Sl. No.

Party Name/Citation

Conclusion

1

[TS-5185-SC-2018-O]

Receipt on SARs redemption not perquisite pre-2000; Clause (iiia) to Sec 17(2) prospective

SC dismisses Revenue's appeal, holds that amount received by assessee (Chairman and Managing Director of Procter and Gamble India) towards redemption of Stock Appreciation Rights (SARs) is to be treated as capital gains and not perquisite us 17(2)(iii), but since no consideration was paid by assessee for acquiring them, such receipts cannot be taxed as capital gains; P&G USA had issued SARs to assessee without any payment of consideration from 1991 to 1996 and SARs were redeemed in October 1997 for an amount of Rs. 6.80 Cr which was held as taxable by AO; SC takes not of amendment by Finance Act, 1999 to insert clause (iii) of Sec 17(2) w.e.f. April 1, 2000 to bring the similar transactions within the purview of perquisite u/s 17, however, rejects Revenue's stand that such amendment was clarificatory and retrospective; Also rejects Revenue's contention to tax it u/s 17(2)(iii), holds that "Courts cannot construe the law in such a way that brings an individual within the ambit of Income Tax Act to pay tax who otherwise is not liable to pay. In the absence of any such specific provision, if an individual is subjected to pay tax, it would amount to the violation of his Constitutional Right"; Also rejects Revenue's reliance on CBDT Circular No 710 of 1995 observing that it pertained to issue of shares to employees and not SARs, moreover holds that "a Circular cannot be used to introduce a new tax provision in a Statute which was otherwise absent"; Also holds that the said amount cannot be taxed u/s 28(iv) as it does not arise from business

2

[TS-5003-AAR-2018-O]

No TDS required on Indian salary component of NR-employee deputed abroad

AAR allows application filed by Indian companies (Applicants), holds Applicants not liable to deduct TDS on salaries paid in India to employees deputed to their overseas group companies for AY 2012-13 when such employees were non-residents in India; Referring to Sec. 5(2), Sec.15, AAR holds that "chargeability to tax under the head "salaries" arises under section 5(2) read with section 15. Revenue's attempt to say that section 5(2) alone is the charging section and income … should be taxed in India as it was received in India, cannot be accepted."; Observes that since services were rendered in the USA, salary accrued to employee in the USA and fact whether the employer was Indian or foreign is immaterial

3

[TS-6630-ITAT-2018(Delhi)-O]

Income earned by assessee by rendering professional services using his technical skills is business income and not salary income; Expenditure on earning the income is allowable

 ITAT allows assessee’s appeal; Accepts its contention that amounts received from 2 companies under independent contracts in return of rendering of professional services is business income and not salary income and thus amount spent to earn the said income is deductible; Observes that “There is no employer employee or master servant relationship. There is also no permanent contract..... The contract amount is paid to the assessee by the companies on the basis of day to day working and no payment was made for the off days. The agreements clearly stipulates the word ‘Contract’ and nowhere the word remuneration or salary or wages is mentioned.”

4

[TS-7051-ITAT-2018(Bangalore)-O]

Rent free accommodation provided to employees by National Dairy Research Institute, an autonomous research institute in dairy development, is liable to tax deduction at source u/s. 192

Also refer to -

[TS-7366-ITAT-2017(Bangalore)-O]

ITAT holds assessee (an autonomous institution established as a society under the Societies Registration Act) in default u/s. 201(1) for not deducting tax from perquisite value of rent free accommodation provided to its employees; Rejects assessee’s argument that assessee-society is under the Department of Indian Council of Agricultural Research, Ministry of Agriculture and an instrumentality of the State under Article 12 of the Constitution of India; Holds that employees of a corporation fully controlled by the Central Government cannot be equated with Central Government employees though it is instrumentality of the State within the meaning of Article 12 of the Constitution of India; Thereby holds that employees of assessee-society are not employees of Central Government and hence valuation has to be done under clause (ii) of Rule 3(1) (applicable to cases other than Central and State Govt. employees) and not clause (i);

Relies on coordinate bench decision in Central Food Technology wherein it was held that “Public corporations are established by Government to achieve purpose of welfare state. Financial autonomy and functional autonomy are required for such purpose. These corporations are commercial corporations, development corporations, social services corporations or Financial corporations. Such corporations have all trappings of Government but their, employees cannot be equated with employees either holding office or post in connection with the affairs of the Union or of such State.”

