2018 (4) TMI 1369 - HC - Income Tax

Personal expenses - whether can be taxed in the hands of assessee u/s 2(24)(iv) as the amount was routed through the franchisee, which was the HUF of the assessee? - Held that - See case of Commissioner of Income-Tax, Chennai Vs.C.S.Srivatsan 2013 (3) TMI 248 - MADRAS HIGH COURT as held the assessees have various avathars in various establishments - each of the unit has different composition. Each unit has varied number of members. Under such circumstances, the acceptability of the finding given by the Income Tax Appellate Tribunal has to be considered that the amounts paid by the company towards personal expenses of the assessee cannot be taxed in its hands under Section 2(24)(iv). - Decided in favour of assessee.

Summary

Issues:
1. Taxability of amounts paid by the company towards personal expenses of the assessee under Section 2(24)(iv).
2. Validity of remanding the matter back to the assessing officer on the issue of receipt of commission.

Analysis:

Issue 1: Taxability of Personal Expenses
The High Court considered the appeal which raised the issue of whether the Tribunal was correct in holding that the amounts paid by the company towards personal expenses of the assessee cannot be taxed under Section 2(24)(iv) as the amount was routed through the franchisee, which was the HUF of the assessee. The Revenue challenged similar orders before the Income Tax Appellate Tribunal in cases of related assessees. The Tribunal remanded the matter to the Assessing Officer for fresh consideration after providing the assessee with an opportunity to be heard. The Court referred to a previous judgment where a similar issue was dismissed in favor of the assessee. The Court upheld the decision of the Tribunal, stating that the remand was justified based on the nature and circumstances of the transaction, as well as the modus operandi of the group. Consequently, the Tax Case Appeal was dismissed, and the substantial question of law was answered in favor of the assessees and against the revenue.

Issue 2: Remand on Receipt of Commission
The second issue involved the validity of remanding the matter back to the assessing officer on the issue of receipt of commission, especially when the entity supposed to have received the commission was formed after a survey was conducted. The Court noted that the Income Tax Appellate Tribunal's findings did not require any interference, considering the legal and factual aspects discussed. The Court confirmed the Tribunal's decision to remand the matter for further assessment. Ultimately, the Tax Case Appeals were dismissed, and no costs were awarded.

In summary, the High Court upheld the decisions of the Income Tax Appellate Tribunal, dismissing the Tax Case Appeals and ruling in favor of the assessees on both issues raised in the appeal.