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TMI Blog2017 (12) TMI 1066X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the salary and income-tax were both from the KSEB, in whose project the assesses were employed. C.W. Steel (1971 (8) TMI 68 - KERALA High Court) is more on point, in interpreting the definition of 'salary' in the Act, then, which inter alia included perquisites; which, by an Explanation, included any payment made by the employer in satisfaction of an obligation of the employee; which, but for the payment, would have been payable by the employee. Section 195A brings in the same effect, the absence of which prompted the Hon'ble Supreme Court in Emil Webber [1993 (2) TMI 1 - SUPREME Court ]to direct treatment of the tax payment as “income from other sources”. Question of law raised to be answered in favour of the revenue and again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... showed the tax component paid by the KSEB as income from other sources . The Assessing Officer added on the tax paid by KSEB, returned as income from other sources , to the salary paid and computed the total salary paid as provided in Section 195A of the Income Tax Act, 1961 ('Act' for short). Tax was determined for the said component of salary and deductions were made with respect to the tax paid by the KSEB. The balance was demanded from the assesses, the foreign nationals, who were in India by virtue of the contract. 3. The assesses filed appeals before the first Appellate Authority, who, based on Emil Webber v. Commissioner of Income Tax - 200 ITR 483 , reversed the order of the Assessing Authority and directed the tax pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obstante clause 1.9.2 to hold that the KSEB is not paying the salary or the tax, but, gets it reimbursed from the Consultant. It is the finding of the Tribunal that tax liability being not the liability of the KSEB, both the salary and the tax is paid by the very same person. Hence, the argument of the assesses that Section 195A of the Act would be applicable only if both salary and tax is paid by the employer; cannot be sustained. We are unable to countenance the finding of the Tribunal in that respect. The agreement is clear insofar as the salary of the employees, deputed by the Consultant, being paid by Consultant and the tax being paid by the KSEB. 6. However, on the question of whether Section 195A of the Act has to be employed, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo sums that income-tax will have to be calculated. In North British Railway Company v. Scott [1922] 8 TC 332 (HL), a railway officer had, by contract, a salary which was to be paid free of tax, and it was held that the effect was that the real salary was the sum which after deduction of the tax from it would leave the sum which was expressed to be payable to him as salary free of tax. In other words, the House of Lords held that the fact that the sums paid by the railway company were not deducted from the salary increased the salaries of the officers of the railway company; and the salaries received by the officers must be deemed to be not only the salaries paid into their hands, but also the sums paid on their behalf to the revenue. Here, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from other sources , was upheld. Hence, the tax paid directly to the revenue would be income of the employee; but, the direction to assess it as income from other sources was in the context of there being no analogous provision as Section 195A in the Act at that point, being the assessment years 1974-75 and 1975-76. 8. Section 195A of the Act refers to an agreement or arrangement under which the tax chargeable on any income is to be borne by the person by whom the income is paid and for the purposes of deduction of tax, such income (that paid as tax separately) shall be increased to such amount as would, after deduction of tax thereon, be equal to the net amount payable under such agreement or arrangement. Hence, the amount paid as ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in Emil Webber to direct treatment of the tax payment as income from other sources . 10. We are of the opinion that the question of law raised has to be answered in favour of the revenue and against the assessee on a different reasoning than that given by the Tribunal. We are told that in many of the assessment orders the computation has not been properly made. The Assessing Officer would, hence, employ Section 195A and compute the amounts properly within a period of two months from the date of receipt of the certified copy of this judgment. The assessees are said to have paid up the amounts already. Only if there is a balance due, the same would have to be satisfied by the assessee or its agent. The Income Tax Appeals are ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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