1.

Whether tips paid by the customers for availing services in the restaurants of
the assesses constituted salary within the meaning of section 15 and section 17
and whether the assesses were liable to deduct taxes at source on these
payments under section 192. Explain with the help of relevant case laws.

Ingredients of section 15 & 17 (3 Marks)

Explanation & reasoning (5 marks)
Case Law (2 Marks)
ANS: - The ingredients of section 15 basically talks about salary from employer.
And Section 17 is basically talks about what all things would be included in
Salary and in that Tips, would not be included.
And under section 192 of Income Tax Act the assesse would be held liable for
Tax default, but the income which the person is getting from the Third Party so
it would not be included/liable for to deduct the taxes

The basic of these sections would be applicable when the worker or the
employee gets some amount of income from the employer and when it creates
employee-employer relation but in this present scenario it doesnt form any
kind of employer-employee relation, so it would not be applicable for tax.

Case Law: - ITC Limited vs. CIT (SC)

- Tips being purely voluntary amounts that may or may not be paid by
customers for services rendered to them would not, therefore, fall within
Section 15(b) at all.
- Tips are received by the employer in a fiduciary capacity as trustee for
payments that are received from customers which they disburse to their
employees for service rendered to the customer.
- So, when there is no employer-employee relation that amount would not
be taxable under Income Tax Act.

2. Steve Waugh, the Australian cricketer comes to India for 100 days every year.
Find out his residential status for the A.Y. 2016-17. With the help of relevant
provision
 Ans: - According to Section 6(1)(c) If he was in India for a period or periods
amounting in all to 365 days or more during the four years preceding
the relevant previous year and he was in India for a period or periods
amounting in all to 60 days or more in that relevant previous year.

(Section + reasoning)

3. Mr. X after about 30 years stay in India returns to America on January 29,
2013. He returns to India in June 2015 to join an American company as its
oversea branch manager. Determine his residential status for the assessment
year 2016-17 with the help of relevant provision.

Ans:- According to section 6(1)(a)

4. Respondent-assesse is public limited IT company based in Bangalore. To

implement Employees Stock Option Scheme (ESOP), the assesse created a
Trust known as Technologies Employees Welfare Trust and allotted 7,50,000
warrants at Re. 1 each to the said Trust. Each warrant entitled the Holder
thereof to apply for and be allotted one equity share of the face value of Rs. 10
each for total consideration of Rs. 100. The Trust was to hold the warrant and
transfer the same to the employees of the company under the terms and
conditions of the scheme governing ESOP. During the assessment years 1997-
98, 1998-99 and 1999-2000, warrants were offered to the eligible employees
at Re. 1 each by the trust. They were issued to employees based on their
performance, security and other criteria. Under the ESOP scheme, every
warrant had to be retained for a minimum period of 1 year. At the end of that
period, the employee was entitled to elect and obtain shares allotted to him on
payment of the balance Rs. 99. The option could be exercised at any time after
12 months but before expiry of the period of 5 years. The allotted shares were
subject to a lock-in period. During the lock-in period, the custody of shares
remained with the Trust. The shares were non-transferable. The employee had
to continue to be in service for 5 years. If he resigned or if his services be
terminated for any reason, he lost his right under the scheme and the shares
were to be re-transferred to the trust for Rs. 100 per share. Intimation was also
given to BSE that 734500 equity shares were non-transferable and would not
constitute good delivery. Till 13-9-1999 all the shares were stamped with the
remark 'non-transferable'. Thus the said shares were incapable of being
converted into money during the lock-in period.
For the assessment year 1999-2000, the Assessing Officer held that the total
amount paid by the employees consequent to the exercise of option was Rs.
6.64 crores whereas the market value of those shares was Rs. 171 crores. He
held that the 'perquisite value' was the difference between the market value
and the price paid by the employees for exercise of the option. He, therefore,
treated Rs. 165 crores as 'prequisite value' on which TDS was charged at 30
per cent. It was held that the respondent- assessee was a defaulter for not
deducting TDS under section 192 amounting to Rs. 49.52 crores on the above
perquisite value of Rs. 165 crores..
Aggrieved by the aforesaid decisions, the respondent-assessee carried the
matter in appeal to the Tribunal. Decide whether difference value of the share
should be treated as perquisites or not under section 17 with the help of
relevant case laws.
What do mean by perquisites?

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