Case: R &amp; B Falcon (A) Pty Ltd Vs. Commissioner Of Income Tax

the place of work or from the place of work to the place of residence would not attract the exemption provision. The Assessing Authority, therefore, must, in each case, would have a right to scrutinize the claim. CBDT has the requisite jurisdiction to interpret the provisions of Income-tax Act. The interpretation of CBDT being in the realm of executive construction, should ordinarily be held to be binding, save and except where it violates any provisions of law or is contrary to any judgment rendered by the courts. The reason for giving effect to such executive construction is not only same as contemporaneous which would come within the purview of the maxim temporania caste pesto, even in certain situation a representation made by an authority like Minister presenting the Bill before the Parliament may also be found bound thereby. 23. Rules of executive construction in a situation of this nature may also be applied. Where a representation is made by the maker of legislation at the time of introduction of the Bill or construction thereupon is put by the executive upon its coming into force, the same carries a great weight. 24. In this regard, we may refer to the decision of the House of Lords in the matter of R.V. National Asylum Support Service [(2002) 1 W.L.R.2956] and its interpretation of the decision in Pepper v. Hart [(1993) A.C. 593]. on the question of executive estoppel. In the former decision, Lord Steyn stated:- "If exceptionally there is found in the Explanatory Notes a clear assurance by the executive to Parliament about the meaning of a clause, or the circumstances in which a power will or will not be used, that assurance may in principle be admitted against the executive in proceedings in which the executive places a contrary contention before a court." 25. A similar interpretation was rendered by Lord Hope of Craighead in Wilson v. First County Trust Ltd., [2004] 1 A.C. 816, wherein it was stated:- "As I understand it [Pepper v. Hart], it recognized a limited exception to the general rule that resort to Hansard was inadmissible. Its purpose is to prevent the Executive seeking to place a meaning on words used in legislation which is different from that which ministers attributed to whose words when promoting the legislation in Parliament" For a detailed analysis of the rule of executive estoppel useful reference may be to the article authored by Francis Bennion entitled "Executive Estoppel: Pepper v. Hart revisited", published in Public Law, Spring 2007, pg. 1 which throws a new light on the subject matter.26. We may notice a decision of this Court in Sedco Forex International Drill. Inc. & Ors. v. Commissioner of Income Tax, Dehradun & Anr. [(2005) 12 SCC 717] , the question which arose therein was as to the salary paid to the employees of UK National Services for field breaks outside India would be subjected to tax under Section 9(1)(ii) and explanation appended thereto as inserted in 1983 w.e.f 1.4.1979. Appellant therein entered into agreements which are executed in the United Kingdom with each of the said employees who were residents of the said country. This Court, upon noticing the explanation appended to Section 9(1)(ii), as regards its retrospective operation, held: "16. The departmental understanding of the effect of the 1999 Amendment even if it were assumed not to bind the respondents under Section 119 of the Act, nevertheless affords a reasonable construction of it, and there is no reason why we should not adopt it.17. As was affirmed by this Court in Goslino Mario a cardinal principle of the tax law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See also Reliance Jute and Industries Ltd. v. CIT) An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of the main section. If it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the time that the main provision came into force. But if it changes the law it is not presumed to be retrospective, irrespective of the fact that the phrases used are "it is declared" or "for the removal of doubts"." 27. It was categorically held that as the explanation sought to give an artificial meaning to "earned in India" and brings about a change effectively in the existing law, it should not be held to have any retrospective operation. Section 115WB does not contain such a provision. It must, therefore, be given its natural meaning. It would, therefore, be difficult to accept the contention of the learned Solicitor General that the employees must be based in India.28. However, it appears that the contention that such expenditure should be paid on a regular basis or what would be the effect of the words employees journey did not fall for consideration of AAR. What, therefore, is relevant would be the nature of expenses. The question as to whether the nature of a travelling expenditure incurred by the appellant would attract the benefits sought to be granted by the statute did not and could not fall for consideration of the AAR. Its opinion was sought for only on one issue. It necessarily had to confine itself to that one and no other. No material in this behalf was brought on record by the parties. Whether the payments were made to them on a regular basis or whether the expenditures incurred which strictly come within the purview of Section 115WB or not must, therefore, be answered having regard to the materials placed on records. If any question arises as to whether the agreement entered into by and between the appellant and the employees concerned would attract, in given cases, the liability under FBT benefit tax would have, thus, to be determined by the assessing authority.