Case Note & Summary
The appeal was filed by the revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal (ITAT) dated 25.02.2011 for the assessment year 2006-07. The revenue challenged the ITAT's finding that a sum of Rs.4,93,07,540/- paid by the assessee, M/s Sasken Communication Technologies Ltd., to two non-resident employees, Mr. Madan S. Kumar and Mr. Kevin Koenig, was in the course of employment and thus fell under the head 'Salary' or 'Profit in lieu of Salary', and not under the head 'Business income' as per Section 28(va) of the Act. The High Court admitted the appeal on the substantial question of law framed. After hearing the parties, the court upheld the ITAT's order, holding that the payments were indeed salary and not business income. The court dismissed the revenue's appeal, confirming the ITAT's decision.
Headnote
A) Income Tax - Salary vs Business Income - Section 28(va) of Income Tax Act, 1961 - Payment to Non-Resident Employees - The issue was whether payments made to non-resident employees by the assessee company were salary or business income. The court held that payments made in the course of employment are salary, not business income, and Section 28(va) does not apply. (Paras 1-3)
Issue of Consideration
Whether the sum of Rs.4,93,07,540/- paid to Mr. Madan S. Kumar and Mr. Kevin Koenig by the assessee is in the course of employment and falls under the head 'Salary' or 'Profit in lieu of Salary' and not under the head 'Business income' as per Section 28(va) of the Income Tax Act, 1961.
Final Decision
The High Court dismissed the appeal, upholding the ITAT's order that the payment was salary, not business income.
Law Points
- Payment to non-resident employees in course of employment is salary
- not business income
- Section 28(va) of Income Tax Act
- 1961 applies only to business income
- Section 260A appeal by revenue dismissed.
Case Details
2020 LawText (KAR) (06) 23
Justice Alok Aradhe, Justice Hemant Chandangoudar
Sri K.V. Aravind (for appellants), Sri T. Suryanarayana (for respondent)
The Director of Income-Tax, International Taxation, Bangalore & The Income Tax Officer, International Taxation, Ward 19(2), Bangalore
M/s Sasken Communication Technologies Ltd., Bangalore
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Nature of Litigation
Appeal under Section 260A of Income Tax Act, 1961 against ITAT order.
Remedy Sought
Revenue sought to set aside ITAT order and confirm order of Appellate Commissioner.
Filing Reason
Revenue challenged ITAT's holding that payment to non-resident employees was salary, not business income.
Previous Decisions
ITAT order dated 25.02.2011 in ITA Nos.287 & 891/Bang/2009 for assessment year 2006-07.
Issues
Whether the sum of Rs.4,93,07,540/- paid to Mr. Madan S. Kumar and Mr. Kevin Koenig by the assessee is in the course of employment and falls under the head 'Salary' or 'Profit in lieu of Salary' and not under the head 'Business income' as per Section 28(va) of the Income Tax Act, 1961.
Submissions/Arguments
Revenue argued that the payment should be treated as business income under Section 28(va).
Assessee contended that the payment was salary in the course of employment.
Ratio Decidendi
Payments made to employees in the course of employment are salary, not business income, and Section 28(va) of the Income Tax Act, 1961 does not apply.
Judgment Excerpts
This appeal under Section 260A of the Income Tax Act, 1961 has been filed by the revenue.
The subject matter of the appeal pertains to Assessment year 2006-07.
Whether the Tribunal was correct in holding that a sum of Rs.4,93,07,540/- paid to Mr.Madan S. Kumar & Mr.Kevin Koenig by the assessee is in the course of employment and would fall under the head ‘Salary’ or ‘Profit in lieu of Salary’ and not under the head ‘Business income’ as per Section 28(va).
Procedural History
The appeal was filed under Section 260A of the Income Tax Act, 1961 against the ITAT order dated 25.02.2011. The High Court admitted the appeal on 26.06.2012 on the substantial question of law. After hearing, the appeal was dismissed on 10.06.2020.
Acts & Sections
- Income Tax Act, 1961: 260A, 28(va)
