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TMI Blog2007 (6) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... the obligation of the employee is paid by the employer, it will be a perquisite within the meaning of section 17(2)( iv ), which provides that any sum paid by the employer in respect of any obligation which but for such payment would have been payable by the employee, will be a perquisite to be included in the salary of the employee for the purpose of computation of tax liability. There is no dispute about this proposition, which is settled by the judgment of Hon ble jurisdictional High Court in case of TPS Escott [1998] 232 ITR 475 (Delhi). But whether the salary it to be determined after single stage grossing up or by multi-stages grossing up of taxes, is in dispute. 2.1 In cases where employees are paid tax-free salaries, the taxable salary is to be determined after grossing up of salary and taxes paid but whether grossing up has to be a single stage grossing up or multi-stage grossing up will depend upon terms and conditions of the employment. In case, terms of employment simply provide that the employee will be paid a particular salary and tax payable on that salary, then the actual salary will be the salary paid plus the tax paid by the employer on that salary, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the insertion of section 10(10CC) in the Income-tax Act by the Finance Act, 2002 w.e.f. assessment year 2003-04, which provides that tax on income being a perquisite, not provided for by way of monetary payment, which has actually been paid by the employer, at his option, on behalf of such employee, will be exempted in case of the employee assessee. The case of the assessee is that the tax paid by the employer on behalf of the employee is a perquisite not provided for by way of monetary payment and, therefore, tax on such perquisite is exempt under section 10(10CC) of the Act. Once the tax on the tax payable is exempt, multi-stage grossing up is not required. The said sub-section (10CC) of section 10, which exempts tax on such perquisites, is reproduced below as a ready reference: "10(10CC). In case of an employee being an individual deriving income in the nature of a perquisite, not provided for by way of monetary payment, within the meaning of clause (2) of section 17, the tax on such income actually paid by his employer, at the option of the employer, on behalf of such employee notwithstanding anything contained in section 200 of the Companies Act." 2.3 The Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95A cannot be evoked to apply the concept of multi-stage grossing up of income to the profit derived by a non-resident for oil exploration falling under section 44BB." 2.5 CIT(A) observed that the judgment of Hon ble High Court of Uttaranchal in the case of O.N.G.C. ( supra ) was distinguishable as it related to computation of tax and income under section 44BB which was a separate code in itself. CIT(A) also held that the tax paid by the employer on behalf of the employee was a monetary perquisite and, therefore, the same was not exempt under section 10(10CC). Accordingly, CIT(A) confirmed the decision of the Assessing Officer determining the taxable salary after multistage grossing up. Aggrieved by the said decision the present appeals have been filed before the Tribunal. 3. The ld Sr. counsel Shri Syali appearing on behalf of the assessee reiterated the stand taken by the assessee before the lower authorities. It was submitted that provisions of section 10(10CC) were applicable in case of the assessee. The tax perquisite in this case had been paid by the employer to the Government and not to the employee and, therefore, it could not be considered as a perquisite provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of H. D. Dennis ( supra ), in which reference was made to the decision in the case of North British Railway Company v. Scott and Hartlands Diggines. The decision in both the cases was that the tax paid by the company was part and parecel of the salary and not any sum outside the salary or independent of salary. Thus, the tax liability of the assessee was nothing but the salary and not anything outside it. Therefore, this payment of tax on behalf of the assessee will be monetary payment. In view thereof, the provision contained in section 10(10CC) is not applicable for the reason that like salary, this payment is also a monetary payment forming part of the salary." 3.3 The ld. counsel also pointed out that the said decision was also based on a concession. The ld. counsel for the assessee in that case had conceded that the judgment of Hon ble High Court of Uttaranchal in case of ONGC ( supra ) was not applicable in case of the assessee. A decision which is based on a concession or which is sub-silentio cannot be taken as a precedent, it was pointed out. The ld. counsel relied on the judgment of Hon ble High Court of Gujarat in case of N.R. Paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or by way of monetary payment. The argument of the assessee is that this is not a monetary payment, as the same had not been made directly to the assessees but to the third party i.e., the Government. We are unable to accept this argument. A careful perusal of the provisions of section 10(10CC) reproduced in para 2.2 of this order earlier, shows that three are there 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 of section 17(2); ( ii ) it should not have been provided for by way of monetary payment; ( iii ) it should have been paid by the employer. There is no dispute that tax paid by the employer on behalf of the employees is a perquisite. It is also not in dispute that tax is payable and has been paid by the employer. The third ingredient is that it should not have been provided for by way of monetary payment. There is no doubt the tax paid by the employer to the Government is in monetary terms. The provision nowhere states that the perquisite should be paid to the employees directly. It only says that it should not have been provided for by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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