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TMI Blog2018 (4) TMI 1484X X X X Extracts X X X X X X X X Extracts X X X X ..... Held that:- As rightly argued by the learned counsel for the Revenue, unlike Section 221 of the Act, Section 201 (1A) of the Act is not hedged in by any requirement such as good faith, wilful default etc.,. Therefore, for levying interest, mens rea or wilful conduct is wholly irrelevant. In view of the fact that the appellant failed to deduct tax on the payments made, Section 201 (1A) is automatically attracted and even if the appellant is bona fide in not making such deduction, it is nevertheless liable to pay interest. The third question of law framed by the appellant is accordingly answered against it. - I.T.T.A. Nos. 211, 212, 213 And 214 of 2005 And I.T.T.A.No. 211 of 2005 - - - Dated:- 27-12-2017 - SRI C. V. NAGARJUNA REDDY AND SRI M. S. K. JAISWAL AND, JJ. For The Appellant : Mr. B.Chandrasen Reddy For The Respondents : Ms. K. Mamata COMMON JUDGMENT: ( per Hon'ble Sri Justice C.V.Nagarjuna Reddy) The assessee, who is common in all these appeals, raised the following substantial questions of law: 1. On the facts and in the circumstances of the case, whether the Income Tax Appellate Tribunal was correct in law in holding tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the said orders, the appellant filed four separate appeals before the Commissioner of Income Tax, Hyderabad (for short, 'the 1st appellate authority'). The 1st appellate authority set aside the demand raised under Sections 201 (1) and 201 (1A) of the Act to the extent it pertains to the tax charged and interest levied on the payments made to the non-resident consultants working abroad. With regard to the allowances paid to the residents of India deputed to work in U.K., the orders of the A.O. were upheld with a direction to him to consider the particulars furnished/to be furnished and apply appropriate rate of tax as applicable to different employees. Accordingly, demand of ₹ 2,77,35,727/- made earlier was reduced to ₹ 76,33,575/-. The orders of the 1st appellate authority were challenged before the Income Tax Appellate Tribunal, Hyderabad Bench 'B', Hyderabad (for short, 'the Tribunal') in I.T.A.Nos. 1035 to 1038 of 2004. By its common order dated 03-08-2005, the Tribunal dismissed all the appeals. The present appeals have been filed against the said common order of the Tribunal. 3. At the hearing, Mr. B.Chandrasen Reddy, learned counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or a profession set up in India. She referred to Section 6 of the Act and submitted that going by the broad definition of 'a resident in India', it is not the case of the assessee that the employees are not the residents of India and that it is the admitted case of the assessee that its employees, who were ordinarily residents of India, were deputed to work in U.K. in connection with the business of the assessee being carried on in India. As regards the payment made to the resident Indian employees deputed to work in U.K., the learned counsel has submitted that the definition of 'perquisites' under Section 17 (2), which is not exhaustive but only illustrative, is broad enough, which takes within its sweep, any lump-sum payments made by the employer, other than those payments which are exempted under Section 10 (14) of the Act. She has further submitted that in order to claim exemption under Section 10 (14), the payment made, must answer the description of a special allowance or benefit not being in a nature of perquisite within the meaning of Section 17 (2) of the Act, specially granted to meet expenses wholly, necessarily and exclusively incurred in the performan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 'perquisite' under Section 17 (2) or the same are exempted under subsection (14) of Section 10 of the Act read with Rule 2BB of the Rules. 7. Section 15 of the Act deals with salaries and the income enumerated thereunder shall be chargeable to income tax under the head 'salaries'. Section 17 defines 'salary' as including several things. Under this provision, apart from salary, various other things, including perquisites are chargeable to income tax. Sub-section (2) of Section 17 defines perquisites. It is an inclusive definition, which takes within its sweep, various things, including any sum paid by the employer in respect of any obligation, which, but for such payment, would have been payable by the assessee. Section 10 excludes such incomes which do not form part of total income. Sub-section (14) thereto, excludes certain allowances. This provision inter alia reads as under: i. any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of Section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to and relied upon the decision of House of Lords in Owen Vs. Pook (Inspector of Taxes) (1969) 74 ITR 147 , wherein it was held that the perquisite is something which arises by reason of a personal advantage and the same would not apply to a mere reimbursement or a necessary expenditure. Noticing earlier decision in Corry Vs. Robinson (1933) 18 TC 411 , which took a different view, the Division Bench, however, followed the test in Owen ( supra ) and observed that the said test in their opinion is a better test, namely; to decide whether the allowance of this kind was given by way of reimbursement or whether it was given as a personal advantage. The Court took notice of the fact that the allowance paid to the assessee, depending upon his posting at different places such as Delhi or Baroda, was likely to be reduced or increased, depending upon the change in the circumstances from place to place and depending upon whether free transport was allowed or not, which goes to indicate that this allowance was being given to the assessee as a reimbursement rather than as a personal advantage given to him. On those facts, the Division Bench held that living allowance paid to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is office were ordinarily performed by him. They were not exempt under Section 10 (14). 12. In CIT (Addl.) v. A.K.Misra, ITO [1979] 117 ITR 342, the Allahabad High Court held (headnote): City compensatory allowance is granted to meet the personal expenditure necessitated by the high cost of living in big cities. The allowance is not granted with reference to the nature of duties but exclusively with reference to the place of posting. Such an allowance will, therefore, fall within the Explanation to Section 10 (14) and is not exempt from tax. 13. In CIT v. Arthur Fucks, the Patna High Court held (headnote): A plain reading of Section 10 (14) of the Income Tax Act, 1961, makes it clear that one of the preconditions for the claim of exemption is that the allowance in question should have been specifically granted to meet expenses wholly incurred in the performance of duties of office and the exemption is only to the extent such expenses were actually incurred. 14. It was further held (headnote): In the instant case, there was no evidence to suggest that the whole or any part of the amount received by the assessee as living allowance repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es incurred by the employees nor the employees maintained any log books or other evidence to substantiate the claim that the expenses are actually incurred in the performance of duties. The assessee made lump-sum payment as allowances and no evidence was available for the expenditure incurred by the employees. 6.1 A perusal of the ledger copy of the SBI account maintained in assessee's books, from 01-04-2003 to 31-12-2003, it is observed that on 07-04-2003, the assessee paid a sum of ₹ 52,153/- in India to one of the employee consultant Sri D.Srinivas towards outstanding U.K. allowances. Like-wise on 03-05-2003, the assessee paid ₹ 82,000/- in India to Sri N.Ravi Gopal towards outstanding U.K. allowances, without obtaining any details of expenditure incurred by the employees at London. Thus, the assessee paid some of the allowances even in India after the employee's return to India lump-sum. 6.2 From the facts stated above, it is to be concluded that the assessee is not reimbursing the expenditure actually incurred by the consultant employees at London, but they are paid a lump-sum amount without obtaining any Log Book and Vouchers for the expenses i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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