THE COMMISSIONER OF INCOME TAX vs. SAIPEM SPA AS AGENT OF MR. STRINATI ANTONIO

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ITA/315/2000HC UttarakhandUKHC01015092200401 July 2004Author: OTHER3 pages
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What did the High Court hold?

The High Court upheld the ITAT's decision on both issues. Regarding the first question, the Court reasoned that the assessee had to work on a rig which was hazardous, arduous, and continuous. Under such circumstances, free food and beverages were considered a necessity, not a luxury or a perquisite, and therefore, their value could not be added to the assessee's income. For the second question, the Court noted that Section 234B imposes compensatory interest. While Section 191 is not overridden by Sections 192, 208, and 209(1)(a)(d), the scheme of Sections 208 and 209 indicates that an assessee estimates current income and calculates tax. Section 209(1)(d) requires reducing the calculated income-tax by the amount deductible at source, which was not done by the employer. The Court acknowledged conflicting Tribunal decisions at the time and a pending bonafide dispute. It concluded that imposing interest under Section 234B was not justified without hearing and without reasons, especially when the assessee had to estimate current income and a bonafide dispute was pending. Both questions were answered in the affirmative, in favour of the assessee.

What were the facts?

The Revenue, represented by the Commissioner of Income Tax, Meerut, filed an appeal under Section 260A of the Income Tax Act, 1961, against a judgment and order dated March 22, 2000, passed by the Income Tax Appellate Tribunal (ITAT), New Delhi. The appeal pertains to Assessment Year 1990-91. The respondent, Mr. Strinati Antonio, is a non-resident foreign technician employed by Saipem SPA, a foreign company. The core of the dispute involves whether free boarding and lodging provided to the technician on a rig at high seas constitute a perquisite, and whether interest under Section 234B of the Act was correctly charged when the assessee's entire income was subject to Tax Deducted at Source (TDS).

What were the issues?

The Tribunal was asked to decide two questions of law: 1. Whether, on the facts and in the circumstances of the case, the learned ITAT was legally justified in holding that free boarding and lodging facilities provided by the employer on board and rig in high seas cannot be construed to be a perquisite, turning on the interpretation of 'perquisite' under the Income Tax Act. 2. Whether, on the facts and circumstances of the case, the learned ITAT was legally justified in holding that interest under Section 234B of the IT Act cannot be charged since the entire income of the assessee was subject to TDS, whereas this interest is chargeable on assessed tax as defined by Explanation I below Section 234B, concerning the applicability of Section 234B in conjunction with TDS provisions and the calculation of advance tax. Assessee's Contentions: The judgment does not explicitly record the assessee's arguments. However, the ITAT's reasoning implies the assessee argued that the facilities were a necessity due to hazardous work and that interest under Section 234B was not leviable due to TDS and bonafide disputes. Revenue's Contentions: The judgment does not explicitly record the revenue's arguments. However, the appeal filed by the Revenue suggests they contended that the free boarding and lodging were perquisites and that interest under Section 234B was correctly charged.

Which sections of the Income-tax Act were involved?

Section 260A,Section 234B,Section 191,Section 192,Section 208,Section 209

AI-generated summary — verify with the full judgment below

Assessment Year 1990-91

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 459 of 2001 (Old No. 315/2000)

The Commissioner of Income Tax, Meerut and another

……… Appellants

Versus

Saipem SPA as agent of Mr. Strinati Antonio, Arthur Anderson & Co., Bombay.

……… Respondent

Mr. S.K. Posti, Advocate for appellants.

Date: 01.07.2004 Hon’ble P.C. Verma, A.C.J. Hon’ble P.C. Pant, J.

1.

This is an appeal under section 260A of the Income Tax Act, 1961 filed by the Revenue against the judgment and order dated 22.03.2000 passed by the Income Tax Appellate Tribunal, New Delhi in I.T.A. Nos. 4579/D/1993. 2. Mr. Strinati Antonio, respondent is a non-resident foreign technician employed by a foreign company, Saipem SPA.

3.

The questions raised before us are as follows:-

QUESTIONS:

(1.) Whether on the facts and in the circumstances of the case the Ld. ITAT was legally justified in holding that free boarding and lodging facilities provided by the employer on board and rig in high seas cannot be construed to be perquisite?

2.

Whether on the facts and circumstances of the case, the Ld. ITAT was legally justified in holding that interest u/s 234-B of the IT Act cannot be charged since the entire income of the assessee was subject to TDS whereas this interest is

chargeable on assessed tax as defined by Explanation I below Section 234-B?

4.

Heard learned counsel for the parties and perused the record.

5.

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., the reasoning regarding question No. 1 is given 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 is a necessity. It is not a luxury. It is not a perquisite. Its value cannot be added to the income of the assessee.

6.

The reasoning regarding question No. 2 is as under:

It is important to note that section 234B imposes interest, which is compensatory in nature and not as a penalty (See Union Home Products Vs Union of India reported in 215- ITR-758 at page 766). Secondly, although section 191 of the Act is not over-ridden by sections 192, 208 & 209(1)(a)(d) of the Act, the scheme of sections 208 & 209 of the Act indicates that in order to compute advance tax the assessee has to interalia estimate his current income and calculate the tax on such income by applying the rates in force. That u/s 209(1)(d) the income-tax calculated is to be reduced by the amount of tax which would be deductible at source or collectible at source, which in this case has not been done by the employer company according to the law prevailing for which the assessee cannot be faulted. As stated above at the relevant time there were conflicting decisions of the Tribunal. A bonafide dispute was pending. The assessee had to estimate his current income. The words used u/s 209(1)(a) makes the Assessee estimate his current income and since a bonafide dispute was pending, imposition of interest u/s 234B was not justified without hearing and without reasons. Accordingly, we

answer this question in the affirmative i.e. in favour of the assessee and against the department.

7.

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

8.

Appeal disposed of accordingly. No order as to costs.

(P.C. Pant, J.)

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

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