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TMI Blog2011 (11) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... udes the tax paid by the employer company? It may be mentioned that four grounds have been taken in each of the appeals and the question framed above represents the gist of the grounds. However, for the sake of completeness, the grounds taken in the appeal in case of Yuji Horikawa in IT Appeal No. 1958(Delhi) of 2011 are reproduced below:- "(1) The ld. CIT(A) erred in confirming: (a) The assessable income at Rs. 35,32,971/- as against Rs. 31,20,482/- returned by the appellant. (b) The perquisite value of concessional accommodation at Rs. 4,28,411/- as against Rs. 3,44,588/- returned by the appellant less rent recovered. (2) The ld. CIT(A) erred in confirming the conclusion of the Assessing Officer that : (a) The tax paid by the employer is not a perquisite within the meaning of section 17(2)(iv). (b) Salary for the purpose of determining the perquisite value of accommodation under Rule 3 will include the tax paid by the employer company. (3) The CIT(A) erred in not following the principle laid down by the Special Bench of the Delhi Tribunal in the case of RBF Rig Corporation Others Vs. ACIT, 297 ITR (AT) 228." 2. The case of the ld. counsel for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax under the head "salaries". Vide clause (b) thereof any salary paid or allowed to an employee in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him is an income chargeable to tax under the head "salaries". For the purpose of s. 15 vide s. 17(1)(iv), perquisites are included in salary. Vide sub-clause (iv) of clause (2) of section 17 any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee, is included in "perquisites". The interpretation clause, i.e., section 2 of the Act, vide sub-clause (iii) of clause (24) thereof, includes the value of any perquisite or profit in lieu of salary taxable under clauses (2) and (3) of section 17, within the meaning of "income". All these statutory provisions make it clear that an amount of tax which would have been payable by an employee-assessee, if paid by the employer on behalf of the assessee, is to be included in the perquisites amounting to salary rendering it liable to tax by being included in income. 4. In the view taken hereinabove, we are fortified by two English decisions, i.e., North British Railwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her provision of the Act. It is from the said angle that we have to examine whether the amount paid by Ballarpur by way of tax on the salary amount received by the assessee can be treated as the income of the assessee. It cannot be overlooked that the said amount is nothing but a tax upon the salary received by the assessee. By virtue of the obligation undertaken by Ballarpur to pay tax on the salary received by the assessee among others, it paid the said tax. The said payment is, therefore, for and on behalf of the assessee. It is not a gratuitous payment. But for the said agreement and but for the said payment, the said tax amount would have been liable to be paid by the assessee himself He could not have received the salary which he did but for the said payment of tax. The obligation placed upon Ballarpur by virtue of Section 195 of the Income Tax Act cannot also be ignored in this context. It would be unrealistic to say that the said payment had no integral connection with the salary received by the assessee. We are, therefore, of the opinion that the High Court and the authorities under the Act were right in holding that the said tax amount is liable to be included in the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d principle of that case and those of this case. Here the integral connection between the salary received by the assessee and the tax payable thereon, paid by Ballarpur in pursuance of a legal obligation, cannot be overlooked. The third case cited is in Mrs. Sheela Kaushish v. C.I.T, Delhi, 131 I.T.R. 435(S.C). In this case, it was held that determination of annual value under Section 23 of the Income Tax Act, 1961 should be done by taking the standard rent as the basis even where the assessee is receiving rent higher than the standard rent. Again we must say, we see no relevance of the said principle of this case to the facts of this case." 4.3 In the case of RBF Rig Corpn. LLC (supra), the question before the Special Bench was-whether, on the facts and in the circumstances of the case, tax paid by the employer on the income of the assessee is entitled to exemption u/s 10(10CC) of the Income-tax Act, 1961? The Tribunal came to the conclusion that it is not money which is paid to the assessee when taxes are paid on his behalf. It is discharge of his obligation, therefore, the payment fits within the wording of section 17(2)(iv). This decision is explicit that payment of tax on be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interveners are allowed on this issue." 4.4 It may be mentioned at this stage that the aforesaid decision was followed by "G" Bench of the Delhi Tribunal in the case of Transocean Offshore Deepwater Drilling Inc. v. Dy. DIT, (International Taxation) [2009] 34 SOT 323. 4.5 The issue raised in this case was directly dealt with by "E" Bench of Delhi Tribunal in the case of Asstt. CIT v. Makote Hoshizaki, [2009] 27 SOT 191. It has been held that after amendment in Rule 3 coming into force with effect from 01.04.2001, it is clear that for the purpose of determination of perquisite value of rent-free accommodation, the term "salary" will not include value of perquisite as specified in section 17(2) of the Act. Referring to the decision in the case of CIT v. H.D. Dennis [1982] 135 ITR 1/[1981] 7 Taxman 231 (Bom.), it was further held that the definition given in Rule 3 is co-extensive given in section 17, except that there is an express exclusion therefrom of certain kinds of payments mentioned therein. This decision was rendered on 06.04.1981. However, sub-clause (d) of clause (vi) of the Explanation to Rule 3 became applicable with effect from 01.04.2001, which excludes the perquisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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