Commissioner Of Income Tax (Tds) vs Asian Hotels Ltd.
2007 Latest Caselaw 720 Del

JUDGMENT

Madan B. Lokur, J.

1. The Revenue is aggrieved by an order dated 28th June, 2005 passed by the Income Tax Appellate Tribunal, Delhi Bench F in ITA Nos. 1629 to 1636(Del)/2001 and ITA Nos. 1657 to 1664(Del)/2001 relevant for the assessment years 1990-91 to 1997-98.

2. The assessed is running a hotel under the name and style of Hyatt Regency at Bhikaji Cama Place, New Delhi. The assessed entered into an agreement with M/s Hyatt of Hong Kong Ltd. and under this agreement some expatriates were deputed to assist the assessed in better management of the hotel. For the services of these expatriates, the assessed was required to make some payment, one of the heads being per diem payment. According to the agreement, the assessed was to make the payment to M/s Hyatt of Hong Kong Ltd. and not to each individual expatriate.

3. The assessed was of the view that while it was liable to deduct tax at source on the per diem payment, it was not very clear about the rate. Accordingly, the assessed applied to the Assessing Officer and a No Objection Certificate was given (we are told) for as many as six financial years and each certificate mentioned that TDS at 30% was required to be deducted in terms of Section 115A of the Income Tax Act, 1961 since the expatriates were being paid a fee for rendering technical services.

4. On 23rd September, 1998 a survey was conducted in the office premises of the assessed and the Assessing Officer was of the view that the assessed had short deducted tax on the per diem payments. The short deduction was worked out and the assessed paid the entire short deduction as well as interest thereon, apparently to buy peace.

5. Thereafter the Assessing Officer initiated penalty proceedings against the assessed under Section 271C of the Act. This was resisted by the assessed in view of the facts mentioned above.

6. One of the issues that came up for consideration before the departmental authorities was whether the expatriates were employees of the assessed or whether there was some sort of an employer-employee relationship between the assessed and the expatriates. It was pointed out by the assessed that payments were made to M/s Hyatt of Hong Kong Ltd. and so there was no employer-employee relationship between the parties. It was also pointed out that the agreement with M/s Hyatt of Hong Kong Ltd. as well as the No Objection Certificates were placed before the Assessing Officer and that there was no question of the assessed having misrepresented any facts or concealed any facts from the Assessing Officer. It was submitted that the Department took the view that the per diem payment was a fee for technical services but after the survey, the Department appears to have changed its stand and come to the conclusion that the per diem payment was by way of salary.

7. On these broad facts and contentions, the Tribunal considered the question whether the assessed had no reasonable cause to deduct tax at source in full as claimed by the Revenue. While doing so, the Tribunal concluded that there was no employer-employee relationship between the assessed and the expatriates in terms of the agreement. It was accepted by the Tribunal that M/s Hyatt of Hong Kong Ltd. had only extended its world wide facilities and services to the assessed. The Tribunal also accepted that all the relevant primary facts had been placed before the Assessing Officer by the assessed including the agreement between the parties as well as the No Objection Certificates. In view of these facts, the Tribunal held that the bona fides of the assessed were quite clear and that there was no reason for the Revenue to levy penalty upon the assessed. Accordingly the penalty levied by the Assessing Officer as well as by the Commissioner of Income Tax (Appeals) was deleted.

8. From the facts that we have narrated above, it appears that no substantial question of law arises for our consideration. The assessed's case clearly appears to be based on the various No Objection Certificates issued on as many as six occasions. All the primary facts were placed before the Assessing Officer including the agreement that the assessed had with M/s Hyatt of Hong Kong Ltd. and on a consideration of various factors, the Tribunal came to the conclusion that there was no employer-employee relationship between the assessed and the expatriates and the per diem payments were not made by the assessed to any of the expatriates but only to their employer M/s Hyatt of Hong Kong Ltd.

9. We are of the view that the conclusions arrived at by the Tribunal are factual conclusions based on adequate material. We do not find the conclusions to be perverse, but legitimately based on the material on record.

10. The appeal is dismissed.