| Case ID |
39820c3a-0963-4e1e-9f67-b59d1fbdfdb0 |
| Body |
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| Case Number |
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| Decision Date |
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| Hearing Date |
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| Decision |
The court concluded that the receipt of tips constituted income at the hands of the recipients and was chargeable to the income-tax under the head 'Salaries' under section 15. Consequently, it was obligatory upon the assessees to deduct taxes at source from such payments under section 192. The court, however, provided the benefit of bona fide belief to the assessees for the periods up to the relevant assessment years, meaning they were not liable for penalty under section 201 but were required to pay interest under section 201(1A). |
| Summary |
The case involves the Delhi High Court's decision regarding the taxation of tips received by employees of ITC Ltd. and C.J. International Hotels Ltd. under the Income-tax Act, 1961. The central issue was whether tips paid by customers constitute 'salary' under sections 15 and 17 and if the employers were required to deduct tax at source under section 192. The court held that tips are taxable under 'Salaries' and employers are obliged to deduct tax at source. However, the court recognized the assessees' bona fide belief and exempted them from penalties but mandated payment of interest. This case highlights the interpretation of income as defined under sections 2(24), 15, and 17, emphasizing the inclusion of tips as taxable income. The decision clarifies the obligations of employers in tax deduction at source, impacting entities in the hospitality industry. Keywords: Delhi High Court, Income-tax Act, tips taxation, salary definition, tax deduction at source, bona fide belief, hospitality industry tax obligations. |
| Court |
Delhi High Court
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| Entities Involved |
Commissioner of Income Tax,
ITC Ltd.,
C.J. International Hotels Ltd.
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| Judges |
A.K. SIKRI,
M.L. MEHTA
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| Lawyers |
Ms. Rashmi Chopra,
Ms. Prem Lata Bansal,
Deepak Anand,
Ajay Vohra,
Ms. Kavita Jha,
Somhanth Shukla,
M.S. Syali,
Ms. Madhavi Swaroop,
Ms. Husnal Syali
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| Petitioners |
Commissioner of Income Tax
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| Respondents |
ITC Ltd.
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| Citations |
2011 SLD 2908 = (2011) 338 ITR 598
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| Other Citations |
Nehru Place Hotels Ltd. v. ITO [2008] 173 Taxman 88 (Delhi - Mag.),
Emil Webber v. CIT [1993] 200 ITR 483/67 Taxman 532 (SC),
Ram Bagh Palace Hotel v. Rajasthan Hotel Workers' Union, Jaipur AIR 1976 SC 2303,
Quality Inn Southern Star v. The Regional Director, Employees' State Insurance Corpn. [Civil Appeal No. 1250 (SC) of 2001, dated 3-12-2007],
Karamchari Union v. Union of India [2000] 243 ITR 143 (SC)/109 Taxman 1,
Gresham Life Assurance Society v. Styles [1892] 3 TC 185,
All India Defence Accounts Association v. Union of India [1989] 175 ITR 494/43 Taxman 216 (All.),
CIT v. Gopal Krishna Suri [2000] 113 Taxman 707 (Bom.),
CIT v. Ram Rattan Lal Verma [2005] 145 Taxman 256 (All.),
CIT v. L.W. Russel [1964] 53 ITR 91 (SC),
Gwalior Rayon Silk Co. Ltd. v. CIT [1983] 140 ITR 832/14 Taxman 99 (MP),
CIT v. Nestle India Ltd. [2000] 243 ITR 435/109 Taxman 403 (Delhi),
CIT v. Majestic Hotel Ltd. [2006] 155 Taxman 447 (Delhi),
Bennet Coleman & Co. Ltd. v. Mrs. V.P. Damle, Third ITO [1986] 157 ITR 812/(1985) 21 Taxman 131 (Bom.),
CIT v. Prem Nath Motors (P.) Ltd. [2002] 120 Taxman 584 (Delhi)
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| Laws Involved |
Income-tax Act, 1961
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| Sections |
15,
17,
192,
201,
201(1A)
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