. The Regular Bench vide order dated 6-9-2007 recommended that Special Bench be constituted to consider the question and also to review the decisions of Delhi Benches in the cases of B.J. Services Co. Middle East Ltd. and Western Geo International Ltd. (supra). In the above circumstances, the Special Bench was constituted to consider the relevant question. Before the Special Bench, it was contended that the assessees were non-resident foreign nationals employed in India in the relevant assessment year 2004-05. They were employees of non-resident company treated as statutory agent of the assessees. Those employees, as per terms of their employment, were to be paid salary net of taxes and taxes were to be borne by the employer company. Accordingly, in the returns .....

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..... anything to do with payment of remuneration free of tax, one would wonder why overriding effect was given to the clause by stating that clause would apply notwithstanding anything contained in section 200 of the Companies Act . Therefore, reference to section 200 of the Companies Act only supports the view that the clause was intended to exempt payment of taxes by the employer on the remuneration paid to the employee. (para 11.5) There is some controversy as to what is the meaning of at the option of the employer on behalf of the employee . The words at the option of the employer only imply that the employer now has an option to pay the taxes on behalf of the employees. It is for the employer to decide whether taxes are to be paid by the employee or the employer. The clause is not applicable in cases taxes are paid by the employee who is otherwise obliged to pay it. When so paid, no perquisite, as far as employee is concerned, would be involved. This is more than clear from provision of section 192(1A) and section 195, and section 195A and from other consequent changes made through Finance Act, 2002 with effect from 1-4-2003. Sub-section (1A) to section 192 introduced through the .....

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..... ude such payment of taxes from the total income of the assessee. In other words, taxes paid by the employer can be added only once in the salary of the employee. Thereafter, tax on such perquisite is not to be added again. (para 17.1) 11. In view of the decision of the Special Bench in the above referred case, we hold that the tax borne by the employer on perquisites of the employees would constitute non-monetary benefit and as such the same is exempted under section 10(10CC) of the Act. We, therefore, reverse the order of the authorities below on this point and allow the assessee s claim that the tax paid by the employer in respect of salary paid to the aforesaid assessees would constitute non-monetary perquisite eligible for exemption under section 10(10CC) of the Act. In other words, the assessees claim of exemption under section 10(10CC) of the Act in respect of tax paid by the employer in respect of salary paid to its employees, of the Act is directed to be allowed. The Assessing Officer shall modify the assessment orders of all these assessees accordingly. 12. We have also heard both the parties on the issue about awarding any cost to the assessee in all these appeals. 13. Th .....

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