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2015 (2) TMI 1272 - AT - Income TaxTDS u/s 192 - Assessee in default - non deducting tax at source on salary - levying interest on tax not deducted at source - order u/s. 201(1) and 201(1A) - Held that - The plea of the assessee that it made a bonafide estimate of employees salary by valuing the perquisites in the form of residential accommodation provided to the employees by valuing the same as if employees were employees of Central Govt. has to be accepted. In this regard, it is clear from the records that the position with regard to the assessee not being a Central Govt. was brought to its notice by the department only in the proceedings initiated in 2013. Even thereafter, the assessee has been taking a stand that its employees are employees of Central Govt. As held the obligation of the assessee is only to make a bonafide estimate of the salary. Assessee has made such an estimate. The assessee s obligation u/s. 192 is therefore properly discharged and hence proceedings u/s. 201(1) & 201(1A) of the Act have to be quashed and are hereby quashed. - Decided in favour of assessee.
Issues Involved:
1. Applicability of Rule 3 of the Income Tax Rules, 1962 for valuing perquisites. 2. Whether the assessee can be treated as an assessee in default under sections 201(1) and 201(1A) for not deducting tax at source correctly. 3. Bona fide estimate of income under the head 'salaries' by the assessee. Detailed Analysis: 1. Applicability of Rule 3 of the Income Tax Rules, 1962 for Valuing Perquisites: The primary issue was whether the assessee, an autonomous body, should value the perquisites of residential accommodation provided to its employees under Sl.No.1 or Sl.No.2 of Table-1 of Rule 3 of the Income Tax Rules, 1962. The assessee valued perquisites under Sl.No.1, treating its employees as Central Government employees, which the Revenue disputed. According to the Revenue, the correct valuation should be under Sl.No.2, which would result in a higher perquisite value and consequently higher tax deduction at source (TDS). 2. Whether the Assessee Can Be Treated as an Assessee in Default under Sections 201(1) and 201(1A) for Not Deducting Tax at Source Correctly: The Income Tax Officer (TDS) initiated proceedings under sections 201(1) and 201(1A) of the Act, treating the assessee as an assessee in default for short deduction of tax at source. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed this action. The Tribunal noted that the assessee had been deducting tax based on its long-standing belief that it was a Central Government entity. The Tribunal referenced a similar case (CFTRI v. ITO, TDS) where it was decided that CFTRI was not a Central Government entity, and thus, the valuation of perquisites should be under Sl.No.2 of Table-1 of Rule 3. 3. Bona Fide Estimate of Income under the Head 'Salaries' by the Assessee: The Tribunal considered whether the assessee made a bona fide estimate of the income under the head 'salaries.' The assessee argued that it had a bona fide belief that it was a Central Government entity, and thus, it valued perquisites accordingly. The Tribunal accepted this argument, noting that the assessee's belief was based on the control and regulations applicable to it, similar to those of the Central Government. The Tribunal cited several decisions, including CIT v. Nestle India Ltd. and Gwalior Rayon Silks v. CIT, which supported the view that an employer's obligation is to make a bona fide estimate of the income under the head 'salaries.' Conclusion: The Tribunal concluded that the assessee had made a bona fide estimate of the salary, and its obligation under section 192 was properly discharged. Therefore, the proceedings under sections 201(1) and 201(1A) of the Act were quashed. The appeal of the assessee was allowed, and the stay petition was dismissed as infructuous. Pronouncement: The judgment was pronounced in the open court on February 27, 2015.
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