2014 (2) TMI 1025 - AT - Income Tax

TDS u/s 192 - Demand u/s 201(1) of the Act TDS not deducted on various charges u/s 201(1) and Interest u/s 201(1A) of the Act Held that - The assessee was specifically asked whether during the year under appeal any uniform for the employees was prescribed by the company and the answer was in negative - any allowance given by the company to its employees in the name of uniform allowance cannot be said to be exempt under Rule 2BB(1)(f) r.w.s 10(14)(i) of the Income Tax Act - tax at source is deductable from payments in the nature of uniform allowance Decided against Assessee. Deletion of Demand u/s 201(1) and 201(1A) of the Act TDS not deducted on various charges u/s 201(1) Held that - The decision in assessee s own case followed - CMRE was actually not a reimbursement and had and had no correlation with actual expenditure on vehicles - Rule 2BB(i)(c) & not Rule 3 would govern taxability of CMRE payments in employee s hands due to CMRE having no correlation with actual running & maintenance charges of motor car which is the condition required to be satisfied for application of Rule 3(2), Table II(2) - due to declaration by employees of having utilized CMRE for official work the appellant cannot be treated as assessee in default u/s 201(1) even for AY 2010-11 - As far as assessments of employees in A.Y. 2010-11 are concerned, tax liability is to be determined on case to case basis by applying Rule 2BB(l)(c) thus, appellant cannot be treated as assessee in default u/s.201(1) for non-deduction of tax at source from CMRE payments for A.Y.s when FBT was in force, i.e. 2006-07 to 2009-10 as well as AY 2010-11, when FBT was not in force the order of the CIT(A) upheld Decided against Revenue. Scope of taxable income in addition to the salary u/s. 17(1) (iv) of the Act - Whether the AO was justified in treating assessee as assessee in default u/s. 201(1) for non-deducting tax from the amount of advance disbursed under a Scheme to the employees by considering it to be from salary Held that - As per rule 3(7)(vii) of Income Tax rules where employer provides movable assets to its employees for their personal use perquisite value to be taxed as salary is determined @ 10% per annum of the actual cost of asset - the position remained same as envisaged under rule 3(7)(vii)/(viii) of Income Tax Rule, even though instead of assessee-company itself purchasing the goods the same were purchased by the employee in the name of assessee-company out of advance given by the assessee-company - The scheme was designed in accordance with provisions of rule 3(7)(vii)/(viii)of Income Tax Rule and was implemented accordingly by the assessee for the benefit of its employees - The revenue has not brought any material on record to show that the advance was not utilized in accordance with the scheme thus, the order of the CIT(A) upheld in holding that assessee company was not assessee in default u/s. 201(1) for not deducting tax from the amount of advance given under the scheme to the employees by considering the same to be their salary Decided against Revenue.

Summary

Issues Involved:
1. Deduction of tax at source on uniform reimbursements.
2. Deduction of tax at source on conveyance, maintenance, reimbursement expenditure (CMRE).
3. Deduction of tax at source on interest-free advances for purchasing household goods and furniture.

Issue-wise Detailed Analysis:

1. Deduction of tax at source on uniform reimbursements:
The assessee challenged the decision of the CIT (Appeals), which upheld the order of the ACIT (TDS), Baroda, declaring the appellant as an assessee in default for not deducting tax at source from uniform reimbursements to employees. The CIT(A) noted that the uniform allowance was paid despite the discontinuation of prescribed uniforms in 1995. The ACIT(TDS) concluded that the uniform allowance was a disguised salary. The CIT(A) agreed, stating that the normal dress worn by employees could not be considered a uniform and that the allowance was additional salary, not exempt under Rule 2BB(1)(f) read with section 10(14)(i) of the Income Tax Act. The Tribunal upheld this decision, dismissing the appeals filed by the assessee.

2. Deduction of tax at source on conveyance, maintenance, reimbursement expenditure (CMRE):
The Revenue appealed against the CIT(A)'s decision to delete the order passed u/s. 201(1) and interest u/s. 201(1A) regarding CMRE payments. The ACIT(TDS) argued that CMRE was not actual reimbursement but an additional salary, as there was no verification of expenses incurred. The CIT(A) found that the CMRE was paid based on declarations by employees and was not verified, but following the Gujarat High Court's decision, the appellant could not be treated as an assessee in default for not deducting tax at source. The Tribunal agreed, noting that the issue was covered by the jurisdictional High Court's decision in favor of the assessee, and dismissed the Revenue's appeals.

3. Deduction of tax at source on interest-free advances for purchasing household goods and furniture:
The Revenue also appealed against the CIT(A)'s decision regarding interest-free advances for household goods and furniture. The ACIT(TDS) considered these advances as additional salary. The CIT(A) held that the advances were used to purchase assets in the name of the employer, and the perquisite value was taxed as per Rule 3(7)(vii)/(viii) of the Income Tax Rules. The Tribunal found that the scheme was implemented according to the provisions and that the advance did not constitute the employee's income. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeals.

Conclusion:
In summary, the Tribunal upheld the CIT(A)'s decisions on all issues, confirming that the assessee was not in default for not deducting tax at source on uniform reimbursements, CMRE payments, and interest-free advances for household goods and furniture. The appeals filed by both the assessee and the Revenue were dismissed.