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TMI Blog2007 (11) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... e salary of the employee, the tax on such tax as perquisite is exempt under the above provision. In other words, it is not possible to have double grossing up. However, Delhi Bench of the Tribunal in the case of B.J. Services Co. Middle East Ltd. v. Asstt. CIT [IT Appeal Nos. 4033 to 4053 of 2005, dated 23-3-2007], did not accept this contention of the assessee and held that tax paid by the employer was part of salary and, therefore, tax on tax is not exempt and is liable to be added for computing total income of the assessee employee. 2.1 Again in the case of Western Geo International Ltd. v. Asstt. CIT [2007] 16 SOT 459 decided by the Delhi Benches of the Tribunal, it was held that since the employer has made monetary payment in the shape of payment of employee's taxes, the nature of perquisite should be considered as monetary only. The assessee was held not entitled to exemption under clause (10CC) of section 10 of the Income-tax Act. We shall refer to these decisions in detail hereinafter. 3. The assessee vide application dated 30-6-2007 in the case of REF Rig Corpn. LIC (RBFRC) v. Asstt. CIT [IT Appeal Nos. 1810 to 1815 of 2006, dated 30-11-2007] as agent of Alnasser Rahim a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that taxes on salary were to be borne by the employer. Accordingly in the returns of the employees filed by employer company in the representative capacity, tax borne by the employer on the salary paid was added as a perquisite and tax was calculated on the resultant figure. However, no further tax on tax was claimed to be payable in the light of provision of section 10(10CC) of the Income-tax Act. The employer company also paid tax collected in terms of provisions of section 192(1A) of the Income-tax Act (hereinafter referred to as the Act) which did not include tax on tax. 5. The Assessing Officer did not allow claim of the assessee taxpayers. He held that tax borne by the employer was a monetary perquisite, hence further tax thereon should also be added to the salary by multiple stage grossing up process. In other words he wanted tax on tax to be added to salary. It was the contention of the Assessing Officer that since as per terms of employment, tax has to be borne by the employer, all taxes calculated by multiple stage grossing up are to be borne by the employer resulting into further tax perquisite. He referred to provisions of sections 192, 198, 195A to deny claim of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the employer should be subjected to multiple stages grossing. Shri Tulsiyan referred to three decisions as under: 4.2-1 Frank Beaton v. CIT [1985] 156 ITR 16 (Delhi). In this case, Frank Beaton was an employee of M/s. Qantas Airways Ltd., an Australian company. During his employment, he was to be paid tax-free salary and rent-free accommodation. During assessment year 1971-72, his salary was Rs. 73,712 and rent-free accommodation in the form of a house rented as Rs. 2,400 per month. During the assessment year 1972-73, he received salary of Rs. 39,072 and corresponding accommodation for a shorter period. The ITO calculated the tax liability on multiple-stage grossing up process entailing huge liability on the employer. The CIT(A) also confirmed the order of ITO. A writ petition was filed by the employer seeking refund of excess tax paid over single-stage tax by the employer. It is required to be noted that at the relevant time, sections 10(10CC) and 192(1A) had not come into operation and hence, the question of determining whether the 'perquisite' by way of tax payment by the company on behalf of the employee was of 'monetary' or non-monetary nature, was not the subject-matter o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee. He specifically drew our attention to clause (iv), which according to him is most important and would clinch the issue. The said clause is as under: "(iv) any sum paid by the employer in respect of any obligation which but for such payment, would have been payable by the assessee." 6.5 Shri Tulsiyan further pointed out that neither monetary nor non-monetary perquisites are defined in the Act. Therefore, we are to understand the meaning, purpose and intention of clause (10CC) of section 10 through phraseology it has used and the intention with which it was introduced. Shri Tulsiyan thereafter drew our attention to Memorandum explaining provisions introduced in Finance Bill, 2002 with reference to new clause 10(10CC). The heading and other relevant provisions are as under: "Scheme for taxation of perquisites simplified with employer given option to pay tax on behalf of employees" "64.1 Under the existing provisions of section 192 of the Income-tax Act, 1961, an employer is required to deduct tax at source on income under the head "salaries", inclusive of the value of perquisites. In case, such tax is paid by an employer on behalf of an employee, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulsiyan the expression "provided for" means