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TMI Blog2009 (2) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(a) of the IT Act in all the years and certain refunds were issued in all the three years. For the asst. yr. 1999-2000, the refund worked out to Rs. 6,18,605. The aforesaid excess amount, according to the AO, was not exempt under s. 10(5B) of the IT Act and was taxable income of the assessee which had escaped assessment. Accordingly, reassessment proceedings were taken against the assessee by issuing notices under s. 148 of the IT Act in all the years. 3. In the reassessment proceedings, the assessee contended that refund issued in the name of the assessee could not be treated as a "perquisite" as neither any benefit accrued to the assessee nor any amenity was provided to him. The amount of tax was deposited by the employer and, therefore, refund issued in this case belonged to the employer. It was pointed out that the appellant had also filed an application with the AO to issue the refund in the name of the employer. However, refund was issued in the name of the employee, which was subsequently handed over to the employer. A confirmation to the above effect was also placed on record. It was accordingly praye9 that the refund allowed by the Revenue in the three years was not th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic research as is approved for the purposes of this clause by the prescribed authority or in any business carried on in India and the individual was not resident in India in any of the four financial years immediately preceding the financial year in which he arrived in India and the tax on his income for such services chargeable under the head 'Salaries' is paid to the Central Government by the employer [which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in s. 200 of the Companies Act, 1956 (1 of 1956)], the tax so paid by the employer for a period not exceeding forty-eight months commencing from the date of his arrival in India: Proviso and Explanation not being relevant are not quoted (Omitted by the Finance Act, 2002, w.e.f. 1st April, 2003.)" Circular No. 707, dt. 11th July, 1995 [(1995) 126 CTR (St) 85], r/w Circular No. 285, dt. 21st Oct., 1980 [(1981) 20 CTR (St) 15], being relevant is reproduced: "References have been received by the Board in cases where non-residents are deputed to work in India and the taxes are borne by the employers. In certain cases, an employee to whom refunds are due has already left India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alculations inadvertently paid to the Central Government, more than what was due and, therefore, the excess amount paid was refunded to the assessee. The assessee has claimed that he wrote to the AO to issue the refund voucher in the name of the employer, yet the AO issued the refund voucher in the name of the assessee. After receipt of refund voucher, the amount of refund was remitted and paid to the employer. An electronic confirmation from the employer to the above effect has been placed on record. The AO, however, has raised some doubt on the authenticity of above confirmation but for the present purposes, that doubt is not very material since the AO has simultaneously held that payment to the employer was 'application of income' after it had accrued to and received by the assessee. The AO, further held U1at amount of refund with interest received by the assessee was a 'perquisite' liable to be taxed under s. 17(2)(iv). We would at the outset like to deal with the said finding. The relevant provision is as under: "'17. Salary', 'perquisite' and 'profits in lieu of salary' defined.-For the purposes of ss. 15 and 16 and of this section,- (1) ........... (2) 'perquisite' inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . If amount or benefit is not due, then recipient has a legal obligation to restore the advantage or benefit to the person to which it belongs. A perquisite or a benefit, which can be brought to tax, must be received under some legal or equitable claim even though it be contingent. A mere receipt of money or property which one is obliged to return or repay to the rightful owner, as in the case of a loan or credit, cannot be taken as a benefit or a perquisite. Anything received without any claim of right has to be repaid to the person to whom it belongs. In the case of IRC vs. Wilcox 90 L.Ed. 752, it was held that taxable gain is conditioned upon the presence of a claim of right to the alleged gain and the absence of definite obligation to repay or return that which would otherwise constitute a gain; and it does not accrue from the mere receipt of property or money which one is obliged to return or repay to the original owner. Tax liability may rest upon the enjoyment by the taxpayer of privileges and benefits so substantial and important as to make it reasonable and just to deal with him as if he were the owner, and to tax him on that basis. Above decision has been quoted with ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as taxable income in the hands of the assessee. It is the claim of the assessee that excess amount was in fact returned to the employer. A confirmation to the above effect has been placed on record. The Revenue authorities, in our considered opinion, are not justified in rejecting above confirmation without making verification from the employer. However, even if it is accepted that amount has not yet been returned, it would not make any material difference to the nature of the receipt or to the obligation to return the amount. Alternatively if it is held that excess amount also had the same character as amount "due" and "payable", then it was exempt under s. 10(5B) and could not be charged in the hands of the assessee. 9. It is relevant to refer to provision of s. 198 of the IT Act, which is as under: "198. Tax deducted is income received.-All sums deducted in accordance with the foregoing provisions of this chapter shall, for the purpose of computing the income of an assessee, be deemed to be income received." Provided that the sum being the tax paid, under sub-s. (1A) of s. 192 for the purpose of computing the income of an assessee, shall not be deemed to be income recei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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