Isao Sakai, New Delhi v. JCIT, New Delhi

ITA 1957/DEL/2011 | 2006-2007
Pronouncement Date: 04-11-2011 | Result: Allowed

Appeal Details

RSA Number 195720114 RSA 2011
Assessee PAN AYCPS7554H
Bench Delhi
Appeal Number ITA 1957/DEL/2011
Duration Of Justice 6 month(s) 14 day(s)
Appellant Isao Sakai, New Delhi
Respondent JCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 04-11-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 04-11-2011
Date Of Final Hearing 28-10-2011
Next Hearing Date 28-10-2011
Assessment Year 2006-2007
Appeal Filed On 20-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C DELHI BEFORE SHRI C.L. SETHI AND SHRI K.G. BANSAL ITA NO. 1957(DEL)/2011 ASSESSMENT YEAR: 2006-07 MR. ISAO SAKAI J OINT COMMISSIONER OF INCOME C/O JAPAN AIRLINES INTL. CO. LTD. VS. TAX RANGE-42 NEW DELHI. 36 CHANDERLOK BUILDING JANPATH NEW DELHI. PAN: AYCPS7554H ITA NO. 1958(DEL)/2011 ASSESSMENT YEAR: 2006-07 MR. YUJI HORIKAWA JOINT CO MMISSIONER OF INCOME C/O JAPAN AIRLINES INTL. CO. LTD. VS. TAX RANGE-42 NEW DELHI. 36 CHANDERLOK BUILDING JANPATH NEW DELHI. PAN: ABRPH9028H ITA NO. 1959(DEL)/2011 ASSESSMENT YEAR: 2006-07 MR. YOSHIMI KAMANO JOINT COMMI SSIONER OF INCOME C/O JAPAN AIRLINES INTL. CO. LTD. VS. TAX RANGE-42 NEW DELHI. 36 CHANDERLOK BUILDING JANPATH NEW DELHI. PAN: AMGPK 9667F ITA NO. 1960(DEL)/2011 ASSESSMENT YEAR: 2006-07 MR. TELSUO MITERA JOINT C OMMISSIONER OF INCOME C/O JAPAN AIRLINES INTL. CO. LTD. VS. TAX RANGE-42 NEW DELHI. 36 CHANDERLOK BUILDING JANPATH NEW DELHI. PAN: AKJPM4853E CONTD. PAGE 2 ITA NOS. 1957 TO 1960(DEL)/2011 2 (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. ANJALI GUPTA ADVOCATE RESPONDENT BY : SHRI SALIL MISHRA SR. DR DATE OF HEA RING : 28.10.2011 DATE OF PRO NOUNCEMENT : 04.11.2011 ORDER PER BENCH ALL THESE APPEALS INVOLVE A COMMON GROUND-WHETHE R THE CIT(APPEALS) ERRED IN CONFIRMING THE FINDING OF TH E ASSESSING OFFICER THAT SALARY FOR THE PURPOSE OF DETERMINING PERQUISIT E VALUE OF ACCOMMODATION UNDER RULE 3 INCLUDES THE TAX PAID BY THE EMPLOYE R COMPANY? IT MAY BE MENTIONED THAT FOUR GROUNDS HAVE BEEN TAKEN IN EA CH OF THE APPEALS AND THE QUESTION FRAMED ABOVE REPRESENTS THE GIST OF THE GROUNDS. HOWEVER FOR THE SAKE OF COMPLETENESS THE GROUNDS TAKEN IN THE APPEAL IN CASE OF YUJI HORIKAWA IN ITA NO. 1958(DEL)/2011 ARE REPRODUCE D BELOW:- 1. THE LD. CIT(A) ERRED IN CONFIRMING: (A) THE ASSESSABLE INCOME AT RS. 35 32 971/- AS AGA INST RS. 31 20 482/- RETURNED BY THE APPELLANT. (B) THE PERQUISITE VALUE OF CONCESSIONAL ACCOMMOD ATION AT RS. 4 28 411/- AS AGAINST RS. 3 44 588/- RETURNED BY THE APPELLANT LESS RENT RECOVERED. