TMI Blog2011 (6) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... or apparent on record which could be corrected by the AO in exercise of his power under Section 154 of the Act - Accordingly, questions of law framed are answered in favour of the Revenue. - ITA No.486 of 2008 with ITA No.487 of 2008 & ITA No.488 of 2008 - - - Dated:- 3-6-2011 - MR. JUSTICE A.K. SIKRI, MR. JUSTICE M.L. MEHTA, JJ. A.K. SIKRI, J. 1. These three appeals preferred by the assessee pertain to the Assessment Years 1996-97, 1997-98 and 1998-99 involving common questions and emanate from common orders passed by the Income Tax Appellate Tribunal ( the Tribunal‟ for brevity). The common question of law which arises for consideration is as to whether the tax paid by the employer in respect of salary paid to the employees is salary under Rule 3 of the Income Tax Rules for the purpose of computing the value of perquisites in respect of rent free accommodation provided to the expatriate employees. However, another question touching the scope of powers of AO under Section 154 Income Tax Act (hereinafter referred to as the Act‟) also arises for consideration as, after the assessment, rectification order was passed by the Assessing Officer (AO) treating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee requiring it to explain as to why the value of perquisite in respect of rent free accommodation should not be recomputed after including the tax element in gross salary and therefore, order be rectified under Section 154 of the Act. The assessee was asked to file its submission by 29.03.2004. 4. The assessee filed its objection to the said show cause notice issued under Section 154 of the Act contending that this is not a mistake apparent from record. The AO did not find favour with this contention and rejected the same on the ground that record consists of all the material facts and figures available; no fresh facts had been gathered; and the mistake related to determining the base figure for calculation of perquisites as per law . The AO referred to the judgment of this Court in the case of T.P.S. Scott and Ors. Vs. Commissioner of Income Tax [232 ITR 475], wherein it was held that tax perquisite is the part of gross salary. On that basis, order dated 22.03.2004 was rectified by recomputing perquisites for rent free accommodation by including tax element in the gross salary. 5. The assessee preferred appeal thereagainst challenging the assumption of jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the argument of the assessee was that when the Tribunal refused to accept the contention and it was not even the subject matter before the AO while giving appeal effect, the AO could not tinker with such an order passed much thereafter that too invoking the powers under Section 154 of the Act. 7. The Tribunal has not accepted the aforesaid contention of the assessee. The order of the Tribunal would reveal that it has referred to the discussion contained in Para 34 of its earlier order dated 22.03.204 and on the basis thereof, it has concluded that no such issue was discussed earlier and the Tribunal had refused to go into this issue raised on an earlier occasion as it had no power to do so. Thus, when the Tribunal on an earlier occasion was sitting as Appellate Authority over the decision of the AO/CIT(A) and the question had not arisen for consideration at that time, the question of merger of the order of the AO into the order of the Tribunal did not arise. After repelling this preliminary objection of the assessee, the Tribunal went into the merits of the issue and concurred with the view taken by the AO as well as CIT (A). 8. Mr. Ganesh, learned Senior Counsel appearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of law‟ in various cases by this Court, which itself proves beyond doubt that the issue raised is debatable. The learned Senior counsel also referred to the decisions of various High Courts on the taxability on the inclusion of tax payment by the employer in the gross salary for the purpose of rent free accommodation perquisite. To bolster his submission that this also manifests that the issue involved was not free from doubt he has argued that varied opinions existed at the relevant time when proceedings under Section 154 of the Act were initiated by the AO. To this submission, Mr. Ganesh further added that in the instant case itself, the Tribunal by a process of interpretation‟, had come to the conclusion that tax payment by the employer was to be included in the salary for the computation of rent free accommodation perquisite. The very fact that the Tribunal had to undergo this laborious exercise militated against the stand of the Department that it was an apparent mistake which was sought to be rectified by the AO. 11. Ms. Rashmi Chopra, learned counsel appearing for the Revenue, countered the aforesaid submissions with the plea that in the first round of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that the Tribunal refused to go into the issue raised by the learned D.R. for the first time before it, which was to the effect that the tax should be included in salary for working out perquisite in respect of rent free accommodation, by pointing out that the Tribunal did not have power to enhance the assessment and if the argument is accepted, then the provisions of cross appeal and cross objection would become redundant. Since the Tribunal did not go into the question at all, there was no question of the merger of the order of the Assessing Officer into the order of the Tribunal in this regard. Thus, it was not a case of derivative jurisdiction of the A.O. and, therefore, the case relied upon by the learned counsel have no bearing on determining the matter. Further, sub-Section (4) of Section provides that where an amendment is sought to be made under this Section, the order shall be passed in writing by the Income Tax Authority concerned, which means that the author who passed order can amend the order provided the mistake sought to be rectified is a mistake apparent from record. The subject matter of rectification in this case was not the order of the Tribunal, which refus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the assessee is that the amount paid by Ballarpur by way of tax cannot be treated as 'income' of assessee at all. His second contention is that the assessee did not receive the said amount and, therefore, it cannot constitute his income. Indeed, the learned Counsel sought to argue that Ballarpur was under no obligation to pay the said tax amount relating to the salary amount received by the assessee. We find it difficult to agree with the learned Counsel. 7. The definition of 'income' in clause (24) of Section 2 of the Act is an inclusive definition. It adds several artificial categories to the concept of income but on that account the expression 'income' does not loss its natural connotation. Indeed, it is repeatedly said that it is difficult to define the expression 'income' in precise terms. Anything which can properly be described as income is taxable under the Act unless, 'of course, it is exempted under one or the other provision of the Act. It is from the said angle that we have to examine whether the amount paid by Ballarpur by way of tax on the salary amount received by the assessee can be treated as the income of the assessee. It cannot be overlooked that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was not accepted giving the following reasons: Firstly, we have already pointed out that the definition is inclusive and it is a well-settled rule of interpretation of inclusive definition that it is not controlled or confined to the words or expressions which are included in the said definition. On the contrary, it is intended to enlarge the scope of the concept which is sought to be defined. Secondly, the purpose of r. 3 is to lay down the mode of valuation of the perquisite for the purpose of computing the income chargeable under the head "Salaries" under s. 15 of the Act. The definition of the word "salary" given in s. 17, as the section itself shows, is for the purposes of ss. 15 and 16 of the Act. It is, therefore, legitimate to presume that the Legislature did not intend to give a different meaning to the word "salary" in r. 3 from that given in s. 17 of the Act. Therefore, the two definitions will have to be construed as co-extensive in their scope except so far as there is an express exclusion of some of the payments which otherwise go with the word "salary". Thirdly, the purpose of giving a separate definition of salary in r. 3 appears to be to exclude certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals by this Court are pending in this Court, the assessee cannot come out of the clear mandate of the aforesaid judgments. The admission of certain appeals may be on the basis of certain facts appearing in those cases. Even otherwise, when we find that the issue which is involved in the instant appeals was the same on which the aforesaid pronouncements existed at the time when the AO invoked its powers under Section 154 of the Act. It can clearly be treated as mistake in law which has been corrected. 21. We also do not find any merit insofar as the arguments of the learned counsel for the assessee that in the impugned order the Tribunal arrived at the conclusion that the tax paid by the employer to be included in the salary for the computation of rent free accommodation perquisite by the process of interpretation and therefore, the matter was debatable. Obviously, when the assessee argued, on merits, that such a tax payment should not be treated as a part of salary for computation for rent free accommodation perquisite, it became incumbent upon the Tribunal to deal with this argument and give its reasoning as to why such a contention of the assessee would not hold any water. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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