2009 (10) TMI 55 - HC - Income Tax

Salary in Indian currency as well as in foreign currency - While framing the assessment the Assessing Officer (AO) added an amount of Rs.1, 68, 104/- treating it to be a monetary perk - AO also grossed up tax liability applying the provisions of 195A ITAT deleted the addition of non monetary benefit - Insofar as grossing up is concerned the ITAT held that the AO had not given any finding to the effect that the tax on monetary benefits/salary was paid by the employer and therefore such grossing up of the tax was not sustainable held that - Since the finding of fact is arrived at that this advance tax has been paid by the employee and not by the employer the basis for this grossing up by the AO was clearly unsustainable - advance tax was in fact paid by the Assessee himself. In the circumstances we are of the view that no question of law arises insofar as the grossing up is concerned. - since the tax effect on that amount is much less than Rs.4 lac we refuse to entertain the appeal on that ground

Summary

Issues:
1. Whether the amount paid by the employer should be considered a monetary perk.
2. Whether the grossing up of tax liability was justified.
3. Whether the addition of Rs.1,68,104/- should be sustained.

Analysis:
1. The Assessee, an employee of a company, received salary in both Indian and foreign currency, with tax paid by the employer. The Assessing Officer (AO) treated a specific amount as a monetary perk, increasing the gross total income. The CIT (Appeal) later deleted this addition, stating it was a non-monetary perk, as the Assessee had paid advance tax himself. The ITAT upheld this decision based on a previous judgment.

2. The AO grossed up the tax liability without providing a clear basis for doing so. The ITAT found this action unjustified, as there was no evidence that the tax on salary was paid by the employer. The Revenue challenged this decision, arguing that the case should have been remitted back to the AO for clarification. However, the court disagreed, noting that under Section 195A of the Income Tax Act, grossing up could only be done if the tax was borne by the employer. As the advance tax was paid by the Assessee and not the employer, the grossing up was deemed unsustainable.

3. Regarding the addition of Rs.1,68,104/-, the court refused to entertain the appeal due to the low tax effect on that amount, being less than Rs.4 lac. The court ultimately dismissed the appeal, concluding that no question of law arose concerning the grossing up of tax liability, as the advance tax was proven to be paid by the Assessee himself.