2012 (9) TMI 234 - AT - Income Tax

Income tax on salary paid by employer Weather tax paid by foreign employer on salary is eligible u/s 10(10CC) It s monetary or non-monetary perquisite - Tax is calculated & paid by employer on behalf of assessee - Held that - From the Combined reading of section 10(10CC) & 17(2iv), it can be concluded that taxes borne by the employer were obligation, otherwise such payments would have been payable by the assessee. Therefore are exempt under the provisions of section 10(10CC) & non-monetary consideration as decided in the case of RBF Rig Corporation (2007 (11) TMI 334 - ITAT DELHI-F). Decision in favor of assessee

Summary

Issues:
1. Whether the tax paid by the employer on behalf of the employee can be categorized as a non-monetary payment eligible for exemption under Section 10(10CC) of the Act.
2. Whether the taxes borne by the employer are to be considered as non-monetary perquisites and exempt under the provisions of section 10(10CC) of the Act.
3. Whether the addition made by the Assessing Officer and upheld by the Ld CIT(A) regarding the tax paid by the employer on behalf of the employee should be allowed or not.

Issue 1:
The appeal was filed against the order of Ld CIT(A) dated 15.3.2010, challenging the decision regarding the tax paid by the employer on behalf of the appellant. The appellant contended that the taxes paid by the employer should be considered a non-monetary perquisite eligible for exemption under Section 10(10CC) of the Act. The Assessing Officer recalculated the taxable income, treating the tax paid by the employer as a monetary perquisite. The appellant argued that the tax borne by the employer should not be considered a monetary perquisite, citing the decision of the Special Bench of the ITAT in a similar case. The Tribunal found that the Ld CIT(A) mistakenly adjudicated on US taxes and Life Insurance Premium instead of focusing on the tax paid by the employer. It was concluded that the tax paid by the employer on behalf of the employee falls within the definition of section 17(2)(iv) and is exempt under section 10(10CC) of the Act. Therefore, the appeal on this issue was allowed.

Issue 2:
The Assessing Officer denied the exemption claimed by the assessee under section 10(10CC) of the Act, considering the taxes borne by the employer as similar to taxes deducted and paid by the employer from the gross salary. The appellant argued that the tax paid by the employer should be treated as a non-monetary perquisite, relying on relevant legal provisions and precedents. The Ld CIT(A) upheld the addition made by the Assessing Officer. However, the Tribunal, after considering the provisions of section 10(10CC) and section 17(2)(iv) of the Act, along with the decision of the Special Bench of the ITAT, concluded that the taxes borne by the employer are indeed eligible for deduction under section 10(10CC) of the Act. Therefore, the appeal on this issue was allowed.

Issue 3:
The appellant challenged the addition made by the Assessing Officer and upheld by the Ld CIT(A) regarding the tax paid by the employer on behalf of the employee. The appellant argued that the tax paid by the employer should be considered a non-monetary perquisite and exempt under the provisions of section 10(10CC) of the Act. The Tribunal, after thorough analysis of the legal provisions and precedents, allowed the appeal on all grounds related to the tax paid by the employer on behalf of the employee. The Tribunal held that the taxes borne by the employer are eligible for deduction under section 10(10CC) of the Act. Therefore, the appeal was allowed in favor of the assessee.

In conclusion, the Tribunal allowed the appeal filed by the assessee, holding that the tax paid by the employer on behalf of the employee qualifies as a non-monetary perquisite eligible for exemption under Section 10(10CC) of the Act. The decision was based on a detailed analysis of legal provisions, precedents, and the specific circumstances of the case.