5

[TS-7055-ITAT-2018(Bangalore)-O]

Employees of assessee (a statutory corporation) cannot be regarded as employees of the State or Central Government; Payments towards unutilized leave period on retirement of employees in excess of Rs. 3 lakhs not exempt u/s. 10(10AA)(i), liable to deduction of tax u/s. 192

Bangalore ITAT quashes Sec. 201(1)/(1A) proceedings on assessee-employer (a State Power Transmission company, ‘KPTCL’) with respect to TDS default u/s. 192 for AYs 2013-14 and 2014-15 on leave encashment payments made to employees on retirement; Notes that assessee was under a bonafide belief that it’s a State Government company and therefore leave encashment payments to its employees on retirement would be exempt u/s. 10(10AA); Though ITAT acknowledges that in view of co-ordinate bench ruling in Central Food Technological Research Institute, employees of Statutory Corporations cannot be regarded as employees of the State or Central Government, but observes that the Revenue in the past has accepted assessee’s treatment as employees of State Government; Also takes note of the historical background under which KPTCL came into existence and the manner of exercise of control and affording of protection to employees of KPTCL by the State Government, remarks that all these factors “weighed with KPTCL when it made estimate of its employees income under the head 'Salaries'”; Accepts assessee’s bonafide belief plea relying on co-ordinate bench ruling in Indian Institute of Science, distinguishes Revenue’s reliance on co-ordinate bench rulings in Central food Technological Research Institute and CSIR National Aerospace Laboratories as the issue of bonafide estimate while deducting TDS was never considered nor raised by the parties.

6

[TS-7067-ITAT-2017(KOLKATA)-O]

Salary credits to seafarer’s NRE account by employer exempt, ITAT grants benefit of ‘vague’ CBDT circular

ITAT holds that remuneration received by assessee-individual (a non-resident engaged as a 'Captain' with a foreign shipping company) in his NRE account in India, is not taxable; Relies on recent CBDT Circular No. 13/2017 wherein it was clarified that salary accrued to non-resident seafarers for services rendered outside India on foreign ships shall not be included in the total income merely because such salary was credited in NRE account in India; Highlighting the vagueness in the circular, ITAT remarks that "It is not clear as to whether the expression 'merely because' used in the Circular ….covers either of the situations or both the situations contemplated above";

7

[TS-5784-ITAT-2017(Kolkata)-O]

Exempts salary credits to seafarer’s NRE account, grants benefit of ‘vague’ CBDT circular

Kolkata ITAT holds that remuneration received by assessee-individual (a non-resident engaged as a ‘master’ with a foreign shipping company) in his NRE account in India, not taxable for AY 2011-12; ITAT relies on recent CBDT circular 13/2017 wherein it was clarified that salary accrued to non-resident seafarers for services rendered outside India on foreign ships shall not be included in the total income merely because such salary was credited in NRE account in India;

8

[TS-5555-ITAT-2017(Mumbai)-O]

ITAT re-characterizes retainership payments to independent professionals as 'salaries'; Applies TDS u/s 192 over Sec 194J

Mumbai ITAT rules that ‘retainership fees’ payment by assessee (a film production company) under the service contract, constitutes ‘salary’, TDS u/s 192 applicable for AY 2005-06, rejects assessee’s stand that the persons were hired in the capacity of independent professionals and hence Sec 194J TDS was applicable; ITAT refers to service contract covenants which provide for fixed remuneration, ‘termination of employment’ clause, leave clause, also notes that various designations, viz. Production manager, Production executive, Production assistant, Manager cum Accounts & Finance,  were assigned to these persons, holds that “the facts and the evidences … clearly establish  that there existed an employer-employee relationship between these persons”; Though no PF, ESI, gratuity, bonus, etc, was paid, ITAT clarifies  that “payment of these incentives is one of the indicators of existence of employer-employee relationship but not the conclusive or the only ingredient.”; Separately, ITAT holds that payment to Singaporean entity for rendering post production services, not FTS under Article 12 of India-Singapore DTAA as no technology or skill was made available to assessee, moreover, ITAT holds that  in absence of the work carried out through non-resident’s PE in India, the payment cannot be taxed as business profits under Article 7 of DTAA; With respect to expenditure incurred on ‘printing and processing of film’, ITAT holds the same in the nature of post production activities,  and hence TDS u/s 194C was applicable and not that u/s 194J, relies on co-ordinate bench ruling in Yashraj  Films Pvt Ltd

