C.J. INTERNATIONAL HOTELS LTD. vs. COMMISSIONER OF INCOME TAX

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ITA/679/2016HC DelhiDLHC01169295201627 September 2016Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MS. JUSTICE DEEPA SHARMA2 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed the appeal, setting aside the impugned order of the ITAT. The court noted that the issue had been decided by the Supreme Court in ITC Gurgaon vs. CIT AIR 2016 SC 2127. The Supreme Court held that the amounts received as tips were not tax deductible, and consequently, the assessee could not be treated as an assessee-in-default under Section 201(1A) of the Income Tax Act. The High Court followed this ratio, concluding that the present appeal had to be allowed. The operative direction was to set aside the impugned order.

What were the facts?

The appeal concerns C.J. International Hotels Ltd. (the appellant/assessee) and the Commissioner of Income Tax (the respondent/revenue) for an assessment year not specified. The appellant is challenging an order of the Income Tax Appellate Tribunal (ITAT). The dispute revolves around whether tax was liable to be deducted under Section 192 of the Income Tax Act on service charges and tips collected by the hotel for its employees. The ITAT had previously ruled in favour of the assessee, following a High Court judgment in CIT vs. ITC Ltd. (2011) 338 ITR 598. However, this High Court judgment was subsequently set aside by the Supreme Court in ITC Gurgaon vs. CIT AIR 2016 SC 2127.

What were the issues?

1. Whether tax was liable to be deducted under Section 192 of the Income Tax Act, 1961, on amounts received by the assessee on account of service charges and tips added by customers for the benefit of its employees. Assessee's Contention: The judgment does not record any specific arguments made by the assessee in this appeal. However, it notes that the ITAT had previously followed the High Court's judgment in CIT vs. ITC Ltd. (2011) 338 ITR 598, which supported the assessee's position. Revenue's Contention: The judgment does not record any specific arguments made by the revenue in this appeal. However, it notes that the Supreme Court's decision in ITC Gurgaon vs. CIT AIR 2016 SC 2127, which set aside the High Court's judgment, is relevant to the present case.

Which sections of the Income-tax Act were involved?

Section 192,Section 201(1A)

AI-generated summary — verify with the full judgment below

$~6 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 679/2016

C.J. INTERNATIONAL HOTELS LTD.

..... Appellant

Through : Appearance not given.

versus

COMMISSIONER OF INCOME TAX

..... Respondent Through : Mr. Rahul Kaushik, Sr. Standing Counsel

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MS. JUSTICE DEEPA SHARMA

O R D E R %

27.09.2016

Issue notice. Mr. Rahul Kaushik, Sr. Standing Counsel accepts notice. The question of law urged in this appeal is whether tax was liable to be deducted under Section 192 of the Income Tax Act, towards the amounts received by the assessee on account of service charges and tips added by its customer for the benefit of its employees. At the outset, it is pointed out that this issue engaged the attention of this court in a previous year and is covered by the judgment reported as CIT vs. ITC Ltd. (2011) 338 ITR 598. The ITAT had followed that judgment in the case of the assessee in previous years. The appeals against that judgment were reversed recently by the Supreme Court in its judgment in ITC Gurgaon vs. CIT AIR 2016 SC 2127, and consequently the judgment of

this court was set aside. In view of the ratio of the court that the amounts (tips) were not tax deductible and that consequently, the assessee could not be treated as assessee-in-default under Section 201(1A), the present appeal has to be allowed. The impugned order is accordingly set aside.

S. RAVINDRA BHAT, J

DEEPA SHARMA, J SEPTEMBER 27, 2016 sm

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