to make something ready or to do something necessary for a benefit. Shri Tulsiyan gave examples that you make provision for family or your staff or children and so on and, therefore, it will be stated that family or staff is provided for. Likewise under section 10(10CC) the monetary payment should be provided for the employees. It should be employee who is provided for by way of monetary payment within the meaning of clause (2) of section 17. It should be actual money payment to the employee and not money's worth. In other words if some monetary benefit is directly or indirectly received by the assessee which has money's worth, the same is not a monetary payment. It was further submitted that the distinction between a provision by way of monetary payment and other provision not by way of monetary payment has to be seen and kept in view. The provision under consideration only excludes from exemption "perquisites" involving payment of money directly to the employees for a specific amenity or benefit. The Legislature wanted to exempt non-monetary perquisites allowed to the employee by the employer under the provision. 6.8 Shri Tulsiyan furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Whether one takes contract to be protected contract or not protected contract, in both cases, value of benefit remains constant. Lastly, we may point out that section 195A has no application. It is not a charging section. It provides for recovery of tax. It provides for tax deduction at source. The fact that tax at source is deductible under section 195A from the sum payable does not mean that the contractor is assessable for that receipt, for example, in cases where contractor has carried forward losses or in case where the contractor suffers losses from other contracts, which are liable to be set off. Therefore, mechanism for recovery of tax mentioned under section 195A will not make the receipt chargeable to tax." Shri Tulsiyan submitted that the decision clearly in favour of the assessee, has been wrongly held to be distinguishable by the revenue authorities. 6.10 Shri Tulsiyan then drew our attention to the following expression in section 10(10CC), "notwithstanding anything contained in section 200 of the Companies Act, 1956." He argued that sub-section (1) of section 200 of the Companies Act prohibits the company from payment of tax free remuneration to its employee and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, is considered a perquisite, and is chargeable to tax." 6.12 It was submitted by Shri Tulsiyan that aforesaid statement in the Memorandum clinches the issue. When tax is paid by an employer on behalf of an employee, it is not considered a monetary payment to the employee but a perquisite being in the nature of an obligation which but for such payment would have been payable by the employee. Hence it is a non-monetary perquisite. Shri Tulsiyan further drew our attention to provision of section 40(a)(v) which prohibits deduction of any tax actually paid by an employer referred to in clause (10CC) of section 10. Shri Tulsiyan then made a detailed reference to the decisions of Tribunal in the cases of B.J. Services Co. Middle East Ltd. and Western Geo International Ltd. and explained that aforesaid decisions were wrongly decided by the Benches. 6.13 Shri Tulsiyan ultimately submitted as under in support of his arguments that perquisite in the shape of payment of taxes by the employer was exempt in the hands of the employee under section 10(10CC) of the Income-tax Act. Shri Tulsiyan further submitted as under: "8.4 It is submitted in humility and with respect that the above view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilentio and, therefore, not a binding precedent. In this connection, Shri Syali drew our attention to decision of Supreme Court in the case of Municipal Corporation of Delhi v. Gurnam Kaur [1989] 1 SCC 101 where their Lordships of Supreme Court quoted Prof. P.J. Fitzgerald, editor of the Salmond on Jurisprudence, 12th edn. Explaining the concept of sub silentio as under: "A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided B in his favour; but point B was not argued or considered by the court. In such circumstances, although point B was logically involved in the facts and although the case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub silentio." 