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]For a detailed analysis of the rule of executive estoppel useful reference may be to the article authored by Francis Bennion entitled "Executive Estoppel: Pepper v. Hart revisited", published in Public Law, Spring 2007, pg. 1 which throws a new light on the subject matter.26. We may notice a decision of this Court in Sedco Forex International Drill. Inc. & Ors. v. Commissioner of Income Tax, Dehradun & Anr. [(2005) 12 SCC 717] , the question which arose therein was as to the salary paid to the employees of UK National Services for field breaks outside India would be subjected to tax under Section 9(1)(ii) and explanation appended thereto as inserted in 1983 w.e.f 1.4.1979. Appellant therein entered into agreements which are executed in the United Kingdom with each of the said employees who were residents of the said country. This Court, upon noticing the explanation appended to Section 9(1)(ii), as regards its retrospective operation,The departmental understanding of the effect of the 1999 Amendment even if it were assumed not to bind the respondents under Section 119 of the Act, nevertheless affords a reasonable construction of it, and there is no reason why we should not adopt it.17. As was affirmed by this Court in Goslino Mario a cardinal principle of the tax law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See also Reliance Jute and Industries Ltd. v. CIT) An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of the main section. If it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the time that the main provision came into force. But if it changes the law it is not presumed to be retrospective, irrespective of the fact that the phrases used are "it is declared" or "for the removal of doubts".It was categorically held that as the explanation sought to give an artificial meaning to "earned in India" and brings about a change effectively in the existing law, it should not be held to have any retrospective operation. Section 115WB does not contain such a provision. It must, therefore, be given its natural meaning. It would, therefore, be difficult to accept the contention of the learned Solicitor General that the employees must be based in India.28. However, it appears that the contention that such expenditure should be paid on a regular basis or what would be the effect of the words employees journey did not fall for consideration of AAR. What, therefore, is relevant would be the nature of expenses. The question as to whether the nature of a travelling expenditure incurred by the appellant would attract the benefits sought to be granted by the statute did not and could not fall for consideration of the AAR. Its opinion was sought for only on one issue. It necessarily had to confine itself to that one and no other. No material in this behalf was brought on record by the parties. Whether the payments were made to them on a regular basis or whether the expenditures incurred which strictly come within the purview of Section 115WB or not must, therefore, be answered having regard to the materials placed on records. If any question arises as to whether the agreement entered into by and between the appellant and the employees concerned would attract, in given cases, the liability under FBT benefit tax would have, thus, to be determined by the assessing authority.CBDT categorically states in answer to question number 7 that(2) provides for an expansive definition. Does it mean that(2) is merely an extension of(1) or it is an independent provision? If(2) is merely an extension of(1), Mr. Ganesh may be right but we must notice that Section 115WA provides for imposition of tax on expenditure incurred by the employer or providing its employees certain benefits. Those benefits which are directly provided are contained in(1). Some other benefits, however, which the employer provides to the employees by incurring any expenditure or making any payment for the purpose enumerated therein in the course of his business or profession, irrespective of the fact as to whether any such activity would be carried on a regular basis or not, e.g., entertainment would, by reason of the legal fiction created, also be deemed to have been provided by the employer for the purpose ofion (1) envisages any amount paid to the employee by way of consideration for employment, what would be the limits thereof are only enumerated in(2). We, therefore, are of the opinion that(1) and (2), having regard to the provisions of Section 115WA as also(3) of Section 115WB, must be held to be operating in differenthave noticed the factual matrix of the instant case. The employees concerned are experts in their field. They are necessarily residents of other country. They are brought to the Rig by providing air tickets for their coming from their place of residence to the Rig. The employer incurs the said expenditure as of necessity. It, therefore, clearly falls within the purview of the words consideration for employment. If fringe benefits are provided for consideration for employment, which is given or provided to the employee by way of an amenity, reimbursement or otherwise; clearly clause (a) of(1) shall be attracted. A statute, as is well known, must be read in its entirety. What would be the subject matter of tax is contained in(1) and (2).(3), therefore, provides for an exemption. There cannot be any doubt or dispute that the latter part of the contents of(3) must be given its logical meaning. What is sought to be excluded must be held to be included first. If the submission of learned Solicitor General is accepted, there would not be any provision for exclusion from payment of tax any amenity in the nature of free or subsidized transport.16. Thus, when the expenditure incurred by the employer so as to enable the employee to undertake a journey from his place of residence to the place of work or either reimbursement of the amount of journey or free tickets therefor are provided by him, the same, in our opinion, would come within the purview of the term by way of reimbursement or otherwise. The Advanced Law Lexicon defines "otherwise"other like means; contrarily; different from that to which it relates; in a different manner; in another way; in any other way; differently in other respects in different respects; in some other like capacity.We, therefore, are of the opinion that AAR was right in its opinion that the matters enumerated in(2) of Section 115WB are not covered by(3) thereof, and the amenity in the nature of free or subsidized transport is covered bye benefit tax being a tax on expenditure; the only concern of the revenue wherefor should be as to whether such expenditure has been made. Appellant has a permanent establishment in India. It paysin India. It carries on business in India. It has for the purpose of carrying out its business activities engaged persons from within India or outside India. If it makes any expenditure for bringing any employee from abroad, the same would also liable to be taken into consideration for the purpose of(1) of Section 115WB.