What did the Tribunal hold?

The Tribunal held that deductions made by the employer towards future benefits are part of the salary and thus, the gross salary income is taxable. The Tribunal followed its own earlier decisions on identical issues for the same assessees in preceding assessment years.

The assessees received gross salary from a Swiss employer, but offered only the net salary after certain deductions for pension, insurance, etc., to tax. The Assessing Officer treated the gross salary as taxable income, which was upheld by the CIT(A).

What were the issues?

Whether deductions made by an employer from gross salary for pension, insurance, etc., constitute diversion of income at source or are part of taxable salary income.

Shri Ravinder Kumar, New Delhi vs DCIT | ITAT Delhi 2022

Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI

Before: SHRI G.S. PANNU, HON’BLE & SHRI SAKTIJIT DEY

Hearing: 19.10.2022Pronounced: 26.12.2022

order for the sake of convenience.

The common dispute in both the appeals relate to the additions made to the salary income. Briefly the facts, more or less common in both the appeals are, the assessees are resident individuals. Both the assessees were in employment with M/s.

San Lorenzo AG, Switzerland. In the year under consideration, Sh. Ravinder Kumar received gross salary of CHF 1,30,000/-.

Whereas, Smt. Rita Kumari received salary of CHF 97,499/-. In course of assessment proceedings, the Assessing Officer, while examining the returns of income filed by both the assessees, noticed that the salary income offered by the assessees are lesser than the amount received. On further verification, he found that the employer had made various deductions, such as, federal pension fund, fixed cantonal charges, insurance etc. After reducing the deductions made by the employer, the assessees have offered the net salary income. When the Assessing Officer called upon the assessee to explain, why the gross salary income received by the assessee should not be taxed, the assessee submitted that the salary was received net of deductions. Hence, the net salary income is taxable. Proceeding further, the assessee 2 | P a g e submitted that since, the deductions made are diversion of income at the source itself, they cannot be included in the salary income of the assessee for taxation purposes. The Assessing Officer, however, was not convinced with the submissions of the assessee and brought the gross salary income to tax. The decision of the Assessing Officer was confirmed by learned Commissioner (Appeals).

Before us, learned counsel appearing for the assessee reiterated the stand taken before the departmental authorities.

However, he fairly submitted that the Tribunal has decided identical issue against the assessees in the preceding assessment years.

Learned Departmental Representative submitted, in assessees’ own case in assessment years 2010-11 and 2011-12, the issue has been decided against the assessees by the Tribunal.

We have considered rival submissions and perused the materials on record. Undisputedly, from the gross salary income received by the assessee certain deductions were made by the employer towards federal pension, fixed cantonal charges, insurance etc. The deductions made by the employer were reduced from the gross salary income by the assessees and net salary income was offered to tax.

In this regard, the submissions of the assessees are, since the employer had deducted the amount in dispute at the source, it will amount to diversion of income at source as the assessee never received such amount as part of salary. We are not convinced with the aforesaid submissions of the assessee. From the nature of deduction made by the employer, it is very much clear that from the salary income certain amounts were deducted towards the future benefits of the assessees. Therefore, such deductions certainly are part of the salary received by the assessee. That being the case, the salary income has to be taxed on gross basis. It is observed, identical issue came up for consideration before the Tribunal in case of the concerned assessees in the preceding assessment years i.e. assessment years 2007-08 and 2010-11. While deciding the issue, the Tribunal in order dated 04.08.2017 in and Ors. and ITA No. 5308 to 5310/Del/2014, dated 19.09.2017 has decided the issue against the assessee by holding that the gross salary income received by the assessee is taxable. There being no difference either in factual or legal position in the 4 | P a g e impugned assessment year respectfully following the earlier decisions of the Coordinate Bench, we uphold the additions made in respect of both the assessees. Grounds raised are dismissed.

In the result, the appeals are dismissed.

Order pronounced in the open court on 26th December, 2022

SHRI RAVINDER KUMAR,NEW DELHI vs. DCIT, NEW DELHI

What did the Tribunal hold?

What were the facts?

What were the issues?

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