7.1 Thereafter their Lordships laid down the principle as under: "41. Does this prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t salary. The Bench in para 4 framed the issue for their consideration as under: "The issue raised before us relates to computation of taxable salary in case of employees who have been provided with net of tax salary by the employer." The Bench further recorded as under: "It is also not in dispute that in cases where 'net of tax salary' is payable by the employer, the taxable salary has to be determined after multi-stage grossing up as explained in para 2.1 of this order." The Bench rejected the contention of the assessee that tax on tax is exempt in the hands of employee by observing, "there is no case for multi-stage grossing up and taxable salary in these cases will be net salary paid by the employer plus the tax payable on that salary which has already been declared by the assessees." The Hon'ble Bench rejected the contention of the assessee with the following observations: "A careful perusal of the provisions of section 10(10CC) reproduced in para 2.2 of this order earlier shows that there are three basic ingredients which are required to be satisfied in order to make the section applicable. These ingredients are: (i) the payment should be a perquisite within the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. The word, "monetary" has its genesis in the word 'money' and, therefore, Shri Syali brought to our notice definition of "money" in Webster Illustrated Contemporary Dictionary. With reference to meaning of word 'monetary' and expression 'provided by way of' in clause 10(10CC), Shri Syali submitted as under: "'Of or pertaining to currency or coinage or of pertaining to money'. To appreciate the amplitude of the provisions of section 10(10CC) it is apposite to also take note of the words 'provided' and 'by way of' preceding the word monetary and payment following kit. The word provide means to supply; furnish; to afford; stipulate to make ready for future use. The expression 'by way of' is defined in Words and Phrases Permanent edition at page 844 as under: "phrase "by way of" is idiomatic, and perhaps may be difficult of rendition into exact phraseology, but may be taken to mean "as for the purpose of", "in character of", "as being", and was so intended to be construed in an act providing that certain companies should pay an amount tax, for the use of the state, "by way of" a license for their corporate franchise. Jersey City Gas light Co. v. United Cas Imp. Co. C.C.N.J., 46 F. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is to be considered and when provisions of section 10(10CC) are considered along with sections 17(2), 40(a)(v), sections 192(1A), 195, 195(1A) and 198, no doubt is left in the mind that taxes paid by the employer is nothing but a monetary payment to which provisions of section 10(10CC) cannot apply. The learned Departmental Representatives fully supported the decision of Benches in the case of B.J. Services Co. Middle East Ltd. and Western Geo International Ltd. It was argued that clause (iv) to section 17(2) makes it amply clear that any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee, is a perquisite. The value of the perquisite is to be assessed. It was an income which had accrued to the assessee employee. For this proposition, reliance was placed on decision of Madras High Court in the case of Boeing v. CIT [2001] 250 ITR 667 as in the case of CIT v. Tara Singh [1998] 233 ITR 669 (Delhi). The Departmental Representatives also submitted that it is a condition that payment of tax to be covered under sec6on 10(10CC) should be made at the option of the employer. It is, therefore, necessary to see the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed great reliance on the decision of Emil Webber v. CIT [1993] 200 ITR 483 (SC). Reliance was also placed on decision of Mysore High Court in the case of Tokyo Shibaura Electric Co. Ltd. v. CIT [1964] 52 ITR 283 and several cases where the view was taken that income-tax paid by employer on behalf of employee is part of salary of the assessee and is liable to be taxed as such. Some decisions as to how value of perquisites is to be computed are also cited in the written submissions like CIT v. K.S. Sundaram [1999] 239 ITR 851 (Mad.). The sum and substance of submission of the revenue is that tax paid by the employer is a monetary payment and, therefore, not covered by provisions of section 10(10CC). It is a perquisite liable to be taxed as salary. 9.3 The learned D.R. accordingly supported the view that tax paid by the employer was a monetary payment in the shape of a perquisite to which provisions of section 10(10CC) are not applicable. 10. In rebuttal, the learned counsel for the assessee and for the Interveners met the arguments of the learned Departmental Representative. 11. We have given careful thought to the rival submissions of the parties. Before we consider and disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of tax thereon at the rates in force for the financial year in which such income is payable, be equal to the net amount payable under such agreement or arrangement." 