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE CONCLUSI ON OF THE ASSESSING OFFICER THAT : ITA NOS. 1957 TO 1960(DEL)/2011 3 (A) THE TAX PAID BY THE EMPLOYER IS NOT A PERQUISI TE WITHIN THE MEANING OF SECTION 17(2)(IV). (B) SALARY FOR THE PURPOSE OF DETERMINING THE PER QUISITE VALUE OF ACCOMMODATION UNDER RULE 3 WILL INCLUDE THE TAX PAID BY THE EMPLOYER COMPANY. 3. THE CIT(A) ERRED IN NOT FOLLOWING THE PRINCIP LE LAID DOWN BY THE SPECIAL BENCH OF THE DELHI TRIBUNAL IN THE CASE OF RBF RIG CORPORATION & OTHERS VS. ACIT 297 I TR (AT) 228. 2. THE CASE OF THE LD. COUNSEL FOR THE ASSESSEE I S THAT TAX PAID BY THE EMPLOYER ON BEHALF OF THE EMPLOYEE CONSTITUTES PE RQUISITE WITHIN THE MEANING OF SECTION 17(2)(IV) OF THE INCOME-TAX ACT 1961 (THE ACT FOR SHORT). IN THE CASE OF RBF RIG CORPORATION LLC VS. ACIT (2008) 113 TTJ (DEL) (FB) 143 IT HAS BEEN HELD THAT PAYMENT OF TAX ON BEHALF OF THE EMPLOYEE AT THE OPTION OF THE EMPLOYER CAN ONLY B E TREATED AS DISCHARGE OF AN OBLIGATION OF THE EMPLOYEE WHICH BUT FOR SUCH PAYMENT WOULD HAVE BEEN PAYABLE BY THE EMPLOYEE HIMSELF. THEREFORE THE AMOUNT OF TAX PAID IS A PERQUISITE COVERED UNDER SECTION 17(2)(IV) O F THE ACT. IT IS HER FURTHER CASE THAT IF THE TAX PAID BY THE EMPLOYER IS PERQ UISITE THEN THE AMOUNT SO PAID BY THE EMPLOYER CANNOT BE INCLUDED WHILE C OMPUTING SALARY UNDER RULE 3 OF THE INCOME-TAX RULES 1962 FOR THE P URPOSE OF ASCERTAINING THE PERQUISITE VALUE OF ACCOMMODATION SUPPLIED BY THE EMPLOYER TO THE EMPLOYEE. ITA NOS. 1957 TO 1960(DEL)/2011 4 3. ON THE OTHER HAND THE LD. SENIOR DR REFERRED EXTENSIVELY TO VARIOUS PARAGRAPHS OF THE ASSESSMENT ORDER AND ARGUED THA T THE WORD OBLIGATION USED IN THE AFORESAID PROVISION DOES NOT INCLUDE I NCOME-TAX PAYMENT ON BEHALF OF THE EMPLOYEE AND SUCH PAYMENT AMOUNTS T O PAYMENT OF SALARY IN CASH. 4. WE MAY NOW DISCUSS SOME OF THE CASES RELIED UPON BY THE RIVAL PARTIES. 4.1 IN THE CASE OF T.P.S SCOTT & OTHERS VS. CIT (1998) 232 ITR 475 (DEL) THE QUESTION BEFORE THE HONBLE HIGH COURT WAS-WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE AM OUNT OF TAX PAID BY BRITISH HIGH COMMISSION TO THE INDIAN GOVERNMENT O N 29 TH MARCH 1992 IS CHARGEABLE IN THE HANDS OF THE ASSESSEE UNDER SE CTION 15 READ WITH SECTION 17(2)(IV)? THE FINDING OF THE HONBLE COURT IS T HAT THE INCOME-TAX PAID BY THE EMPLOYER ON BEHALF OF THE EMPLOYEE IS A PA RT OF THE SALARY OF THE ASSESSEE AND THE WORD SALARIES WOULD IN ITS NAT URAL IMPORT WILL INCLUDE IN IT THE TAX PAID ON BEHALF OF THE EMPLOYEE. THE JUDGMENT DOES NOT REALLY SETTLE THE MATTER AT HAND ONE WAY OF THE OTHER. WHAT IS TO BE NOTED FROM THE POINT OF VIEW OF REVENUE IS THE FINDING THAT THE WORD