1995 (5) TMI 65 - AT - Income Tax

Assessing Officer, Assessing Perquisite, Assessment Order, Cash Allowance, Income From Other Sources, Indian Company, Special Allowance

Summary

Issues Involved:

1. Validity of assessments under section 143(3) due to alleged violation of the proviso to section 143(2).
2. Assessment of perquisite value for rent-free accommodation and free meals.
3. Assessment of tax on tax.
4. Levy of interest under section 234B.

Issue-wise Detailed Analysis:

1. Validity of Assessments under Section 143(3) due to Alleged Violation of Proviso to Section 143(2):

The appellants argued that the assessment orders were null and void as notices under section 143(2) were issued after the expiry of one year from the filing of the return, violating the proviso to section 143(2). The CIT(A) found that notices were issued on 18-3-1992 and served on 20-3-1992, within the stipulated time. The appellants did not challenge this finding before the Tribunal. The appellants contended that the first notice lapsed due to non-compliance, and a fresh notice issued on 15th July 1993 was invalid. The Tribunal rejected this argument, stating that the first notice initiated the assessment process, and subsequent notices were in continuation. Section 129 allows a succeeding officer to continue proceedings from where the predecessor left off. The Tribunal found no merit in the contention that the first notice lapsed and upheld the validity of the assessments.

2. Assessment of Perquisite Value for Rent-Free Accommodation and Free Meals:

The appellants claimed exemption under section 10(14)(i) for rent-free accommodation and free meals, arguing these were special allowances granted during their tour to India. The Tribunal examined the employment letters, which specified that the employer was obliged to provide boarding and lodging. This benefit was part of the employment contract, making it a perquisite under section 17(2). Since the benefits were perquisites, they did not qualify for exemption under section 10(14)(i). The Tribunal confirmed the assessment of the value of these benefits as perquisites.

3. Assessment of Tax on Tax:

The Tribunal noted that NFCL agreed to bear all taxes imposed on the expatriate employees, resulting in a benefit to the employees. This benefit is assessable as income from other sources under section 56, as held by the Supreme Court in Emil Webber v. CIT. The Tribunal rejected the assessment of perquisite value of tax on tax by the Assessing Officer, stating that the tax paid by the Indian company should be assessed under the head 'Income from other sources'. The Tribunal allowed the appeals partly on this ground.

4. Levy of Interest under Section 234B:

The appellants contested the levy of interest under section 234B. The CIT(A) did not address this ground on merits. The Tribunal remanded this issue to the CIT(A) for a fresh decision, directing a speaking order to be passed after giving the appellants an opportunity of being heard.

Conclusion:

The appeals were partly allowed, with the Tribunal upholding the validity of the assessments, confirming the assessment of perquisites for rent-free accommodation and free meals, and directing the assessment of tax on tax as income from other sources. The issue of interest under section 234B was remanded to the CIT(A) for a fresh decision.