THE COMMISSIONER OF INCOME TAX vs. M/S HUGES SERVICES FE PVT. LTD.

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ITA/515/2001HC UttarakhandUKHC01002929200330 December 2003Author: OTHER3 pages
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What did the High Court hold?

The High Court held that the matter was squarely covered by its previous decision dated 9th October 2003 in Income Tax Act Appeal No. 57 of 2002, Commissioner of Income Tax, Dehradun & another V/s SEDCO Forex International Drilling Co. Ltd. In that precedent, the Court had held that free food and beverages provided on a rig, where work was hazardous, arduous, and continuous, constituted a necessity and not a luxury or a perquisite, and its value could not be added to the employee's income. Applying this reasoning, the High Court answered both questions in the affirmative, in favour of the assessee and against the Department. The Court found that the free accommodation facility provided on the rig was a necessity due to the nature of the work and thus not a perquisite. Consequently, the assessment authority was not justified in charging interest under Section 201(1A).

What were the facts?

The Commissioner of Income-Tax, Dehradun (the Revenue) filed an appeal against the order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 1991-92. The appeal was filed by the Commissioner of Income-Tax and another against M/s Hughes Services (Far East) Pvt. Ltd., acting as the agent of Mr. De Passos F. The core of the dispute concerns the taxability of free accommodation provided to an employee on board a rig in high seas. The ITAT had previously ruled that this facility did not constitute a perquisite. The High Court was considering whether the ITAT's decision was justified and whether interest under Section 201(1A) of the Income Tax Act was applicable.

What were the issues?

1. Whether on the facts and circumstances of the case, the Ld. ITAT was not justified in holding that free accommodation facility provided by the employer to its employee on board the rig in high seas cannot be construed to be a perquisite? (Question of law and fact, concerning the definition of perquisite under the Income Tax Act). 2. Whether on the facts and circumstances of the case, the Ld. ITAT 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 u/s 201(1A) of the IT Act? (Question of law, concerning the applicability of Section 201(1A) based on the perquisite determination). Assessee's Contention: The judgment does not explicitly record arguments made by the assessee. However, the questions posed by the court imply that the assessee would have argued in favour of the ITAT's decision that the accommodation was not a perquisite. Revenue's Contention: The Revenue contended that the ITAT was not justified in its holding and that the assessment authority was justified in charging interest under Section 201(1A). The Revenue likely argued that the free accommodation constituted a perquisite taxable in the hands of the employee and consequently, the employer (as agent) was liable for tax and interest.

Which sections of the Income-tax Act were involved?

Section 201(1A)

AI-generated summary — verify with the full judgment below

Assessment Year 1991-92 IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL Income Tax Appeal No. 515 of 2001 The Commissioner of Income-Tax, Dehradun and another

………………. Appellants

Versus

M/s Hughes Services (Far East) Pvt. Ltd., As agent of Mr. De Passos F, Dehradun

…………… Respondent

Mr. S.K. Posti, Advocate for the appellants. Mr. V.K. Bist., Advocate for the respondent.

Coram: Hon’ble P.C. Verma, A.C.J.

Hon’ble Rajesh Tandon, J.

Date: 30.12.2003

PC:-

The matter is squarely covered by our decision dated 9th October 2003 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 questions raised before us are as follows:-

QUESTIONS:

1.

Whether on the facts and circumstances of the case the Ld. ITAT was not justified in holding that free accommodation facility provided by the employer to its employee on board the rig in high seas cannot be construed to be perquisite?

2.

Whether on the facts and circumstances of the case, the Ld. ITAT 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 u/s 2019A) of the IT Act? In our decision dated 9th October 2003 in Income Tax Act Appeal No. 57 of 2002; The Commissioner of Income Tax, Dehradun & another V/s SEDCO Forex International Drilling Co. Ltd., it has been held 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.”

For the reasons aforesaid, we answer both the above questions in the affirmative i.e. in favour of the assessee and against the department. Appeal disposed of. No order as to costs.

(Rajesh Tandon, J.) (P.C. Verma, A.C.J.) Gur

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