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KAMLESH K SINGHAL GENERAL MANAGER (MM) Versus COMMISSIONER OF INCOME-TAX-III

2016 (10) TMI 167 - GUJARAT HIGH COURT

Reopening of assessment - Charge of fringe benefit tax - double taxation - employer ONGC had reimbursed Conveyance Maintenance and Repair Expenditure ('CMRE') and uniform allowance to the petitioner, which was not reflected in the salary certificate issued by the employer, nor ONGC had deducted tax at source on such amounts - Held that:- Once a certain benefit is held to be a fringe benefit and the employer is taxed accordingly under chapter XIIH of the Act, the same benefit cannot be included i .....

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llowance, cannot challenge the order by way of revision and is, therefore, must be turned down. - Thus impugned order passed by the Commissioner is set aside. The disallowance of 20% of the CMRE benefit and 100% of the uniform allowance made in case of the petitioner by the Assessing Officer is reversed. The Assessing Officer shall pass a consequential order giving effect to this judgment. The petition is disposed of. - SPECIAL CIVIL APPLICATION NO. 2059 of 2012 - Dated:- 20-9-2016 - MR. AKI .....

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orporation of India ('ONGC' for short). For the assessment year 2007-08, the petitioner had filed the return of income on 29.06.2007, declaring total income of ₹ 9,03,346/- . After once accepting such return, the Assessing Officer, issued notice under section 148 of the Act on the ground that the employer ONGC had reimbursed Conveyance Maintenance and Repair Expenditure ('CMRE' for short) and uniform allowance to the petitioner, which was not reflected in the salary certifi .....

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nce of CMRE amount and ₹ 21,422/- towards uniform reimbursement. 3. The case of the petitioner is that on such benefits, the employer ONGC has paid fringe benefit in terms of section 115WA and that therefore, there was no liability for the employee to pay tax on such amounts as part of his salary. On such basis, the petitioner filed a revision petition before the Commissioner. Before the Commissioner, the petitioner raised multiple contentions including that the employer had treated the be .....

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t whether the revised return was filed or not, once an assessee is in position to show that he has been overassessed under the provisions of the Act, even if such overassessment is as a result of the assessee's own mistake, the Commissioner of Income Tax has the power to correct such an assessment under section 264 of the Act. 4. The Commissioner however, rejected the revision petition on the short ground that the Commissioner of Income Tax in similar cases has confirmed 20% of CMRE disallow .....

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y provisions of the circulars of CBDT, counsel submitted that the tax under FBT regime would exclude taxation under the normal provisions in the hands of the employees. 6. Our attention was drawn to various decisions rendered by this Court in case of ONGC where, in relation to similar payments, the Court had held that ONGC was not required to deduct tax at source since the amount in question did not form salary of the employee. 7. On the other hand, learned counsel Shri Parikh for the Revenue op .....

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stioned this stand of the ONGC in this respect and accepted the FBT from the employer. We must, therefore, proceed on the basis that even as per the Revenue it was a fringe benefit for the purpose of section 115WA during the period when the FBT regime was in force. If that be so, immediate question would be, can the employee also be asked to pay tax on such amounts treating them as salary. 9. As is well known, the FBT regime survived for a short time. It was introduced under chapter XIIH under t .....

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deemed to have been provided by an employer to his employees during the previous year at the rate of thirty percent on the value of such fringe benefits. (2) Notwithstanding that no incometax is payable by an employer on his total income computed in accordance with the provisions of this Act, the tax on fringe benefits shall be payable by such employer. Various fringe benefits were specified under section 115WB. Under subsection (1) of section 115WA thus, in addition to income tax charged, an ad .....

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s made two major departures from the normal tax provision. First, the payer of fringe benefits was held responsible to pay tax at flat rate of 30% of the value of benefit and second such tax would be paid by the employer even if otherwise not liable to pay tax on the basis of normal computation of his income. The FBT is therefore, referred to as a surrogate tax. 10. Section 17 of the Act defines the term salary, perquisite etc. Subsection (2) of section 17 which defines the term 'perquisite& .....

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h dismantling of the FBT regime, relevant portion of subsection (2) of section 17 has undergone a change. Clause( vi) thereof is replaced by clauses (vi), (vii) and (viii) with effect from 01.04.2010. Clause( viii) in the present form reads as under: (viii) the value of any other fringe benefit or amenity as may be prescribed. 12. It can thus be seen that before and after the FBT provisions, subsection (2) of section 17 included within the meaning of term perquisite, the value of any other fring .....

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pter XIIH. In plain terms therefore in case of fringe benefit chargeable to tax under chapter XIIH, the same benefit would not form part of a perquisite of an employee in terms of section 17(2) of the Act. The statutory provisions were thus, so framed in a manner as to avoid the same benefit suffering the taxation at two ends. If a benefit paid by an employer to an employee is treated as a fringe benefit liable to tax under section 115WA of the Act, the employer alone shall suffer tax at a presc .....

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in the hands of the employer under chapter XIIH cannot be taxed in the hands of the employee as perquisite under section 17 of the Act. The employer, therefore, does not have an option to tax the benefit arising on account of share allotment as perquisite which is otherwise to be taxed as FBT. 13. Under the circumstances, once a certain benefit is held to be a fringe benefit and the employer is taxed accordingly under chapter XIIH of the Act, the same benefit cannot be included in the income of .....

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common order dated 15.04.2010 for the assessment years 2008-09 and 200910, in which, he held as under: … Thus he accepts that the FBT might be payable on such CMRE but it is liable to tax in the hands of the employees also. No specific provision is pointed cut in support of this argument of the A.O. The agreement of the assessee that when perquisites are subjected to FBT it is not taxable perquisites is further supported by the amendment in clause (vi) of section 17(2) which specifically .....

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as income in the hands of employees. Accordingly, I hold that the assessee was not liable to deduct tax at source u/s.192 on such amounts. Accordingly, the order passed by the A.O. For these two years is quashed. 15. This issue in one form or the other, reached the High Court in three separate proceedings. In case of Commissioner of Incometax (TDS) v. Oil & Natural Gas Corporation (India) Ltd., reported in [2013] 38 taxmann.com 187 (Gujarat), (hereinafter to be referred to as 'ONGC1' .....

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, a Division Bench considered the question whether the Tribunal was right in holding that the payment of uniform allowance to the employees by ONGC incurred FBT and failed to consider that the payment of uniform allowance was nothing but an additional salary. The Division Bench confirmed the decision of the Tribunal. Referring to clause6 of subsection (2) of section 17 of the Act, it was observed that the perquisites do not include fringe benefit chargeable to tax under chapter XIIH. It was conc .....

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nce again the Court following the decision in case of ONGC2 case held that the uniform allowance paid by the ONGC to its employees cannot be regarded as additional salary attracting the provisions of TDS. 18. Thus, this issue is sufficiently clear by above three judgments of this Court in case of ONGC1. In case of ONGC2, the Court also considered the Revenue's objection that the perquisite was not in the nature of fringe benefit, but an additional tax. Such contention was negated. In any cas .....

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