11.2 The learned representative also drew our attention to provisions of section 40(a)(v) providing that any tax actually paid by an employer is not a permissible deduction. They have also referred to provisions of section 198 to the effect that sums deducted at source for purposes of computing the income of an assessee be deemed to be income received. Proviso to the section providing that tax paid under sub-section (1A) of section 192 shall not be deemed to be income received. Section 199 providing for credit of tax deducted at source and section 200 fixing an obligation on the person to deposit the tax deducted at source are also referred to during the course of hearing. We do not feel that any detailed reference to above section will be of any use for our purpose. It is no doubt true and rightly pointed out by Shri Tulsiyan that through Finance Bill, 2000, under which new clause 10(10CC) was introduced, was intended to change the Scheme for taxation of perquisites. An employer was given an option to pay tax on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be notwithstanding anything contained in section 200 of the Companies Act. 11.5 Taking the last sentence of the clause, we have already noted provision of section 200 of the Companies Act prohibiting a company from paying tax free salary to its officers or employees. If the clause did not have anything to do with payment of remuneration free of tax, one would wonder why overriding effect was given to the clause by stating that clause would apply 'notwithstanding anything contained in section 200 of the Companies Act'. Therefore, reference to section 200 of the Companies Act only support the view that clause was intended to exempt payment of taxes by the employer on the remuneration paid to the employee. 11.6 As far as other circumstances mentioned above are concerned, there is some controversy as to what is the meaning of 'at the option of the employer on behalf of the employee'. In our opinion, the words 'at the option of the employer' only imply that the employer now has an option to pay the taxes on behalf of the employees. It is for the employer to decide whether taxes are to be paid by the employee or the employer. The clause is not applicable in cases taxes are paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e controversy, we may now refer to decisions to which our attention was drawn and which are relevant to the issue involved. In the case of Tokyo Shibaura Electric Co. Ltd v. CIT [1964] 52 ITR 283, the Hon'ble Mysore High Court held as under: Head Note: "An agreement between A, a non-resident company, and B, a resident company, provided that in consideration of the licence granted by A to B to manufacture certain articles, and services to be rendered by A, B shall pay to A royalty at three per cent on the net sales of articles manufactured and sold by B and further that 'all payments to be made shall be made without deductions for taxes or other charges assessed in India, which shall be assumed by B' (the resident company). The department contended that the real income of A under the agreement upon which B could be assessed as the agent of A was not the amount of royalty payable in fact to A plus the tax payable in India in respect of the said sum as claimed by the assessee, but such an amount as would, if the tax payable in India thereon was deducted, leave to A the stipulated three per cent of the sale proceeds. The net royalty payable to A under the agreement for the years 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vyas referred to various decisions which may be noticed. In CIT v. Kanan Devan Hills Produce Co. Ltd. [1979] 119 ITR 431, the Calcutta High Court held that any cash payment directly made to the employee cannot be considered to be a perquisite within the meaning of section 40(c)(iii) of the Act, which provision corresponds to section 40A(5). The question before the court was whether the overseas allowance, managing allowance, devaluation allowance and transport allowance did not fall within the expression 'benefit, amenity or perquisite' within the meaning of section 40(c)(iii) of the Act. The court observed as follows: 'In our view, in their ordinary meaning, the words "which results directly or indirectly in the provision of any benefit or amenity or perquisite whether convertible into money or not" in clause (c)(iii) of section 40 excludes cash paid directly to an employee as there is no question of convertibility to money where cash would be paid. This interpretation is reinforced by the fact that originally the said sub-section contained the expression "remuneration" which was specifically excluded by the amendment introduced in 1964 which also introduced the clause 'whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see following its decision in Indian Leaf Tobacco Dev. Co. (1982) 137 ITR 827 (Cal.). In CIT v. Venkataraman [1978] 111 ITR 444, the Madras High Court had occasion to consider a similar provision as contained in section 2(6C)(iii) of the Indian I.T. Act, 1922, which defined income as including 'the value of any benefit or perquisite, whether convertible into money or not obtained from a company'. It was held that "from this language it is clear that the benefit or perquisite" contemplated cannot be money itself. If it is money, the question of its value being taken into account or the benefit or perquisite being converted into money will not arise. It was also observed that the same section made a distinction between 'benefit or perquisite' on the one hand and 'any sum paid' on the other indicating that the benefit or perquisite contemplated by the section was other than money. In CIT v. Manjushree Plantations Ltd [1980] 125 ITR 150 (Mad.), the question was whether the leave allowance was not a