COMMISSIONER INCOME TAX vs. M/S HUGHES SERVICES

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ITA/354/2000HC UttarakhandUKHC01025256200330 December 2003Author: OTHER3 pages
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What did the High Court hold?

The High Court held in favour of the assessee on both issues. Regarding the first issue, it affirmed the ITAT's finding that free food and beverages provided on board a rig, where the work was hazardous, arduous, and continuous, constitute a necessity rather than a luxury or a perquisite, and therefore, their value cannot be added to the assessee's income. For the second issue, the Court held that interest under Section 234B is compensatory in nature. It reasoned that while Section 191 is not overridden by Sections 192, 208, and 209(1)(a)(d), the scheme of Sections 208 and 209 requires an assessee to estimate current income and calculate advance tax, reducing it by tax deductible at source. Since the employer did not deduct tax at source as required by law, and there were conflicting Tribunal decisions at the time, the assessee could not be faulted for not estimating income and paying advance tax accordingly. Therefore, imposing interest under Section 234B without proper hearing and reasons was not justified. The appeal was disposed of answering both questions in the affirmative, in favour of the assessee.

What were the facts?

This appeal concerns Assessment Year 1989-90. The appellants are the Commissioner of Income Tax, Meerut, and another authority. The respondent is M/s Hughes Services (Far East) Pvt. Ltd., acting as an agent for Mr. Lamb C.H.D. The appeal challenges an order passed by the Income Tax Appellate Tribunal (ITAT). The procedural history indicates that this matter is squarely covered by a previous decision of the High Court dated October 9, 2003, in Income Tax Act Appeal No. 57 of 2002, involving the Commissioner of Income Tax, Dehradun, and SEDCO Forex International Drilling Co. Ltd. The dispute pertains to the taxability of certain benefits and the levy of interest.

What were the issues?

The Tribunal was asked to decide two questions of law: 1. Whether the ITAT was legally justified in holding that free boarding and lodging facilities provided by the employer on board a rig in the high seas cannot be construed as a perquisite, turning on the interpretation of provisions related to perquisites under the Income Tax Act. 2. Whether the ITAT was legally justified in holding that interest under Section 234B of the Income Tax Act cannot be charged when the entire income of the assessee was subject to Tax Deducted at Source (TDS), and whether this interest is chargeable on assessed tax as defined by Explanation I below Section 234B. The appellants (Revenue) did not present specific arguments in this judgment, as the matter was stated to be covered by a prior decision. The respondent (Assessee) implicitly supported the ITAT's findings, as the High Court ultimately ruled in their favour. The judgment references the reasoning from the prior case of SEDCO Forex International Drilling Co. Ltd. for both questions.

Which sections of the Income-tax Act were involved?

Section 234B,Section 191,Section 192,Section 208,Section 209

AI-generated summary — verify with the full judgment below

Assessment Year 1989-90

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 67 of 2001 (Old No. 354/2000)

The Commissioner of Income Tax, Meerut and another

............ Appellants

Versus

M/s Hughes Services (Far East) Pvt. Ltd., As a agent of Mr. Lamb C.H.D., Dehradun.

................ Respondent

Mr. S.K. Posti, Advocate for 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 legally justified in holding that free boarding and lodging facilities provided by the employer 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 legally justified in holding that interest u/s 234-B of the IT Act cannot be charged since the entire income of the assessee was subject to TDS whereas this interest is

chargeable on assessed tax as defined by Explanation I below section 234-B?

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., the reasoning regarding question No. 1 is 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.” The reasoning regarding question No. 2 is as under:

“In this connection it is important to note that section 234B 215-ITR-758 at page 766). Secondly, although section 191 of the Act is not over-ridden by sections 192, 208 & 209(1)(a)(d) of the Act, the scheme of sections 208 & 209 of the Act indicates that in order to compute advance tax the assessee has to interalia estimate his current income and calculate the tax on such income by applying the rates in force. Thus u/s 209 (1)(d) the income-tax calculated is to be reduced by the amount of tax which would be deductible at source or collectible at source, which in this case has not been done by the employer company according to the law prevailing for which the assessee cannot be faulted. As stated above at the relevant time there were conflicting decisions of the Tribunal. A bonafide dispute was pending. The assessee had to estimate his current income. The words used u/s 209(1)(a) makes the Assessee estimate his current income and since a bonafide dispute was pending, imposition of interest u/s 234B was not justified without hearing and without reasons. Accordingly, we answer this question in the affirmative i.e. in favour of the assessee and against the department.”

For the reasons aforesaid, we answer both the above questions in the affirmative i.e. in favour of the asseessee 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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