SALARIES IN ITS ITA NOS. 1957 TO 1960(DEL)/2011 5 NATURAL MEANING INCLUDES TAX PAID ON BEHALF OF TH E EMPLOYEE. FOR THE SAKE OR READY REFERENCE PARAGRAPH NOS. 3 AND 4 OF T HE DECISION ARE REPRODUCED BELOW:- 3. WE MAY REFER TO THE RELEVANT STATUTORY PROV ISIONS. SECTION 15 SETS OUT THE INCOME WHICH SHALL BE C HARGEABLE TO INCOME-TAX UNDER THE HEAD SALARIES. VIDE CLAUS E (B) THEREOF ANY SALARY PAID OR ALLOWED TO AN EMPLOYEE IN THE PREVIOUS YEAR BY OR ON BEHALF OF AN EMPLOYER OR A FORMER EMPLOYER THOUGH NOT DUE OR BEFORE IT BECAME DUE T O HIM IS AN INCOME CHARGEABLE TO TAX UNDER THE HEAD SALARIES . FOR THE PURPOSE OF S. 15 VIDE S. 17(1)(IV) PERQUISITES ARE INCLUDED IN SALARY. VIDE SUB-CLAUSE (IV) OF CLAUSE (2) OF SE CTION 17 ANY SUM PAID BY THE EMPLOYER IN RESPECT OF ANY OBLIGA TION WHICH BUT FOR SUCH PAYMENT WOULD HAVE BEEN PAYABLE B Y THE ASSESSEE IS INCLUDED IN PERQUISITES. THE INT ERPRETATION CLAUSE I.E. SECTION 2 OF THE ACT VIDE SUB-CLA USE (III) OF CLAUSE (24) THEREOF INCLUDES THE VALUE OF ANY PER QUISITE OR PROFIT IN LIEU OF SALARY TAXABLE UNDER CLAUSES (2) AND (3) OF SECTION 17 WITHIN THE MEANING OF INCOME. ALL THESE STATUTORY PROVISIONS MAKE IT CLEAR THAT AN AMOUNT OF TAX WHICH WOULD HAVE BEEN PAYABLE BY AN EMPLOYEE -ASSESSEE IF PAID BY THE EMPLOYER ON BEHALF OF THE ASSESS EE IS TO BE INCLUDED IN THE PERQUISITES AMOUNTING TO SALARY R ENDERING IT LIABLE TO TAX BY BEING INCLUDED IN INCOME. 4. IN THE VIEW TAKEN HEREINABOVE WE ARE FORTI FIED BY TWO ENGLISH DECISIONS I.E. NORTH BRITISH RAILWAY C O. VS. SCOTT (1922) 8 TAX CASES 332 (HL) AND HARTLAND VS. DI GGINES (1926) 10 TAX CASES 247 (HL). BOTH THESE DECISI ONS HAVE BEEN FOLLOWED BY TWO HIGH COURTS IN INDIA I.E. THE BOMBAY HIGH COURT IN CIT VS. H.D. DENNIS (1982) 26 CTR ( BOM.) 107 : (1982) 135 ITR 1 (BOM): TC 58R. 443 AND THE M ADRAS HIGH COURT IN CIT VS. I.G. MACKINTOSH (1975) 99 ITR 419 (MAD.): TC 58R. 438. BOTH THE HIGH COURTS HAVE HE LD THAT THE ITA NOS. 1957 TO 1960(DEL)/2011 6 INCOME-TAX PAID BY THE EMPLOYER ON BEHALF OF THE EMPLOYEE IS A PART OF THE SALARY OF THE ASSESSEE AND THE WO RD SALARIES WOULD IN ITS NATURAL IMPORT COMPREHEND WITHIN IT TAX PAID ON BEHALF OF THE EMPLOYEE. 4.2 IN THE CASE OF EMIL WEBBER VS. CIT (1993) 200 ITR 483 (SC) THE QUESTION BEFORE THE HONBLE COURT WAS-WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE AMOUNT OF TAX PAID BY BALLARPUR ON BEHALF OF THE ASSESSEE IN ASSESSMENT YEARS 1974-75 AND 19 75-76 IS TAXABLE UNDER THE HEAD OTHER SOURCES? THE HONBLE COURT OB SERVED THAT AFTER LOOKING INTO THE MATTER FROM ANY ANGLE IT IS CLEAR THAT THE AMOUNT PAID BY WAY OF TAX ON THE SALARY RECEIVED BY THE ASSESSEE CAN