perquisite and, therefore, the allowance of the same would not fall to be restricted in terms of section 40(a)(v) of the Act. The court referred to the decision of the Calcutta High Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Karnataka High Court in CIT v. Mysore Commercial Union Ltd. [1980] 126 ITR 340, before the Calcutta High Court in CIT v. Kanan Devan Hills Produce Co. Ltd. [1979] 119 ITR 431 and before the Madras High Court in CIT v. Manjushree Plantations Ltd. [1980] 125 ITR 150. Though reference is made by the counsel for the assessee to the decision of the Madras High Court in CIT v. G. Venkataraman [1978] 111 ITR 444 that could easily be explained because the language of the section which the court considered in that case was materially different from what we are dealing with here. We don't see any reason to give undue emphasis to the words 'whether convertible into money or not' so as to give a very restricted meaning to the term 'benefit, amenity or perquisite', a meaning which would not serve the evident purpose of the section. We say so because that would mean that any cash allowance paid by the employer to an employee of any sum whatsoever will be entitled to deduction despite section 40(a)(v) because restriction is limited only to non-cash advantage given to the employee. Such a construction appears to us to be quite irrational defeating the very purpose of prescribing the limit under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... li & Chemical Corporation of India Ltd. v. CIT [1986] Tax LR 483 (Cal.), CIT v. Darjeeling Co. Ltd. [1989] 176 ITR 331 (Cal.), CIT v. Indian Press Exchange Ltd. [1989] 180 ITR 275 (Cal.), National & Grindlays Bank Ltd. v. CIT [1991] 192 ITR 144 (Cal.), CIT v. Indian Explosives Ltd. [1990] 184 ITR 339 (Cal.) and CIT v. Indian Oxygen Ltd. The Bombay High Court followed the aforesaid decision in Kanan Devan Hills Produce Co. Ltd. [1979] 119 ITR 431 (Cal.) in CIT v. Indokem (P.) Ltd. [1981] 132 ITR 125. This view was reiterated by the Bombay High Court in [1988] 169 ITR 44 CIT v. Mercantile Bank Ltd. [1989] 177 ITR 96 (Bom.), CIT v. Boehringer Knoll Ltd. [1987] 163 ITR 528 (Bom.), CIT v. J. Govindram (P.) Ltd. [1989] 177 ITR 204, CIT v. Mansants Chemicals (P.) Ltd. [1991] 191 ITR 75 (Bom.), Ruston and Hornsby (India) Ltd. v. CIT [1991] 191 ITR 367 (Bom.), CIT v. Greaves Cotton & Co. Ltd. [1991] 191 ITR 58 (Bom.), CIT v. Alembic Distributors Ltd. [1986] 162 ITR 565 (Bom.), CIT v. Yorkshire Insurance Co. Ltd. [1991] 192 ITR 169 (Bom.), CIT v. Mafatlal Gangabhai & Co. (P.) Ltd. 192 ITR 89 (Bom.), Asbestos Cement Ltd. v. CIT [1991] 192 ITR 245 (Bom.), CIT v. Empire Dyeing & Mfg. Co. Ltd. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly for his own purpose or benefit. Reading the words 'incurs directly or indirectly any expenditure', in isolation, would give no meaning to the said subsection. The nature of the expenditure is clearly indicated in the latter part of this sub-section, and that is expenditure in respect of any assets of the company which are used by an employee for his own purposes of benefit. The cash payment or reimbursement is not included in this sub-clause at all. Therefore, while agreeing with the aforesaid decision, Question No. 1 has to be answered in the affirmative and in favour of the assessee." 13.3 In the case of CIT v. Mafatlal Gangabhai & Co. (P.) Ltd [1996] 219 ITR 644, their Lordships of Supreme Court have considered the question whether cash payment made by an assessee to its employee fall within the mischief of section 40(a)(v) and section 40A(5). Their Lordships noted, "On appeal, the CIT(A) upheld the assessee's contention that cash payments cannot be treated as 'perquisites' for the purpose of and within the meaning of section 40A(5). Revenue s appeal to the Tribunal was dismissed. An application under section 256(1) was also dismissed by the Tribunal whereupon it approached ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ': in clause (b) of Explanation (2) to the sub-section takes in both benefits and amenities. The said definition also includes, inter alia, 'payment by the assessee of any sum in respect of any obligation which but for such payment, would have been payable by the employee' - words which are found in the main limb of section 40(a)(v) but which are missing in the main limb of sub-clause (ii) of clause (a) of sub-section (5). Thus, except for certain structural changes, section 40A(5)(a)(ii) and section 40(a)(v) are similar in all material aspects. It, therefore, follows that what we have said with respect to section 40(a)(v) applies equally to section 40A(5)(a)(ii). 