THE COMMISSIONER OF INCOME TAX and ORS vs. HYUNDAI HEAVY INDUSTRIES CO.

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ITA/14/2003HC UttarakhandUKHC01009108200309 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court, referring to its earlier decision in the case of Commissioner of Income Tax and another Vs. Sedco Forex International Drilling Co. Ltd., held that the free accommodation, food, and beverages provided on board a rig in high seas are a necessity due to the hazardous, arduous, and continuous nature of the work. Therefore, such facilities cannot be considered a luxury or a perquisite. Consequently, the Department was not justified in levying interest under Section 201/201(1-A) of the Income-Tax Act on the employer. The questions of law were answered in the affirmative, in favor of the assessee and against the Department. The appeal was dismissed.

What were the facts?

The appeal was filed by the Commissioner of Income Tax and Dy. Commissioner of Income Tax, Dehradun (the Revenue) against an order dated 22.03.2002 passed by the Income Tax Appellate Tribunal (Delhi Bench 'D'), New Delhi. The dispute pertains to Assessment Year 1998-99. The assessee is Hundai Heavy Industries Co. Ltd. The core issue revolves around the taxability of free accommodation provided to employees on board a rig in high seas. The Tribunal had held that this accommodation was not a perquisite, leading to the Revenue's challenge.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was legally justified in holding that free accommodation facility provided by the employer on board the rig in high seas cannot be construed as a perquisite? (Question of law) 2. Whether, on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was legally justified in holding that no perquisite arose on account of free accommodation facility provided by the employer to its employee, and the Assessment Authority was not justified in charging interest under Section 201/201(1A) of the Income Tax Act? (Question of mixed law and fact, turning on Section 201/201(1A)) Assessee's contentions: Not recorded in the judgment. Revenue's contentions: Not recorded in the judgment. The judgment refers to a previous decision in Commissioner of Income Tax and another Vs. Sedco Forex International Drilling Co. Ltd. for reasoning.

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 NAINITAL

Income Tax Appeal No.14 of 2003

1.

The Commissioner of Income Tax, Dehradun.

2.

Dy. Commissioner of Income Tax, Special Range, Dehradun

………. Appellants

Versus

Hundai Heavy Industries Co. Ltd., Commerce Centre, 17th Floor, Cuffe Parade, Mumbai

… Respondent

Dated: December 09, 2005

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

Coram: Hon. P.C. Verma, J. Hon. J.C.S. Rawat, J.

This appeal is against the order-dated 22.03.2002, passed by the Income Tax Appellate Tribunal, (Delhi Bench ‘D’ New Delhi) in ITA No.4553(Del) of 2000. The dispute relates to the Assessment Year 1998-99. 2. The substantial questions of law raised in the appeal are as follows:

1.

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

2.

“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 its employee and the Assessment Authority was not justified in charging interest under Section 201/201(1A) of the Income Tax Act?”

3.

9th October, 2003; the reasoning regarding these questions are given as under:-

In this case, assessee 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 favor of the assessee and against the Department.

5.

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

(J.C.S. Rawat, J.) (P.C. Verma, J.) Rajeev Dang

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