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TMI Blog2017 (2) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 2642 to 2645/Del/2015 - - - Dated:- 14-2-2017 - Smt Diva Singh, Judicial Member And Sh. O. P. Kant, Accountant Member Assessee by : Sh.K.M.Gupta, Adv Revenue by : Sh. Anil Kumar Singh, Sr.DR ORDER Per Diva Singh, JM All these appeals have been filed by the assessee assailing the correctness of the order dated 03.03.2015 of CIT(A)-41, New Delhi pertaining to 2004-05 to 2007-08 assessment years on identical issues accordingly all these appeals are being decided by a common order. 2. Ld.AR inviting attention to the grounds raised submitted that the assessee has been held to be in default for the short deduction of tax on account of credit tips recovered from the hotel guest to the employees. Inviting attention to the impugned order in 2004-05 AY which is identical to the consolidated order passed in 2005-06 AY it was submitted that the appeal of the assessee was dismissed by the CIT(A), relying upon the decision of Jurisdictional High Court order dated 11.05.2011 in the case of CIT vs ITC Ltd. and C.J. International Hotel Ltd. The said decision, it was submitted is no longer good law in view of the decision of the Apex Court in the case of ITC Ltd. vs CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company's books of account as Cash Advance representing the amounts payable to its employees. The amount standing to the credit of this account is withdrawn from bank and given to the staff representatives of various departments for sharing amongst themselves in the manner they have decided. The Company cannot interfere in the manner of such tips-sharing amongst the employees. The system presently following by the company is to call the representatives of different departments and collectively pay back such tips for onward sharing, first amongst themselves (i.e. departments) and thereafter amongst the staff within each department. These representatives are nominated by the staff of the respective departments based on their mutual trust. The Company has no information on the quantum of tips that goes to respective groups and further to different employees in each such department. As the company has no obligation to pay the amount of tips and further as the amount of tips received by the staff is not flowing from the employer, the company has not deducted tax on the amount of tips distributed. Reliance was placed on Sun-n-Shade Hotel P Ltd. v. State of Maharashtra (1969) 23 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 and 17 of the I.T. Act. As per the Webster Dictionary tips means, small gift of money for services rendered. Thus there exists no dispute on the fact that it is a payment made by the employer as a reward or remuneration for services rendered by employees. Section 17 of the I. T. Act extends the scope of section 15 and provides an inclusive definition to it by including perquisites and profit in lieu of salary also as part of salary. Thus the wider definition of salary given by section 17, includes any amount paid by an employer to its employee by virtue of his employment as the same would constitute income under the head salary. 4.11. In the modern time, it is a common practice particularly in service industries, that payment and receipt of tips is customary. It is also not necessarily true that the recipients of tips are persons have meagre income and not subject to tax. Hence by non deducting taxes on such 'tips' or payments to employees and by not remitting it in the Govt. account the employer is not fulfilling its statutory responsibility of contributing to tax evasion. Tips whether paid in cash or through card is in every way an additional income of the emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereon. The AO herein also treated the receipt of TIPS as income under the head salary in the hands of various employees and held the assessee liable to deduct tax at source of such payment u/s 192 of the Income Tax Act, 1961 and held to be in default u/s 201(1) on which interest u/s 201(1A) was also held to be attracted. However, in the facts of that case, the assessee was successful in its appeal before the First Appellate Authority. The said order was upheld by the ITAT and in a further appeal filed by the Revenue. The Revenue succeeded in upsetting the order of the ITAT before the Hon ble High Court. 4.3.1. The Hon ble High Court held, after considering Sections 15, 17 and 192 of the Income-tax Act, that tips would amount to 'profit in addition to salary or wages' and would fall under Section 15(b) read with Section 17(l)(iv) and 17(3)(ii). The Hon ble High Court further held that when tips are received by employees directly in cash, the employer has no role to play and would therefore be outside the purview of Section 192 of the Act. However, the moment a tip is included and paid by way of a credit card by a customer, since such tip goes into the account of the em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held by the Apex Court on analysis of section 15 that it would be evident that for the said section to apply there should be a vested right in an employee to claim any salary from an employer or former employer whether due or not if paid; or paid or allowed, though not due. 4.4.3. Considering the analogue provisions as considered in the case of CIT vs CW Russel (1964) 53 ITR 91 (SC) it was held that Section 7(1) of 1922 Act which preceded section 15 17 of the present Act it was necessary to have a vested right to receive an amount from his employer before it could be brought to tax under the head salaries. It was noted that the section pre-supposed the existence of relationship of employer and employee and on the facts of that case it was noted that there is no vested right in the employee to claim any amount of TIPS from his employer. The material facts in the facts of the present case also continue to remain identical. The TIPS being purely voluntary amounts it was noted may or may not be paid by the customer for services rendered to them and thus would not pass the requirement of section 15 as it is not contemplated in the contract of employment. 4.4.4. The reliance p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uniary gain or advantage. The Apex Court in ITC held that all the Court decided in the aforesaid decision was that even if an amount is received by an employee which has no connection with the profits of the employer, it may yet be salary as any advantage or gain by receipt of such payment would be included in the expression profits in lieu of salary . Hence, the court did not accede to the contention of learned counsel for the assessee that as the CCA amount is paid to meet additional expenditure as contemplated by statutory service rules, it cannot be said to be profit . It was noted that the Court in the said decision finally held that CCA and HRA would be taxable income in the hands of the employee as they directly arose from the employer and employee relationship and it was held that cannot be understood that dehorse the employer and employee relationship, any amount received from the employer by the employee would become salary u/s 17. Thus, since the contract of employment in the case of not being the proximate cause for the receipts of TIPS by the employee from a customer though even if collected in the fiduciary capacity by the employer, it was held would be outside the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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