BE TREATED AS INCOME OF THE ASSESSEE. HOWEVER IT CANNOT BE OVERLOOKED THAT T HE SAID AMOUNT IS NOTHING BUT TAX ON THE SALARY. BY VIRTUE OF OBLIGATION UN DERTAKEN BY BALLARPUR TO PAY TAX ON THE SALARY OF THE ASSESSEE AMONG OTHER S IT PAID THE SAID TAX. THEREFORE THE PAYMENT IS FOR AND ON BEHALF OF THE ASSESSEE AND IT IS NOT A GRATUITOUS PAYMENT. IF THE TAX HAD NOT BEEN PAI D BY BALLARPUR THE SAME WOULD HAVE TO HAVE BEEN PAID BY THE ASSESSEE. THER EFORE IT WILL BE UNREALISTIC TO SAY THAT THE SAID PAYMENT HAD NO CONNECTION WITH THE SALARY. ACCORDINGLY THE AMOUNT WAS HELD TO BE IN CLUDIBLE IN THE TOTAL INCOME AS SALARY. ACCORDING TO US THIS CASE A LSO DOES NOT DEAL DIRECTLY ITA NOS. 1957 TO 1960(DEL)/2011 7 WITH THE QUESTION AT HAND. FOR THE SAKE OF READY REFERENCE PARAGRAPH NOS. 7 8 9 AND 10 OF THE JUDGMENT ARE REPRODUC ED BELOW:- THE DEFINITION OF INCOME IN CLAUSE (24) OF SECTI ON 2 OF THE ACT IS AN INCLUSIVE DEFINITION. IT ADDS SEVERAL ART IFICIAL CATEGORIES TO THE CONCEPT OF INCOME BUT ON THAT ACC OUNT THE EXPRESSION INCOME DOES NOT LOSE ITS NATURAL CONNO TATION. INDEED IT IS REPEATEDLY SAID THAT IT IS DIFFICULT TO DEFINE THE EXPRESSION INCOME IN PRECISE TERMS. ANYTHING WHIC H CAN PROPERLY BE DESCRIBED AS INCOME IS TAXABLE UNDER TH E ACT UNLESS OF COURSE IT IS EXEMPTED UNDER ONE OR THE OTHER PROVISION OF THE ACT. IT IS FROM THE SAID ANGLE THA T WE HAVE TO EXAMINE WHETHER THE AMOUNT PAID BY BALLARPUR BY WAY OF TAX ON THE SALARY AMOUNT RECEIVED BY THE ASSESSEE CAN B E TREATED AS THE INCOME OF THE ASSESSEE. IT CANNOT BE OVERLOOKED THAT THE SAID AMOUNT IS NOTHING BUT A TAX UPON THE SALARY RECEIVE D BY THE ASSESSEE. BY VIRTUE OF THE OBLIGATION UNDERTAKEN BY BALLARPUR TO PAY TAX ON THE SALARY RECEIVED BY THE ASSESSEE AMON G OTHERS IT PAID THE SAID TAX. THE SAID PAYMENT IS THEREFORE FOR AND ON BEHALF OF THE ASSESSEE. IT IS NOT A GRATUITOUS PAYM ENT. BUT FOR THE SAID AGREEMENT AND BUT FOR THE SAID PAYMENT TH E SAID TAX AMOUNT WOULD HAVE BEEN LIABLE TO BE PAID BY THE ASS ESSEE HIMSELF HE COULD NOT HAVE RECEIVED THE SALARY WHICH HE DID BUT FOR THE SAID PAYMENT OF TAX. THE OBLIGATION PLACED UPON BALLARPUR BY VIRTUE OF SECTION 195 OF THE INCOME TA X ACT CANNOT ALSO BE IGNORED IN THIS CONTEXT. IT WOULD BE UNREAL ISTIC TO SAY THAT THE SAID PAYMENT HAD NO INTEGRAL CONNECTION WI TH THE SALARY RECEIVED BY THE ASSESSEE. WE ARE THEREFORE OF THE OPINION THAT THE HIGH COURT AND THE AUTHORITIES UND ER THE ACT WERE RIGHT IN HOLDING THAT THE SAID TAX AMOUNT IS L IABLE TO BE INCLUDED IN THE INCOME OF THE ASSESSEE DURING THE S AID TWO ASSESSMENT YEARS. THE QUESTION THEN ARISES UNDER WHICH HEAD OF INCOME SHOULD THE