In a recent order of Income Tax Appellate Tribunal (ITAT), Delhi has reiterated that, Tax Deduction at Source (TDS) cannot be deducted from the Tips received by Hotel employees.
The assessee company is engaged in the business of chain of hotels. Survey operation under section 133A of the Income Tax Act, 1961 was carried out at the business premises of the assessee company at Hotel -The Oberoi, New Delhi.
During the survey proceedings, it was noticed that the assessee company was in receipt of extra amount known as “TIPS” paid by the guests in cash or through credit cards at the time of settlement of bills in appreciation of good services provided by the service staff. On disbursal of this amount to the employees by the hotel, no tax was deducted.
The Assessing Officer required the assessee to explain why under the provision of Section 192 why TDS was not deducted. The assessee explained as per record that “the company in the business of running a chain of hotels, has a non-executive staff of about 700 persons. The members of staff belong to different departments such as Kitchen, Sales, Housekeeping, Horticulture, Laundry, Systems, Training, Logistics, Materials/Stores, Communication, Bell dusk, Airport Management, finance, Front Office, Banquet, Pastry shop, Human resource, Security, ‘Therapists Technicians etc. The company does not interfere in the manner of tips sharing amongst its staff. Cash-tips, if any, received by staff of the company are pooled and shared amongst its staff; the company cannot interfere in this matter. When credit-tips are paid by the customers, the company is per necessity required to act as a collecting agent of credit tips for and on behalf of its staff.
