COMMISIONER OF INCOME TAX vs. READING and BATES

ITA/543/2001HC UttarakhandUKHC01002836200420 July 2004Author: OTHER2 pages

AI SummaryAllowed

What did the High Court hold?

The High Court held that the free food and beverages provided to the assessee were a necessity, not a luxury, given that the assessee had to work on a rig which was hazardous, arduous, and continuous. Therefore, the value of these facilities could not be added to the assessee's income. The Court answered the question in the affirmative, in favour of the assessee and against the department. The appeal was disposed of accordingly, with no order as to costs. The principle established is that essential provisions for employees working in arduous and continuous conditions, such as on a rig, are not to be treated as taxable perquisites.

What were the facts?

The appeal by the Revenue (Commissioner of Income Tax, Dehradun) is against the order dated 20.03.2001 passed by the Income Tax Appellate Tribunal (ITAT), New Delhi. The assessee, Mr. R.J. Temple, is a non-resident foreign technician employed by Reading and Bates Exploration Company, which had executed contracts in India. The assessee derived income from salaries during the assessment year 1993-94. The core issue revolves around the taxability of free boarding and lodging facilities provided to the assessee at a rig in high seas.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was legally justified in holding that free boarding and lodging facilities provided by the employer at the rig in high seas cannot be construed to be a perquisite? (Question of law, concerning the definition of perquisite under the Income Tax Act, 1961). Assessee's Contention: The judgment does not explicitly record the assessee's arguments. However, the reasoning implies that the assessee likely argued that the facilities were a necessity due to the nature of the work. Revenue's Contention: The judgment does not explicitly record the Revenue's arguments. However, the appeal itself indicates the Revenue's disagreement with the ITAT's finding that the facilities were not perquisites.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

Assessment Year 1993-94

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 543 of 2001

The Commissioner of Income Tax, Dehradun and another

……… Appellants

Versus

Readings & Bates Exploration Co., As agent of Mr. R.J. Temple, C/o Arthur Anderson & Co., 426, World Trade Centre, Barakhamba Lane, New Delhi ……… Respondent

Mr. S.K. Posti, learned counsel for the Tax Department. Ms. Krishi Shukla, learned counsel for the respondent.

Date: 20.07.2004

Hon’ble P.C. Verma, A.C.J. Hon’ble P.C. Pant, J.

This is an appeal under section 260A of the Income Tax Act, 1961 filed by the Revenue against the judgment and order dated 20.03.2001 passed by the Income Tax Appellate Tribunal, New Delhi in I.T.A. Nos. 6436/Del/1995. 2. Mr. R.J. Temple, respondent is a non-resident foreign technician employed by a foreign company, Reading and Bates Exploration Company which, in the year under consideration, executed contracts in India. During the year under consideration, respondent was in employment of this company and thus derived income from ‘salaries’ from it.

The questions raised before us is as follows:-

QUESTIONS:

Whether on the facts and in the circumstances of the case, the ITAT was legally justified in holding that free

boarding and lodging facilities provided by the employer at the rig in high seas cannot be construed to be perquisite?

Heard learned counsel for the parties and perused the record.

As this Court has discussed in Income Tax Act Appeal No. 57 of 2002; The Commissioner of Income Tax, Dehradun & another V/s SEDCO Forex International Drilling Co. Ltd., decided on 9th October 2003, the reasoning regarding question is given in the following paragraphs:

The reasoning regarding aforesaid question is as under:

In this case, assessee had to work on the rig. It was hazardous, arduous and continuous. Under such circumstances free food and beverages in a necessity. It is not a luxury. It is not a perquisite. Its value cannot be added to the income of the assessee.

For the reasons aforesaid, we answer the above mentioned question in the affirmative i.e. in favour of the assessee and against the department.

11.

Appeal disposed of accordingly. No order as to costs.

(P.C. Pant, J.)

(P.C. Verma, A.C.J.)

H. Negi

Recent GST High Court judgments

Search GST case law →