SAID INCOME BE PLACED. INASMUCH AS THE ASSESSEE IS NOT AN EMPLOYEE OF BALLARPUR WHICH MADE THE PAYMENT IT C ANNOT BE BROUGHT WITHIN THE PURVIEW OF SECTION 17 OF THE ACT . IT MUST ITA NOS. 1957 TO 1960(DEL)/2011 8 NECESSARILY BE PLACED UNDER SUB-SECTION (1) OF SECT ION 56 INCOME FROM OTHER SOURCES. ACCORDING TO THE SAID SUBSECTION INCOME OF EVERY KIND WHICH IS NOT TO BE INCLUDED FR OM THE TOTAL INCOME UNDER THE ACT SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCES IF IT IS NOT CHARGEABLE TO INCOME TAX UNDER ANY OF THE OTHER HEADS SPECIFIED I N SECTION 14 ITEMS A TO E. IT IS NOT THE CASE OF THE ASSESSEE TH AT ANY PROVISION OF THE ACT EXEMPTS THE SAID INCOME FROM THE LIABILI TY TO TAX. THE LEARNED COUNSEL FOR THE ASSESSEE-APPELLANT RELI ED UPON CERTAIN DECISIONS IN SUPPORT OF HIS CONTENTION. THE FIRST IS THE DECISION OF THIS COURT IN N.A. MODI V. S.A.L. NARAY ANA RAO 61 ITR 428 SC. AN ADVOCATE WAS APPOINTED AS A JUDGE. H E RECEIVED CERTAIN INCOME AFTER HIS APPOINTMENT AS A JUDGE IN LIEU OF THE PROFESSIONAL SERVICE RENDERED BY HIM BE FORE HIS APPOINTMENT. THE QUESTION WAS WHETHER THE SAID AMOU NT IS TAXABLE. IT WAS HELD THAT IT WAS NOT (IN VIEW OF TH E PROVISIONS OF THE ACT AS IT THEN STOOD). THE BASIS FOR THE SAID D ECISION IS THAT THE ASSESSEE THEREIN CANNOT BE SAID TO BE CARRYING ON THE PROFESSION OF AN ADVOCATE AT THE TIME HE RECEIVED T HE SAID INCOME. WE ARE UNABLE TO SEE HOW THE SAID DECISION HELPS THE ASSESSEE HEREIN. INDEED IN THE SAID DECISION THIS COURT EMPHASIZED THAT THE QUESTION WHETHER AN INCOME FALL S UNDER ONE HEAD OR THE OTHER HAS TO BE DECIDED ACCORDING TO TH E COMMON NOTION OF PRACTICAL MEN INASMUCH AS THE ACT DOES N OT PROVIDE ANY GUIDANCE IN THE MATTER. IT WAS OBSERVED THAT TH E HEADS OF INCOME MUST BE DECIDED ON THE NATURE OF INCOME BY A PPLYING PRACTICAL COMMON NOTIONS AND NOT BY REFERENCE TO TH E ASSESSEES TREATMENT OF INCOME. THE APPLICATION OF SAID TEST DOES NOT CERTAINLY HELP THE ASSESSEE HEREIN. THE SECOND DECISION CITED IS OF THE BOMBAY HIGH COU RT IN CIT BOMBAY V. SMT. T.P. SIDHWA 133 ITR 840. THE QUESTI ON WAS WHETHER THE INCOME FROM PROPERTY RECEIVED BY AN ASS ESSEE OF WHICH HE IS NOT THE OWNER CAN BE TAXED AS INCOME F ROM OTHER SOURCES. IT WAS HELD THAT IT CANNOT BE SO TAXED. W E DO NOT SEE ANY ANALOGY BETWEEN THE FACTS AND PRINCIPLE OF THAT CASE AND THOSE OF THIS CASE. HERE THE INTEGRAL CONNECTION BE TWEEN THE SALARY RECEIVED BY THE ASSESSEE AND THE TAX PAYABLE THEREON PAID BY BALLARPUR IN PURSUANCE OF A LEGAL OBLIGATIO N CANNOT BE ITA NOS. 1957 TO 1960(DEL)/2011 9 OVERLOOKED. THE THIRD CASE CITED IS IN MRS. SHEELA KAUSHISH V. C.I.T DELHI 131 I.T.R. 435(S.C). IN