2009 (8) TMI 24 - HC - Income Tax

Tax Paid by the employer perquisite in the hands of employee exemption u/s 10(10CC) - ITAT has upheld the order passed by the Commissioner of Income Tax (Appeals) observing that there is no infirmity in the order of the CITA observing that the tax paid by the employer is a perquisite provided for by way of monetary payment and the provisions of Section 10(10CC) are not applicable matter remanded to ITAT for reconsideration

Summary

Issues Involved:
1. Interpretation of Section 10(10CC) of the Income Tax Act, 1961.
2. Application of the principle of multi-stage grossing up in income tax assessment.

Analysis:

Issue 1: Interpretation of Section 10(10CC) of the Income Tax Act, 1961
The appeals were filed under Section 260-A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal (ITAT) regarding the exemption claimed under Section 10(10CC) of the Act. The ITAT upheld the order of the Commissioner of Income Tax (Appeals) stating that the tax paid by the employer on the salary of employees is not exempt under Section 10(10CC). The Assessing Officer (AO) had disallowed the exemption claimed by the employees, resulting in an assessment of income after applying the principle of 'multiple stage grossing up'. The Court framed two questions of law to be answered: whether the tax paid by the employer is exempt under Section 10(10CC) and whether the ITAT erred in holding that income tax is payable by the appellant under the principle of multi-stage grossing up.

Issue 2: Application of the principle of multi-stage grossing up
The Division Bench of the Court had previously set aside the order of the ITAT and remanded the matter for reconsideration in light of subsequent developments. The appeals were disposed of in accordance with the previous order dated 24-7-2009, which included a total of 28 appeals. The Court noted that the order under challenge had already been set aside and the matter remanded to the ITAT for reconsideration. Consequently, all 13 appeals were disposed of in terms of the previous order, and the matters were remanded for reconsideration by the ITAT. The impugned order dated 8-6-2007 was set aside based on the previous judgment.

This comprehensive analysis of the judgment covers the interpretation of Section 10(10CC) of the Income Tax Act, 1961, and the application of the principle of multi-stage grossing up in income tax assessments. The Court's decision to dispose of the appeals in line with a previous order highlights the importance of legal precedents and consistency in tax matters.