2009 (3) TMI 17 - SC - Income Tax

Assessee, a Japanese Organization set up for transmission of news/broadcasting whether subjected to deduction of tax - controversy is that Citizens Tax is a statutory levy in Japan on the Japanese Citizens constituting an overriding charge - emoluments paid by the assessee was subject to deduction of tax as per applicable laws -CIT (A) ought to have examined the provisions of Citizens Individual Inhabitant Tax Act which is a Japanese - no opinion on the merits matter remanded to tribunal

Summary

Issues:
1. Inclusion of Citizen Tax as part of income.
2. Exclusion of Citizen Tax in computation of taxable income.
3. Interpretation of Japanese Law regarding tax liability.

Analysis:
Issue 1: The Assessing Officer included Citizen Tax as part of the income of ex-patriates employed by the Japanese Organization in India, asserting it should have been subject to TDS deduction. The Commissioner of Income Tax (Appeals) held that Citizen Tax is a statutory levy in Japan and constitutes an overriding charge on salary income, thus should be excluded from taxable income. This view was upheld by the tribunal and the High Court, leading to the Civil Appeal.

Issue 2: The Supreme Court noted that the Commissioner should have examined the scope of the Japanese Law, specifically the Citizens Individual Inhabitant Tax Act, to determine the nature of the levy as an overriding charge. The Court highlighted a clause in the appointment letter stating that emoluments are subject to deduction of taxes as per applicable laws, indicating the need to analyze the provisions of the Japanese Law. The Court emphasized that without a thorough examination of the Act, the matter should be reconsidered by the tribunal.

Issue 3: The controversy revolved around whether Citizen Tax in Japan is a statutory levy constituting an overriding charge on salary income. The Supreme Court emphasized the importance of analyzing the provisions of the Citizens Individual Inhabitant Tax Act to make a conclusive determination. The Court remitted the matter to the tribunal for fresh consideration in accordance with the law, refraining from expressing an opinion on the case's merits.

In conclusion, the Civil Appeal was decided without costs, with the Supreme Court directing a reevaluation by the tribunal based on a comprehensive examination of the Japanese Law to determine the treatment of Citizen Tax in the computation of taxable income.