9

[TS-6675-HC-2017(Madras)-O]

No Sec. 234B interest levy on payee where deductor paid tax with interest u/s. 201

Madras HC sets aside Settlement commission order, holds that assessee (an employee of a multinational company) not liable for interest u/s 234B in respect of salary received outside India, accepts assessee’s stand that when the employer abroad had paid the interest u/s 201(1A) for not deducting tax at source, then once again tax cannot be recovered from assessee; For AYs 1996-97 to 2005-06, assessee had filed Income-tax returns disclosing only the salary income received in India, thereafter assessee filed settlement application disclosing income through ESOP and salary received outside India (on which no TDS was deducted by the employer), though Settlement commission admitted such additional income but levied interest u/s. 234B (for advance tax default); HC applies SC judgment in Hindustan Coca Cola Beverage (P) Ltd. wherein it was held that where tax was already paid by the recipient of income, the tax once again could not be recovered from deductor-assessee, remarks that “By applying the above decision to the facts of the case, the correct conclusion that can be arrived is that the taxes have been already paid by the deductor…. once again tax cannot be recovered from the petitioner/assessee”; Follows Bombay HC ruling in Emilio Ruiz Berdejo wherein on identical facts it was held that no further interest can be claimed from assessee either under Sections 234A or 234B or 234C, where deductor has already discharged the tax liability with interest payable u/s. 201(1A); Also relies on Delhi HC ruling in Jacabs Civil Incorporated wherein it was held that once the assessee-payee has no role or duty in deducting or collecting the tax, “the question of payment of any interest did not arise as it cannot be said in such circumstances that the assessee is in default for the purposes of Section 234B of the Act.”

10

[TS-7480-ITAT-2017(Bangalore)-O]

Holds that payment made to pigmy - agents is salary, not commission to attract TDS u/s 194H

Bangalore ITAT deletes disallowance of remuneration (commission) paid by assessee (a co-operative bank) during AY 2012-13 to pigmy agents (pigmy deposit collectors), rules that the aforesaid payment is in the nature of salary and subject to TDS u/s 192 in light of CBDT letter dated March 3, 2008 ; Rejects Revenue’s stand that payments to pigmy collectors are in the nature of commission and not salary and hence should be disallowed u/s 40(a)(ia) for non-deduction of TDS u/s 194H

11

[TS-8785-ITAT-2017(Hyderabad)-O]

Allowance to employees deputed abroad for meeting personal cost taxable as perquisite

Andhra Pradesh HC confirms ITAT order, holds that allowances paid to employees deputed to UK by assessee (software developer) is taxable as perquisite u/s 17 (2) subject to tax deduction at source, disallows claim for exemption u/s 10(14); Notes that allowances represented lumpsum payment to employees by way of conferring additional advantage in order to meet the high cost towards accommodation and other personal expenditure, thus holds that such expenditure cannot be treated as having been incurred in connection with discharge of their duties within the meaning of Sec 10 (14); Agrees with the finding of the first appellate authority that assessee had not kept any evidence indicating actual expenses incurred or maintained any log book /evidence to substantiate that expenses were actually incurred in the course of performance of duties, thus amount paid was not reimbursement but a lumpsum payment taxable as perquisite u/s 17; Also rejects assessee's contention for deletion of interest u/s 201(1A) on the ground that assessee's default was on account of bona fide belief that tax was not deductible, holds that "Section 201 (1A) of the Act is not hedged in by any requirement such as good faith, wilful default etc."; Relies upon co-ordinate bench ruling in Bellien Michael Andresmant which distinguished earlier judgment in S G Pgnatale

12

[TS-5998-ITAT-2017(Delhi)-O]

Amount spent on foreign visits of assessee (a non-employee director-cum-shareholder having no substantial interest in company) for business purposes of the company is not perquisites u/s. 17(2)(iii)

ITAT holds that “Section 17(2)(iii) does not apply to the assessee as assessee was not an employee of the company. The assessee claimed that she was only director and shareholder whereas this section applies to an employee director.”; Relies on coordinate bench decision in Smt. Shilpa Pasari v. ITO [IT Appeal No. 3204 (Delhi) of 2009, dated 14-12-2011] wherein it was held that perquisite under section 17(2)/17(3) can be added in the hands of the assessee only if the employer-employee relationship is established; Notes that assessee filed certificate and Board resolution of the company in which it is clarified that Board has sent the assessee to foreign trip for business purposes and all the expenditure were borne by the company.

