THE COMMISSIONER OF INCOME TAX vs. M/S HUGHES SERVICE

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ITA/550/2001HC UttarakhandUKHC01004917200421 February 2006Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the free accommodation, food, and beverages provided to employees working on the rig were a necessity due to the hazardous, arduous, and continuous nature of the work. It was not considered a luxury or a perquisite. Consequently, the Department cannot levy interest on the employer under Section 201/201(1A) of the Income-Tax Act. The Court answered the questions of law in the affirmative, in favour of the assessee and against the Department. The appeal was dismissed accordingly, with no order as to costs. The specific reasoning for not charging interest for April is linked to the finding that the accommodation was not a perquisite, thus negating the basis for levying interest under Section 201(1A).

What were the facts?

The appeal is filed by the Commissioner of Income Tax and Dy. Commissioner of Income Tax against an order dated January 10, 2001, passed by the Income Tax Appellate Tribunal (Delhi Bench 'C'). The assessment year in dispute is 1991-92. The core of the dispute revolves around the levy of interest under Section 201/201(1A) of the Income Tax Act. The Tribunal's decision was that interest for April of each financial year is not chargeable and that free accommodation provided to employees on a rig in high seas is not a perquisite. The revenue is challenging these findings.

What were the issues?

1. Whether, on the facts and in the circumstances, the Tribunal was legally justified in holding that interest under Section 201/201(1A) of the IT Act for the month of April each financial year is not chargeable, especially considering Section 201(1A) stipulates interest is chargeable from the date tax was deductible? (Question of law) 2. Whether, on the facts and in the circumstances, the Tribunal was legally justified in holding that the free accommodation facility provided by the employer to its employees on board the rig in high seas cannot be construed to be a perquisite? (Question of law) Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The revenue argued that interest under Section 201(1A) is chargeable from the date tax was deductible, implying it should be levied for April. They also contended that free accommodation provided to employees on the rig constitutes a perquisite, and therefore, interest under Section 201(1A) was justified. The revenue's arguments are implicitly challenged by the Tribunal's findings which are being appealed.

Which sections of the Income-tax Act were involved?

Section 201,Section 201(1A)

AI-generated summary — verify with the full judgment below

COURT NO. 2

IN THE HIGH COURT OF UTTARANCHAL AT NAINTIAL

Income Tax Appeal No. 550 of 2001

1.

The Commissioner of Income Tax, Dehradun.

2.

Dy. Commissioner of Income Tax (A), Special-1,

Dehradun .... Appellants Versus

M/s Hughes Services (Far East) Pvt. Ltd. 16-A, Poes Garden, Madras .... Respondents

Dated: February 21, 2006

Mr. P.Maulekhi, Advocate for the appellants.

Coram: Hon. P.C. Verma, J. Hon. B.C. Kandpal, J.

This appeal is against the order dated 10.01.2001, passed by the Income Tax Appellate Tribunal, (Delhi Bench 'C' New Delhi) in TDS No.23(Del) of 1995. The dispute relates to the Assessment Year 1991-92. 2. The substantial questions of law raised in the appeal are as follows:

"Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was legally justified in holding that interest u/s201/201(1A) of I.T. Act for the month of April each financial year is not chargeable, specially in view of the provisions of Section 201 (1A) of I.T. Act, which clearly stipulates that interest is chargeable from the date on which tax was deductible."

Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was legally justified in holding that the free accommodation facility provided by the employer to its employees on board the rig in high seas cannot be construed to be perquisite?"

"Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was not legally justified in holding that no perquisite arose on account of free accommodation facility provided by the employer to it a employee and assessment authority was not justified in charging interest under Section 201 (1A) of the I.T. Act"?

3.

Drilling Co. Ltd. decided on 9th October, 2003; the reasoning regarding these questions are given as under:-

In this case, asseessee had to work on the rig. It was hazardous, arduous and continuous. Under such circumstances, free accommodation, food and beverages is a necessity. It is not a luxury. It is not a perquisite. Therefore, the Department cannot levy interest on the employer under Section 201/201(1-A) of the Income-Tax Act.

4.

In view of the above discussion, the above questions of law are answered in the affirmative i.e. in favour of the assessee and against the Department.

5.

The appeal is dismissed accordingly. No order as to costs.

(B.C. Kandpal, J.) (P.C. Verma, J.) Rajeev Dang

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