Section 195A — the law in short
What the courts have decided on section 195A, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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RBF Rig Corporation LLC v ACIT
ITATHelps taxpayer
My employer pays my Indian tax under a net of tax contract. Must the tax on that tax be grossed up again, or is it exempt under section 10(10CC)?
It is exempt, so there is only one round of grossing up. The Delhi Special Bench held that tax paid by an employer on an employee's behalf is a perquisite under section 17(2)(iv) - the discharge of an obligation which the employee would otherwise have had to meet - and is not a perquisite provided by way of monetary payment. Section 10(10CC) excludes only monetary payments to the assessee, and a payment to a third party, here the Government, is not one. So the tax borne by the employer is added to salary once, and no further tax on that tax is added. The earlier Delhi Bench decisions in B.J. Services and Western Geo were held to be wrong.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