THIS CASE IT WAS HELD THAT DETERMINATION OF ANNUAL VALUE UNDER SECTION 23 OF T HE INCOME TAX ACT 1961 SHOULD BE DONE BY TAKING THE STANDARD RENT AS THE BASIS EVEN WHERE THE ASSESSEE IS RECEIVING RENT HIG HER THAN THE STANDARD RENT. AGAIN WE MUST SAY WE SEE NO RELEVAN CE OF THE SAID PRINCIPLE OF THIS CASE TO THE FACTS OF THIS CA SE. 4.3 IN THE CASE OF RBF RIG CORPORATION LLC (SUPR A) THE QUESTION BEFORE THE SPECIAL BENCH WAS-WHETHER ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE TAX PAID BY THE EMPLO YER ON THE INCOME OF THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 10(10CC) OF THE INCOME-TAX ACT 1961? THE TRIBUNAL CAME TO THE CONCLUSION THAT IT IS NOT MONEY WHICH IS PAID TO THE ASSESSEE WHEN TAXES ARE PAID ON HI S BEHALF. IT IS DISCHARGE OF HIS OBLIGATION THEREFORE THE PAYMENT FITS WITHI N THE WORDING OF SECTION 17(2)(IV). THIS DECISION IS EXPLICIT THAT PAY MENT OF TAX ON BEHALF OF THE EMPLOYEE BY THE EMPLOYER IS DISCHARGE OF AN OB LIGATION AND THEREFORE IT IS A PERQUISITE. IT IS NOT A MONETARY PAYMENT OR A MONETARY ALLOWANCE ETC. CERTAINLY IT IS NOT A MONETARY PAYMENT TO T HE ASSESSEE. THE LD. DR TRIED TO DISTINGUISH THIS CASE BY MENTIONING THAT THE DECISION IS NOT IN THE CONTEXT OF RULE 3 BUT SECTION 10(10CC). IN ANY CASE THE EMPLOYER IS BOUND TO DEDUCT TAX AT SOURCE FROM THE SALAR Y PAID TO AN EMPLOYEE EVEN IF THERE IS NO PRIVATE AGREEMENT BETWEEN THE EMPLOYER AND THE EMPLOYEE THAT THE TAX ON THE SALARY WILL BE BO RNE BY THE FORMER. ITA NOS. 1957 TO 1960(DEL)/2011 10 THEREFORE PAYMENT OF TAX ON BEHALF OF AN EMPLOYE E IS NOTHING BUT PAYMENT OF SALARY IN CASH AS OTHERWISE THE AMOU NT WOULD HAVE BEEN RECEIVED BY THE EMPLOYEE IN CASH AND PAID TO THE INCOME TAX DEPARTMENT IN CASH. IN THIS CONNECTION HEAVY RELIANCE HAS BEEN PAID ON THE DECISION IN THE CASE OF TPS SCOTT & OTHERS (SUPRA). FOR TH E SAKE OF READY REFERENCE PARAGRAPH NO. 17.1 OF THIS DECISION IS REPRODUCE D BELOW:- 17.1 IT IS NOT MONEY WHICH IS PAID TO THE A SSESSEE WHEN TAXES ARE PAID ON HIS BEHALF. IT IS DISCHARGE OF HIS OBLIGATION. THE PAYMENT FULLY FITS IN THE JACKET OF SUB-CLAU SE (IV) OF SECTION 17(2) OF THE ACT. IT MAY BE A MONETARY GAIN OR MONETARY BENEFIT OR A MONETARY ALLOWANCE BUT DEF INITELY IT IS NOT A MONETARY PAYMENT TO THE ASSESSEE. WHAT I S EXCLUDED IN THE CLAUSE IS THE PERQUISITE IN THE SHAPE OF A MONETARY PAYMENT TO THE ASSESSEE. IF IT IS A PAYMENT T O A THIRD PERSON LIKE PAYMENT OF TAXES TO THE GOVERNMENT THEN SU CH PAYMENT OF TAXES CANNOT BE EXCLUDED UNDER CLAUSE 10(10 CC). THE CIRCULAR OF THE BOARD AND PROVISION OF SUB-SECTI ON (1A) OF SECTION 192 SEC. 40(A)(V) AND SECTION 195A FU LLY