13

[TS-5441-ITAT-2017(Ahmedabad)-O]

Allows deduction from salary income towards notice pay recovered by previous employers

Ahmedabad ITAT allows deduction to assessee-employee with respect to notice pay recovered from his salary by previous employers during AY 2010-11; Rejects Revenue’s stand that no deduction for notice pay is available u/s. 16 of the Act and since salary is taxable on due basis, the entire salary due from previous employer was taxable; Clarifies that “this is a case of recovery of the salary .. for which we have not to refer Section 16 of the Act ”; Observes that assessee has actually received the salary from his previous employers after deducting the notice period as per the job agreement with them, holds that only the actual salary received by assessee is taxable

14

[TS-5740-ITAT2017(Mumbai)-O]

Married daughter's rent payment to mother a 'sham' transaction; Dismisses HRA claim

Mumbai ITAT rejects house rent allowance (‘HRA’) exemption u/s 10(13A) claimed by assessee-individual (a chartered accountant) for AYs 2009-10, 2010-11 and 2011-12, holds the entire arrangement of rent payment by assessee to her mother as a ‘sham’ transaction ; During relevant AYs, assessee claimed loss from self occupied property (interest on housing loan) with respect to property jointly owned with her spouse, simultaneously, assessee also claimed HRA by submitting that she paid rent in cash to her mother; ITAT notes that assessee was living with her husband and in all the documents including banks accounts, income-tax return, the address of the property jointly owned with husband was mentioned

15

[TS-5465-ITAT2017(Mumbai)-O]

Upholds penalty u/s 271(1)(c) on salaried individual for concealing capital gains & director fees

Mumbai ITAT upholds concealment penalty u/s 271(1)(c) on assesseeindividual ( a salaried employee) for not disclosing income on account of director's sitting fee (Rs. 4 lakh) and short term capital gains on redemption of mutual fund (Rs. 12 lakh) in the return of income for AY 2011-12; ITAT notes that upon confronted by AO, assessee admitted having earned income and immediately filed revised computation of income during the course of assessment proceedings; Further, rejects assessee’s legal plea that notice issued u/s 274 read with Sec. 271(1)(c) does not specify the charge under which penalty proceedings were initiated;

16

[TS-5599-ITAT-2017(Cochin)-O]

Contribution towards an unrecognised Provident Fund not eligible for deduction u/s. 80C(2)

ITAT dismisses assessee’s appeal; Upholds that action of AO in passing orders u/s. 201(1) and 201(1A), making the assessee in default for the short deduction and making it liable for interest; Refers to the definition of a ‘recognised provident fund’ in Sec. 2(38) and holds that the contribution made by the employee was clearly covered under that section and hence, the assessee by allowing deduction towards a contribution therein, failed to make a correct estimate of income of the assessee as required u/s. 192;Rejects assessee’s reliance on decision of Delhi bench of Tribunal in HCL Infosystems Ltd. [TS-5311-ITAT-2004(Delhi)-O]

17

[TS-6207-HC-2017(Rajasthan)-O]

Payment by Hospital to retainer doctors , professional fees and not salary

Also refer to -

[TS-7418-ITAT-2017(Mumbai)-O]

Rajasthan HC reverses ITAT order, holds that payments made by assessee (running a Hospital) to retainer doctors are in the nature of professional fees and not salary, TDS u/s. 194J applicable and not that u/s. 192; Taking note of contrary judgements on the issue, HC holds that “the view which in favour of assessee is to be taken”; Relies on Karnataka HC ruling in Teleradiology Solutions Pvt. Ltd. and Manipal Health Systems Pvt. Ltd., Punjab & Haryana HC ruling in IVY Health Life Sciences Pvt. Ltd. and Bombay HC ruling in Grant Medical Foundation

18

[TS-6055-ITAT-2016(Bangalore)-O]

Fixed remuneration to consultant–doctors constitutes salary, TDS u/s 194J inapplicable

