2007 (3) TMI 212 - HC - Income Tax

Citizens tax - salary of the employee - Tribunal came to the conclusion that citizens tax is a statutory levy required to be withheld from the salary of the employee - HELD THAT - The Supreme Court in Ishwar Dass Jain v. Sohan Lal 1999 (11) TMI 863 - SUPREME COURT noted two situations where findings of fact can be interfered with (though u/s 100 of the Code of Civil Procedure which is admittedly in pari materia with section 260A of the Act). The first situation is when material or relevant evidence is not considered which, if considered, would have led to an opposite conclusion, while the second situation in which interference is permissible is where a finding has been arrived at by placing reliance on inadmissible evidence which if it was omitted, an opposite conclusion was possible. Neither of these two situations arises in the present case. Therefore, on the basis of the decision rendered by the Supreme Court, no substantial question of law would arise on the finding of fact arrived at by the Commissioner and the Tribunal. We may add that no contention is urged that the finding of fact is in any manner perverse, which may warrant interference u/s 260A of the Act. Learned counsel for the Revenue has submitted that the amount of citizens tax really represents a part of the salary of the employees and, therefore, payment of that amount by the assessee really amounts to a perquisite in the hands of the employee. We are not in agreement with this contention in view of the decision rendered by the Supreme Court in Sitaldas Tirathdas 1960 (11) TMI 17 - SUPREME COURT , particularly because the amount does not even come into the hands of the employee at any point of time and is directly diverted by the assessee towards payment of citizens tax. Thus, we are of the view that no substantial question of law arises for our consideration - Appeal is dismissed.

Summary

Issues:
1. Inclusion of citizens tax as part of income for tax deduction at source.
2. Contention regarding citizens tax being a statutory levy on Japanese citizens.
3. Interpretation of the nature of citizens tax as diversion of income.
4. Appeal against the Tribunal's decision on citizens tax as a statutory levy.
5. Application of Supreme Court's decision on diversion of income to citizens tax.
6. Consideration of concurrent findings by two appellate authorities.
7. Submission that citizens tax represents a perquisite in the hands of employees.

Analysis:

Issue 1: The Revenue contested the inclusion of citizens tax as part of income for tax deduction at source. The Assessing Officer argued that the tax was payable by the assessee to its employees and subject to TDS. The appellant, however, claimed that citizens tax was a statutory levy on Japanese citizens, diverting income at source and thus should be excluded from taxable income.

Issue 2: The Commissioner and Tribunal acknowledged citizens tax as a mandatory levy on Japanese citizens, required to be withheld by the employer and paid to the appropriate authority. This levy was deemed a diversion of income, constituting an overriding statutory charge, supporting the appellant's contention.

Issue 3: The Supreme Court's decision in CIT v. Sitaldas Tirathdas was cited to determine the nature of citizens tax as a diversion of income. The Court emphasized that if an amount is diverted before reaching the assessee, it is not part of their income. Citizens tax, being paid directly to the authorities without reaching the employees, was considered non-taxable income.

Issue 4: The Revenue challenged the Tribunal's decision on citizens tax, arguing that it constituted a part of the employees' salary and should be treated as a perquisite. However, the Court disagreed, citing the diversion of citizens tax directly by the assessee towards payment, aligning with the Supreme Court's precedent.

Issue 5: The Court highlighted the importance of concurrent findings by two appellate authorities, emphasizing that the assessee had indeed deducted citizens tax, which was directly paid to Japanese authorities without reaching the employees, reinforcing the non-inclusion of citizens tax in taxable income.

Issue 6: Referring to Ishwar Dass Jain v. Sohan Lal, the Court explained the limited circumstances under which findings of fact can be interfered with, noting that no substantial question of law arose in the present case, as the findings were not perverse and no inadmissible evidence was relied upon.

Issue 7: The Revenue's argument that citizens tax represented a perquisite in the hands of employees was dismissed, reiterating that the amount never reached the employees and was directly diverted to tax authorities, thus not constituting taxable income. Consequently, the appeal was dismissed, concluding that no substantial question of law required consideration.