SUPPORT THE CLAIM OF THE ASSESSEE. WE THEREFORE HOLD THAT THE TAXES PAID BY THE EMPLOYER ON BEHALF OF THE ASSESSEE IS A PERQUISITE WITHIN THE MEANING OF SECTION 17(2) OF THE IT AC T WHICH IS NOT PROVIDED BY WAY OF MONETARY PAYMENT. THEREF ORE THERE IS NO REASON NOT TO EXCLUDE 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 SA LARY OF THE EMPLOYEE. THEREAFTER TAX ON SUCH PERQUISITE IS NOT TO BE ADDED AGAIN. WE THEREFORE FIND SUBSTANCE IN THE CONTENTION ADVANCED ON BEHALF OF LEARNED COUNSEL FOR THE ASSESSEES AND THE INTERVENERS. THE QUESTION REFERRED TO US IS A NSWERED IN FAVOUR OF THE ASSESSEE. THE APPEALS OF THE ASSE SSEES AND INTERVENERS ARE ALLOWED ON THIS ISSUE. ITA NOS. 1957 TO 1960(DEL)/2011 11 4.4 IT MAY BE MENTIONED AT THIS STAGE THAT THE AFORESAID DECISION WAS FOLLOWED BY G BENCH OF THE DELHI TRIBUNAL IN TH E CASE OF TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. DCIT (2009) 3 4 SOT 323. 4.5 THE ISSUE RAISED IN THIS CASE WAS DIRECTLY DEALT WITH BY E BENCH OF DELHI TRIBUNAL IN THE CASE OF ACIT VS. MAKOTE HOSHIZAKI (2009) 27 SOT 191 (DEL). IT HAS BEEN HELD THAT AFTER AMENDMENT IN RULE 3 COMING INTO FORCE WITH EFFECT FROM 01.04.2001 IT IS CLEAR THAT FOR THE PURPOSE OF DETERMINATION OF PERQUISITE VALUE OF RENT-FREE ACCOMMODATION THE TERM SALARY WILL NOT INCLUDE VALUE OF P ERQUISITE AS SPECIFIED IN SECTION 17(2) OF THE ACT. REFERRING TO THE DE CISION IN THE CASE OF CIT VS. H.D. DENNIS (1982) 135 ITR 1 IT WAS FURTHE R HELD THAT THE DEFINITION GIVEN IN RULE 3 IS CO-EXTENSIVE GIVEN IN SECTIO N 17 EXCEPT THAT THERE IS AN EXPRESS EXCLUSION THEREFROM OF CERTAIN KINDS O F PAYMENTS MENTIONED THEREIN. THIS DECISION WAS RENDERED ON 06.04 .1981. HOWEVER SUB- CLAUSE (D) OF CLAUSE (VI) OF THE EXPLANATION TO RU LE 3 BECAME APPLICABLE WITH EFFECT FROM 01.04.2001 WHICH EXCLUDES THE P ERQUISITES SPECIFIED UNDER SECTION 17(2) OF THE ACT. SINCE THIS RUL E SPECIFICALLY EXCLUDES PERQUISITES SPECIFIED IN SECTION 17(2) FROM THE SALARY FOR THE PURPOSE OF COMPUTATION OF PERQUISITE THE TAX PAID ON BEHALF OF THE EMPLOYEE BY THE ITA NOS. 1957 TO 1960(DEL)/2011 12 EMPLOYER IS NOT INCLUDIBLE IN SALARY FOR THE P URPOSE OF COMPUTING THE PERQUISITE VALUE OF THE ACCOMMODATION SUPPLIED T O THE EMPLOYEE. FOR THE SAKE OF READY REFERENCE THE FINDING RECORDED I N THIS DECISION IN PARAGRAPH NO. 11 IS REPRODUCED BELOW:- 11. THUS ON THE COMPARISON OF DEFINITION OF TH E WORD SALARY BEFORE AND AFTER 01.04.2001 IT IS CLEA R THAT FOR THE PURPOSE OF DETERMINATION OF PERQUISITE VALUE OF RENT-FREE ACCOMMODATION WITH EFFECT FROM 01.04.2001 AS P ROVIDED IN SUB-CLAUSES (D)& (E) OF CLAUSE (VI) THE TERM SALARY WILL NOT INCLUDE THE