THE COMMISSIONER OF INCOME TAX vs. O.N.G.C. AS AGENT OF M/S HYUNDAI HEAVY INDUSTRIAL

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ITA/514/2001HC UttarakhandUKHC01009202200305 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court, in its decision, referred to its prior ruling in the case of Commissioner of Income Tax and another Vs. Sedco Forex International Drilling Co. Ltd. The reasoning provided was that the assessee had to work on a rig, which involved hazardous, arduous, and continuous duty. Under such circumstances, free accommodation, food, and beverages were considered a necessity, not a luxury or a perquisite. Therefore, the Department was not justified in levying interest on the employer under Section 201/201(1-A) of the Income-Tax Act. The questions of law were answered in the affirmative, in favour 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 against an order dated 08.02.2001 passed by the Income Tax Appellate Tribunal (Delhi Bench 'C') in ITA No.2161(Del) of 1993. The dispute pertains to the Assessment Year 1992-93. The assessee is ONGC, acting as an agent for M/s Hundai Heavy Industrial Ltd. The core of the dispute involves whether free boarding and lodging facilities provided by the employer on board a rig in the high seas constitute a perquisite, and consequently, whether interest under Section 201(1A) of the Income Tax Act was leviable.

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 boarding and lodging facilities 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 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(1A) of the I.T. Act? (Question of mixed law and fact, concerning Section 201(1A)) Assessee's contentions: Not recorded. Revenue's contentions: Not recorded. 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.514 of 2001

1.

The Commissioner of Income Tax, Meerut.

2.

Dy. Commissioner of Income Tax, Special Range(1), Dehradun …..Appellants

Versus

ONGC as agent of M/s Hundai Heavy Industrial Ltd., Dehradun …Respondents

Dated: December 05, 2005

Mr. S.K. Posti, Advocate for the appellants. Mr. J.P. Joshi, learned counsel for respondents.

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

This appeal is against the order dated 08.02.2001, passed by the Income Tax Appellate Tribunal, (Delhi Bench ‘C’ New Delhi) in ITA No.2161(Del) of 1993. The dispute relates to the Assessment Year 1992-93. 2. The substantial questions of law raised in the appeal is as follows:

“Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was legally justified in holding the free boarding and lodging facilities provided by the employer 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.

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 favour 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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