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23 Diversion overriding title — Whether the payment of
citizen tax payable to the employees who were Japanese citizens constituted an
overriding charge on the salary and therefore would not be income of such
employees and consequently no tax was to be deducted at source — Matter remanded
to the Tribunal.
The assessee, a Japanese organisation set up for transmission
of news and broadcasting, paid salary to its employees. It also paid some
housing allowance.
The Assessing Officer included citizens tax as a part of the
income of the expatriates employed by the assessee-company in India as part of
the employee’s income on the ground that it was an amount paid by the assessee
to its employees. According to the Assessing Officer, the assessee ought to have
deducted tax at source at the time of payment.
On appeal, the Commissioner of Income-tax (Appeals) held that
citizen tax was a statutory levy in Japan on the Japanese citizens and such tax
constituted an overriding charge on the salary income and, therefore, the same
had to be excluded in computation of taxable income. This view of the
Commissioner (Appeals) was upheld by the Tribunal.
The High Court took the view that in view of the concurrent
finding of fact, no interference was called for and the appeal was dismissed
accordingly.
The Supreme Court was however of the view that the
Commissioner of Income-tax (Appeals) ought to have examined the provisions of
the Citizen Individual Inhabitant Tax Act which was a Japanese law and it ought
to have analysed the provisions of that law, particularly when it was required
to decide the question as to the nature of the levy being an overriding charge
on the salary income, as stated hereinabove. The controversy in the present case
was that whether citizens tax was a statutory levy in Japan on the Japanese
citizens constituting an overriding charge. If it was an overriding charge, then
of course the Commissioner of Income-tax (Appeals) was right in saying that it
would not be an income. However, according to the Supreme Court, since the
provisions of the Act had not been examined, the matter needed to be considered
afresh by the Tribunal. Accordingly, the Supreme Court remitted the matter to
the Tribunal for fresh consideration in accordance with law. The Supreme Court
did not express any opinion on the merits of the case.
[CIT v. NHK Japan Broadcasting Corporation, (2010) 322
ITR 628 (SC)]
