Amounts paid directly by the employer to discharge its employees’ income tax liability do not fall within the excluded category of monetary benefits “payable” to the employee; they fall within the included category, under Section 10 (10CC) as amounts paid directly as taxes.

S. RAVINDRA BHAT, J.

1. This common judgment disposes a bunch of appeals in which the court had framed several questions of law. The important questions pertain to the applicability of Section 10 (10CC) of the Income Tax Act; others are whether mandatory social security and medical insurance or benefits paid in the country of the assessee, are taxable. Apart from these, other questions too require consideration and answer.

Question No. 1: Are amounts paid towards income tax by the employer on behalf of the assessee non-monetary perquisites, and do they consequently fall within the scope of Section 10 (10CC) of the Act.

The present issue arises for consideration in ITA Nos. 1990/2010; 450/2012, 534/2010; 1556/2010; 1557/2010; 494/2010; 508/2010; 577/2010; 631/2010; 1912/2010; 528/2011; 212/2009; 15/2010; 408/2010; 528/2011; 351/2010; 635/2010; 1354/2010; 1561/2010; 1912/2010.

Contentions of the revenue

2. This question arises in the above appeals preferred by the Revenue. The assessee in all the cases were recipients or beneficiaries of what can be termed as “tax-free” or “tax paid income”, i.e. the tax arising out of the income earned by them from their non-resident but taxable employers, was borne by the latter.

3. The assessees contended that by virtue of Section 10(10CC), introduced and brought into force in the Statute with effect from 01.04.2002 by the Finance Act, 2003, they were not liable to pay tax on such amounts which constituted the income tax component paid by the employers. It was contended successfully on their behalf before the Income Tax Appellate Tribunal (ITAT) that such amounts fell outside the purview of taxation by virtue of Section 10CC and could not be regarded as “monetary payment” and, therefore, treated as perquisites under Section 17(2) of the Act. The Revenue questions the decision and the logic underlying the Tribunal‘s determination on this aspect.

4. It is contended on behalf of the Revenue by Ms. Rashmi Chopra that the entire scheme of the Act and the interplay between various provisions have to be taken into consideration rather than an appreciation of Section 10(10CC) alone. Elaborating on this, it was urged that for this purpose, the Court would have to consider the provisions under Section 17(2); Section 40A(5); Section 192(1A), Section 195, Section 195(1A) and Section 198. On an overall consideration of these provisions, it was contended, leave no room for doubt that the taxes brought by the employers are in fact monetary payments, the benefit of which can be claimed by the employee for the purpose of computation of income and payment of tax – as a perquisite.

5. It was emphasized that the definition of perquisite under Section 17(2) is inclusive and extends to diverse manner of concessions or benefits which the employee indirectly enjoys. It was submitted that the Parliament was aware of Section 17(2)(iv), which included all manner of liabilities, such as donations “payable” by the assessee yet it chose to restrict the operation of Section 10(10CC) only to the extent of its overriding Section 200 of the Companies Act. In this context, it was further submitted that the element of income tax is in the nature of personal obligation; it was submitted that such personal obligation would necessarily have to be borne by the employee. By private arrangement in individual cases, it might be borne by the employer. Nevertheless, its character as a perquisite does not get extinguished by the mere introduction of Section 10(10CC). If the intention was otherwise, the Parliament would well have amended Section 17(2)(iv). Learned counsel emphasized that the matter could be looked at from yet another angle. Section 10(10CC) operated in an entirely different field in that it could be said to apply in those cases where the employer receives a benefit not through a monetary payment, but by way of reimbursement of the tax body. In other words, if the tax is actually included in the salary, paid to the