8. There still remain the words 'including any sum paid by the assessee in respect of any obligation which but for such payment would have been payable by such employee' in section 40(a)(v) and similar words found in section 40A(5)(a)(ii) as well, i.e., in sub-clause (iv) of the definition of 'perquisite' in clause (b) of Explanation 2 to sub-section (5). What do they mean? The said words contemplate a situation where the assessee makes a payment (in cash) in respect of an obligation - 'obligation of the employee - which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any income-tax so paid will be assessable in the hands of the employee-assessee as part of his salary income. The provision may raise a further question regarding the year in which the perquisite income will become assessable, an aspect touched upon in Sciandra v. CIT [1979] 118 ITR 675 (Cal.), but it may not be necessary to deal with that aspect for the purposes of the present case." 13.5 In the case of CIT v. R.D. Dennis [1982] 135 ITR 1 (Bom.), their Lordships held as under: "We are fortified in the view we are taking by two decisions, viz., one of the Kerala High Court in CIT v. C.W. Steel (No. 1) [1972] 86 ITR 817, and the other of the Madras High Court in CIT v. Mackintosh [1975] 99 ITR 419. In both the cases, the very same question fell for consideration, viz., whether the income-tax paid by the employer was salary for the purposes of finding out the value of the rent-free accommodation given to the employee. Both the courts have answered the issue in favour of the revenue and against the assessee. The Madras High Court in its judgment has approved of the ratio of the decision of the Kerala High Court. We are respectfully in agreement with the decisions of both the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by Ballarpur was nothing but a tax upon the salary received by the appellant. It was paid by virtue of the obligation undertaken by Ballarpur and, therefore, the payment was not a gratuitous payment but was for and on behalf of the appellant. It would be unrealistic to say that the payment had no integral connection with the salary received by the appellant. Therefore, the tax paid by Ballarpur was liable to be included in the income of the appellant. (ii) That inasmuch as the appellant was not an employee of Ballarpur, the amount could not be brought under the head 'Salary' within the purview of section 17 of the Income-tax Act, 1961, and had necessarily to be placed under section 56(1), viz., under the head 'Income from other sources'." This case in our considered view has no application to the facts of the case. 14. It is evident from above cited decisions that when payment is made in cash by employer to the employee, it is not a perquisite. The cash payment to the employee has been held to be different from a "perquisite". It was held to be different from "convertible into money or not". The cash payment was not held to be money payment while considering the question w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be quite irrational, defeating the very purpose of the Legislation. The aforesaid view, as noted above, has not been approved by the Apex Court and a distinction has been drawn between cash payment on one hand and "benefit, amenity or a perquisite" on the other. 14.4 It is, therefore, reasonable to conclude that payment of taxes by the employer, on behalf of the employee, is a perquisite within the meaning of clause (2) of section 17 of the Income-tax Act. It cannot be a monetary payment to the assessee within the meaning of above clause which is intended to be excluded from application of clause 10(10CC) of the Act. 15. In the two earlier decisions, Tribunal, while not granting benefit to the assessee under section 10(10CC) of the Income-tax Act held that the tax paid by the assessee was nothing but part of the salary and, therefore, it was to be assessed as such. It was also treated as a monetary payment. Shri Syali had rightly pointed out that no reasons were given as to why it is being treated as part of monetary payment. Important provisions and circular etc. were not brought to the notice of the benches and, therefore, an incorrect view of the matter was taken in those c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee is a perquisite or a benefit, but not income from business. It could not be taxed except under clause (iv) of section 28 which provided that a benefit or perquisite was liable to be charged to tax. 17.1 It is not money, which is paid to the assessee when taxes are paid on his behalf. It is discharge of his obligation. The payment fully fits in the jacket of sub-clause (iv) of section 17(2) of the Act. It may be a monetary gain or monetary benefit or a monetary allowance but definitely it is not a monetary payment to the assessee. What is excluded in the clause is the perquisite is in the shape of a monetary payment to the assessee. If it is a payment to a third person like payment of taxes to the Government, then such payment of taxes cannot be excluded under clause 10(10CC). The circular of the Board and provision of sub-section (1A) of section 192, section 40(a)(v), 195A fully support the claim of the assessee. We, therefore, hold that the taxes paid by the employer on behalf of the employee is a perquisite within the meaning of section 17(2) of the Income-tax Act, which is not provided by way of monetary payment. Therefore, there is no reason not to exclude such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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