Western Geco International Ltd. As agent of McInnis John vs Assistant Commissioner of Income Tax

Prafulla C. Pant, J.—These appeals, preferred u/s 260 A of Income Tax Act, 1961, are directed against the order dated 08.06.2007, passed in ITA Nos. 3120 to 3195 /Del/2006 (Assessment Year 2003-04), by Income Tax Appellate Tribunal (for short ITAT), New Delhi Bench ''C'', whereby the appeals of the assessee, have been dismissed.

Heard learned Counsel for the parties.

The questions of law raised in these appeals are as under:

1) Whether the Income Tax Appellate Tribunal erred in law in holding that the appellant/assessee, an employer, who paid Income Tax on the salaries of its employees, is not exempted u/s 10(10CC) of Income Tax Act, 1961?

2) Whether the Income Tax Appellate Tribunal has erred in law in holding that the income tax payable by the appellant on the principle of multiple stage grossing up?

Brief facts of the case are that assessees are employees of Western Geco International Ltd., who filed a return of income on behalf of the employees for the assessment year 2003-04. Return was processed u/s 143(1) of Income Tax Act, 1961. The Assessing Officer (for short A.O.) noticed that no perquisite was included in the income and exemption was claimed u/s 10(10CC) of the Act. After giving opportunity to the parties, the A.O. did not allow the exemption on the perquisite claimed by the assessee, and after applying principle of ''multiple stage grossing up'', the income was assessed at Rs. 13,40,010/-. Aggrieved by said order, the assessees filed the appeals before Commissioner of Income Tax Appeals [for short CIT(A)]. Said authority, vide its order dated 21.07.2006, partly allowed the appeals, whereafter the appeals were preferred by the assessees before ITAT, which were dismissed, vide impugned order dated 08.06.2007.

Clause (10CC) of Section 10 of the Income Tax Act, 1961, provides that in computing total income, in the case of an employee, being an individual deriving income in the nature of a perquisite, not provided for by way of monetary payment, within the meaning of Clause (2) of Section 17, the tax on such income actually paid by his employer on behalf of such employee, (notwithstanding anything contained in Section 200 of Companies Act, 1956), shall not be included.

Learned Counsel for the appellants drew attention of this Court to the fact that a large bench of the same tribunal, has vide its order dated 30.11.2007, passed in ITA No. 1810/Del 2006 (Assessment Year 2004-05) along with 172 other appeals, has considered the issue relating as to whether the tax paid by the employer on the income of the assessee is entitled to exemption u/s 10(10CC) of the Act. The larger bench of ITAT has taken the view that the tax paid by the employer on behalf of the employees, was not a perquisite in the nature of monetary perquisite to its employees, and as such assessees are entitled to exemption u/s 10(10CC) of the Act. The said view taken by the larger bench is contrary to the view taken by the Division Bench of the tribunal in the impugned order.

In the circumstances, without expressing any opinion as to the final merits of the case, we think it just and proper to remand back the matter for reconsideration by the ITAT in the light of the subsequent development, as mentioned above. Accordingly, the impugned order dated 08.06.2007, passed by ITAT New Delhi Bench ''C'' in ITA Nos. 3120 to 3195/Del/2006 (Assessment Year 2003-04), stands set aside. With the above direction, these appeals are disposed of.