Salary: Perquisite: Sections 15 and 17(2): A. Y. 1994-95: Assesee R but NOR: Employer to bear the tax on salary: Assessee paid tax of Rs. 50 lakh: Got reimbursement from employer of Rs. 35 lakh: Salary received by the assessee to be enhanced by Rs. 35 lakh only and balance Rs. 15 lakh paid by assessee not to be enhanced:

The assesee a resident but not ordinarily resident individual was an employee of Coca Cola Inc. USA having salary income. Under the tax equalisation policy framed by the company, the assessee’s tax liability arising out of his foreign assignment was to be borne by the company. In the relevant year, the assessee had received salary of Rs. 77 lakh and the tax payable thereon was Rs. 35 lakh which was reimbursed by the employer. The assessee returned the total income of Rs. 1.12 crore ( 77 + 35 lakh) and paid tax thereon of Rs. 50 lakh. The Assessing Officer made an addition of Rs. 15 lakh treating the same as the amount reimbursable by the employer. The Tribunal allowed the assessee’s appeal and held that though the assesee had paid the tax amounting to Rs. 50 lakh, the assessee was entitled to reimbursement of tax amounting to Rs. 35 lakh only from the employer and the balance Rs. 15 lakh was borne out of the salary income received by the assessee in India.

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

“Only the actual reimbursement of tax by the employer could be included in the salary of the employee and not the tax paid by employee from his salary income for the purposes of grossing up u/s. 195A.”