Commissioner Of Income-Tax vs Nhk Japan Broadcasting ...
2007 Latest Caselaw 685 Del

JUDGMENT

1. The Revenue is aggrieved by an order dated March 10, 2006, passed by the Income-tax Appellate Tribunal, Delhi Bench "A" in I.T.A. No. 3030 to 3040/Del/2001 relevant for the financial years 1988-89 to 1998-99.

2. The assessed is a Japanese organization set up for of the collection and transmission of news and broadcasting.

3. The assessed pays salary to its employees and also some housing allowance. The controversy before us pertains to citizens tax which, it appears, is a statutory payment required to be made by Japanese citizens.

4. The Assessing Officer included citizens tax as a part of the income of the employees on the ground that it was an amount paid by the assessed to its employees. According to the Assessing Officer, tax on this amount was liable to be deducted by the assessed at source.

5. Feeling aggrieved, the assessed preferred an appeal before the Commissioner of Income-tax (Appeals) and the contention urged was that citizens tax is a statutory levy on all Japanese citizens and is required to be withheld by the employer from the salary of the employee and paid over to the appropriate authority. It was said to be an overriding charge constituting a diversion of income at source from the salary to the extent of the amount payable and, therefore, it ought to be excluded from the computation of the taxable income.

6. While dealing with this argument, the Commissioner accepted the contention that the payment of citizens tax is mandatory for all Japanese citizens and it is required to be withheld by the employer and paid over to the appropriate authority. It was also found that it is a diversion of income in the nature of an overriding statutory charge.

7. Feeling aggrieved by the view taken by the Commissioner, the Revenue preferred an appeal before the Tribunal. By the impugned order, the appeal was dismissed and the Tribunal also came to the conclusion that citizens tax is a statutory levy required to be withheld from the salary of the employee.

8. According to learned Counsel for the Revenue, the view taken both by the Commissioner as well as by the Tribunal is incorrect and that is why this appeal under Section 260A of the Income-tax Act, 1961, has been preferred.

9. During the course of arguments, our attention was invited to the CIT v. Sitaldas Tirathdas . In this case the Supreme Court dealt with a situation of diversion of an amount after it went into the hands of the recipient. While dealing with this situation the Supreme Court held as follows (page 374 ) In our opinion, the true test is whether the amount sought to be deducted, in truth, never reached the assessed as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessed. Where by the obligation income is diverted before it reaches the assessed, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessed, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one's own income, which has been received and is since applied. The first is a case in which the income never reaches the assessed, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable.

10. Citizens tax, with which we are concerned in this appeal, is an amount that never reaches the employee and is, therefore, not a part of his income. The question of deducting tax at source on this amount, therefore, does not arise.

11. Our attention has also been drawn to the fact that two appellate authorities have concurrently found that the assessed had deducted this amount of citizens tax and it was directly paid by the assessed to the concerned authorities in Japan without this amount reaching the hands of the employees.

12. The effect of a concurrent finding has been dealt with in Ishwar Dass Jain v. Sohan Lal . The Supreme Court noted two situations where findings of fact can be interfered with (though under Section 100 of the Code of Civil Procedure which is admittedly in pari materia with Section 260A of the Act). The first situation is when material or relevant evidence is not considered which, if considered, would have led to an opposite conclusion, while the second situation in which interference is permissible is where a finding has been arrived at by placing reliance on inadmissible evidence which if it was omitted, an opposite conclusion was possible. Neither of these two situations arises in the present case. Therefore, on the basis of the decision rendered by the Supreme Court, no substantial question of law would arise on the finding of fact arrived at by the Commissioner and the Tribunal. We may add that no contention is urged that the finding of fact is in any manner perverse, which may warrant interference under Section 260A of the Act.

13. Learned Counsel for the Revenue has submitted that the amount of citizens tax really represents a part of the salary of the employees and, therefore, payment of that amount by the assessed really amounts to a perquisite in the hands of the employee. We are not in agreement with this contention in view of the decision rendered by the Supreme Court in Sitaldas Tirathdas [1961] 41 ITR 367, particularly because the amount does not even come into the hands of the employee at any point of time and is directly diverted by the assessed towards payment of citizens tax.

14. Under the circumstances, we are of the view that no substantial question of law arises for our consideration.

15. The appeal is dismissed.