‘Tips’ paid to the employees in Hotels, cannot be taken section 15 (b) of the Income- Tax Act for tax purpose
Civil Appeal Nos. 4435-37 of 2016
Bench: Justice Kurian Joseph; Justice R. F. Nariman
Case Brief: The present appeals are brought against the common judgement delivered by the High Court of Delhi, in the year 2011. The high court in these cases found that the ‘Tips’ which the assesses being running the business of Hotel owners, managers and operators, paid to their employees would amount to ‘profit in addition to salary or wages’ and would fall under Section 15(b) read with Section 17(1)(iv) and 17(3)(ii) of the Income- Tax Act, 1961. In the facts of the case, the business premises of the assessees in these appeals were surveyed by the Revenue and they allegedly found that the assessees had been paying tips to their employees and they were not deducting taxes thereon. As such, firstly the Assessing Officer treated such tips as income under the head of “salary” of the employees and assessees were held responsible for deducting the tax on the same, at source from the payment of employees under section 192 of the Act. The matter raised and as such it was came before the High Court, and thereafter before this bench.
The present bench after considering the facts and circumstances in the case and also after having analyzed the various judgements relied upon the parties, especially, the case of Emile Webber Vs. CIT, (1993) 2 SCC 45313 found it is clear that as income from tips would be chargeable in the hands of the employees as income from other sources, such tips being received from customers and not from the employer, Section 192 would not get attracted at all on the facts of the present case. Moreover, after considering the facts in the case, the bench also observed that there is no vested right in the employee to claim any amount of tip from his employer, as tips are often paid voluntarily and may or may not be paid by the customers for services rendered to them. As such, these tips cannot be taken under the scope of Section 15(b) of the Act. As such, the bench found that the appeals which are preferred by the Appellants- assesses are allowed ad the appeals by Revenue are hereby dismissed. And also the impugned common judgment is also set aside.
Read the Judgement: ITC Limited Gurgaon Vs. Commr.Of I.T(TDS) Delhi