Bangalore ITAT dismisses assessee’s (engaged in health-care business) appeal for AYs 2011-12 to 2013-14, holds that payment of remuneration to consultant doctors (i.e. in-house and visiting consultants) constitutes salary, TDS u/s 192 and not 194J applicable; On perusal of agreement entered between assessee and consultant doctors, notes that remuneration was fixed irrespective of number of patients attended by the consultant doctors, also notes that consultant doctors were working with the assessee for a minimum period of 5 years from the date of joining; Observes that in case consultant doctor left the hospital within a period of 2 years, such doctors were barred from working in Bangalore District for a period of 2 years from the date of leaving, also takes note of restrictions placed on consultant doctor from undertaking any professional work/ assignment in other hospital without assessee’s prior consent; Relies on Karnataka HC ruling in Manipal Health System (P) Ltd. and Bombay HC in Grant Medical Foundation to hold that “there is no independence to the consultant doctors, their working hours and service conditions are under the direct control and superintendence of the assessee” thereby making assessee’s contract with consultant doctors a “contract of service”; Separately dismissing Revenue’s appeal, holds that remuneration paid to visiting doctors is subject to deduction u/s 194J as remuneration was variable with number of patients attended by the doctors

19

[TS-5130-HC-2016(Bombay)-O]

Non-compete agreement, a subterfuge to reduce tax implication; Amount taxable as salary

Non-compete agreement, a subterfuge to reduce tax implication; Amount taxable as salary - HC upholds ITAT order, non-compete fee received by assessee-individual from employer-company at the time of retiring from service at the age of 81 years, taxable as profit in lieu of salary u/s 17(ii) for AY 2002-03; Though non-compete fee is not taxable in view of SC ruling in Guffic Chem Pvt. Ltd., but HC observes that in present case assessee received non-compete amount in tranches not only before retirement but also before the date of non-compete agreement; Further notes that assessee did not protest against TDS deducted by employer company while making non-compete fee payment, remarks that "This itself evidences the fact that the Appellant accepts the fact that payment is not for noncompete fees"; Takes note of other aspects like assessee’s age, odd payment amount, assessee’s appointment as an advisor even after retirement - which indicated that arrangement was an afterthought to reduce tax implication; In view of above, HC accepts Revenue’s stand that non-compete agreement “is a subterfuge to colour an amount received in lieu of salary as noncompete fees so as not to pay tax on the same.”

20

[TS-5207-HC-2016(Karnataka)-O]

Per-diem allowance not subject to Sec 192 TDS, Expense-verification failure cant alter ‘reimbursement’ nature

Karnataka HC confirms ITAT order, holds that assessee-company (‘employer’) not liable to deduct TDS u/s 192 on per diem allowances paid to employees for overseas business-trips during AY 2009-10; Rejects Revenue’s stand that since allowance was paid without verification of expenses incurred by employee concerned, the payment cannot be treated as reimbursement so as to treat it as exempt u/s 10(14), hence amount should be held taxable as perquisite; Upholds ITAT’s reliance on Kolkata ITAT ruling in Saptarshi Ghosh and circulars issued by Ministry of External Affairs instructing that if amount paid as per diem allowance was not highly disproportionate or unreasonable, further verification of actual expenditure not required; HC rules that “When the payment is made to meet the expenses incurred and when not taxable u/s 10(14) of the Act merely because the actual expenses were not verified, the character or nature of the payment would not be changed so as to include u/s 17(2) of the Act.”

21

[TS-5369-HC-2016(Madras)-O]

No TDS on salaries to priests/nuns where church-authorities are ultimate beneficiaries

Madras HC holds that assessee (a catholic school employing religious Priests/nuns) not liable to deduct TDS on salaries to priests/nuns; Accepts assessee’s submission that since the ultimate beneficiary of the income were the tax- exempt church authorities (i.e. Congregation) and not priests/nuns, there was no liability on assessee to deduct TDS.

22.

[TS-6833-ITAT-2018(Mumbai)-O]

Value of interest free unsecured loan obtained from employer taxable as perquisite u/s. 17(iii)(c)

ITAT dismisses assessee’s appeal; Upholds AO’s action of determining the value of perquisite in respect of interest free unsecured loan obtained by assessee-employee from her employer; AO observed that value of benefit obtained by an employee is assessable as perquisite u/s. 17(iii)(c) and brought to tax notional interest on the loan in hands of the employee; However, accepts CIT(A)’s ruling that in determining the value of the perquisite, AO erred in adopting adhoc rate of 15% and not following rule 3(7)(i) which provides for SBI rate as on 1st day of the relevant previous year as the basis;  Thereby upholds CIT(A)’s action of reducing the taxable amount of perquisite; Rejects assessee’s claim that no employer-employee relationship existed in view of observations by the AO that assessee had drawn salary from the employer firm and the firm had deducted tax at source and issued Form 16.