VALUE OF PERQUISITES AS SPECIFIED UNDER SECTION 17(2) OF THE ACT OR ANY PAYMENT OR EXPENDITURE SPECIFICALLY EXCLUDED UNDER PROVISO TO SUB-CLAUSE (III) OF CLA USE (2) OR PROVISO TO CLAUSE (2) OF SECTION 17. NO DOUBT THE ASSESSING OFFICER RELYING ON THE DECISION OF HONBLE BOMBA Y HIGH COURT IN THE CASE OF H.D. DENNIS (SUPRA) HAS HELD THAT THE DEFINITION GIVEN IN RULE 3 IS A CO-EXTENSIVE WITH THE DEFINITION GIVEN IN SECTION 17 EXCEPT THERE WAS AN EXPRE SS EXCLUSION THEREFROM OF KINDS OF PAYMENTS MENTIONED. THIS DECISION WAS RENDERED ON 6.4.1981. HOWEVER SUB-CLAUSE (D ) OF CLAUSE (VI) OF THE EXPLANATION APPLICABLE WITH EFFECT FRO M 1.4.2001 SPECIFICALLY EXCLUDES THE PERQUISITES SPECIFIED UNDER SECTION 17(2) OF THE ACT TO BE INCLUDED IN THE SALARY F OR THE PURPOSE OF DETERMINATION OF PERQUISITE VALUE UNDER RULE 3 OF THE INCOME-TAX RULES 1962. THUS PRIOR TO 1.4.2001 A S PER THE DECISION OF HONBLE BOMBAY HIGH COURT THE TERM SALARY INCLUDED THE PERQUISITES UNDER SECTION 17(2)(I V) OF THE ACT. THE RATIO OF THE DECISION RENDERED BY HONBLE B OMBAY HIGH COURT IS STILL APPLICABLE TO THE EXTENT IT HAS BEEN HELD THAT THE DEFINITION GIVEN IN RULE 3 IS CO-EXTENSIVE WITH THE DEFINITION GIVEN IN SECTION 17 EXCEPT SO FAR AS THERE IS A N EXPRESS EXCLUSION THEREFROM OF THE KINDS OF PAYMENTS MEN TIONED. SINCE SUB-CLAUSE (D) OF CLAUSE (VI) OF EXPLANATION TO RULE 3 SPECIFICALLY EXCLUDES PERQUISITES SPECIFIED IN SECTION 17(2) OF THE ACT FROM SALARY FOR THE PURPOSE OF COMPUTATI ON OF PERQUISITES IN OUR CONSIDERED OPINION IN PRINCI PLE THE SALARY WILL NOT INCLUDE THE TAX PAID BY THE EMPLOYER F OR THE PURPOSE ITA NOS. 1957 TO 1960(DEL)/2011 13 OF DETERMINATION OF PERQUISITE VALUE OF RENT-FR EE ACCOMMODATION UNDER RULE 3 OF THE INCOME-TAX RULE S 1962. 4.6 AS THE ISSUE STANDS COVERED DIRECTLY BY THE DECISION OF A COORDINATE BENCH IN THE CASE OF MAKOTE HOSHIZAKI (SUPRA) WHICH IS IN THE NATURE OF A BINDING PRECEDENT IT IS HELD THAT TH E TAX PAID BY THE EMPLOYER ON BEHALF OF THE EMPLOYEE IS PERQUISITE UNDER SE CTION 17(2) OF THE ACT AND THEREFORE NOT INCLUDIBLE IN SALARY UNDER RULE 3 FOR THE PURPOSE OF COMPUTING THE PERQUISITE VALUE OF THE ACCOMMODAT ION SUPPLIED BY THE EMPLOYER TO THE EMPLOYEE. THE AO IS DIRECTED T O COMPUTE THE PERQUISITE VALUE BY FOLLOWING THE AFORESAID DIRECTION. 5. IN THE RESULT ALL THE APPEALS ARE ALLOWED. SD/- SD/- (C.L. SETHI) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- ASSESSEES-MR. ISAO SAKAI MR. YUJU HORIKAWA MR. YO SHIMI KAMANO & MR. TELSUO MITERA C/O M/S JAPAN AIRLINES INTL. CO. LTD. NEW DELHI. JCIT RANGE-42 NEW DELHI. CIT CIT(A) THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.