2016 (9) TMI 1564 - HC - Income Tax

TDS u/s 192 - Requirement of deducting tax at source by the assessee as an employer on the payments made to the employees under the heading of uniform allowance - Appellate Commissioner confirmed the view of the Assessing Officer, observing that if the appellant's interpretation of term 'uniform' were to be accepted, in every office any dress worn by the employees would qualify as uniform - Tribunal was of the opinion that circular did not prescribe what can be categorized as uniform and resultantly dismissed the appeal - HELD THAT - It is true that the circular dated 29.03.2010 did not cover the period under consideration. However, we cannot find fault with the Tribunal in referring to such circular. Firstly, the circular was produced on record and relied upon by the ONGC. This would not however mean that the Tribunal could have held the issue against the assessee on the basis of such a circular if it applied during a period post the financial year in question. But, if we eliminate this circular from record, there was nothing else suggesting that the ONGC did prescribe any uniform for its employees, at least for the period under consideration. If the stand of the ONGC was that the circular dated 05.12.1987 held the field, it ought to have produced such circular on record. Revenue had collected materials to suggest that there was no uniform prescribed. Statement of senior officer of the ONGC suggested that prescription for uniform made in the past was withdrawn since 1995. If the assessee desired to rebut such material, it had to produce necessary evidence in this respect. Having failed to do so, ONGC cannot criticize the Tribunal for referring to the circular dated 29.03.2010, which the ONGC itself desire to rely upon. An alternative submission was made to the effect that the dress code at the work place would qualify as uniform. We find two difficulties in accepting this submission. Firstly, there is nothing on record to suggest that there was any such dress code prescribed before the said circular dated 29.03.2010 was issued. In absence of any evidence, it is not possible for us to ascertain the nature of dress code and its effect. Even if we proceed on the basis, for the sake of argument that the dress code as referred to in circular dated 29.03.2010 or similar was prescribed during the period under consideration, we do not find that the same would qualify as prescription of a uniform. We have reproduced the relevant portion of the circular dated 29.03.2010. Under this circular, the employer prescribed a dress code for male employees insisting that they must wear shirt which may be half or full sleeve. It should be buttoned and ironed, though stripe would be permissible, loud checks or printed shirts should be avoided. The employees would wear trousers of formal size and would not be permitted to wear cargo trousers. If ties are worn, they should match with the shirts and trousers, belts should be sober and footwear should be formal. Under certain circumstances, however, employees could wear sandals instead of shoes. For women, it was prescribed that they should wear ironed sarees of appropriate colors or traditional salwar kameez or ironed western business suits or formal ladies shirts with tailored dress or formal trousers. These specifications, undoubtedly fit the common parlance meaning of dress code which is often referred to as the minimum standard of dressing depending on the place or occasion and can carry a wide range of choices at the command of the person concerned, of course, within certain parameters which would essentially exclude a certain dressing which is considered too informal or inappropriate for the occasion rather than to specify a precise set of clothes. On the other hand, term 'uniform' in the context of dressing carries a vastly different connotation and would necessarily include precise instructions as to the dress, design, and also colours which will achieve a uniformity in dressing at a work place or at the place of study or some such collection of group of persons belonging to by and large a common class. The term uniform has been explained in the Webster's Third New International Dictionary (unabridged) as marked by lack of variation, diversity, change in form, manner, worth or degree; marked by complete conformity to a rule or pattern or by salient detail or practice; marked by unvaried and changeless appearance. In the context of dressing, the term 'uniform' has been described in this dictionary as dress of a distinctive design or fashion adopted by or prescribed for members of a particular group (as an armed service, an order, or a social or a work group) and serving as a means of identification. It can thus, be seen that the term 'uniform' in the context of dressing carries a precise meaning and a meaning which is entirely different from a far more broader concept of a general dress code. Under the circumstances, we find no merits in these appeals. The same are dismissed.

Summary

Issues Involved:
1. Requirement of deducting tax at source on uniform allowance.
2. Definition and applicability of 'uniform' under Section 10(14)(i) of the Income Tax Act.
3. Validity of the circulars and statements presented as evidence.
4. ONGC's compliance with tax deduction norms.

Detailed Analysis:

1. Requirement of Deducting Tax at Source on Uniform Allowance:
The primary issue revolves around whether ONGC was required to deduct tax at source on payments made to employees under the heading of uniform allowance. The Assessing Officer contended that ONGC did not prescribe any uniform during the relevant assessment year (2010-11), thus the uniform allowance did not qualify for exemption under Section 10(14)(i) of the Income Tax Act. Consequently, ONGC was liable to deduct tax at source on such payments.

2. Definition and Applicability of 'Uniform' under Section 10(14)(i) of the Income Tax Act:
Section 10(14)(i) of the Income Tax Act exempts special allowances granted to meet expenses incurred in the performance of duties. Rule 2BB specifies that allowances for uniforms are exempt if they are for the purchase or maintenance of uniforms worn during duties. The Tribunal and the Assessing Officer concluded that ONGC did not prescribe a uniform post-1995, and the payments made were not for uniforms but were adjusted towards employees' pension contributions. The Tribunal also noted that the circular dated 29.03.2010, produced by ONGC, did not prescribe a uniform but rather a dress code, which does not meet the definition of 'uniform' under the Act.

3. Validity of the Circulars and Statements Presented as Evidence:
The Tribunal and the Commissioner (Appeals) relied on the statement of Shri R.P. Bhatt, a senior finance and accounts officer at ONGC, who confirmed that the uniform prescription was discontinued in 1995. The circular dated 29.03.2010 was considered by the Tribunal, but it was determined that it did not apply to the assessment year in question and only prescribed a dress code, not a uniform. The Tribunal dismissed the appeal, noting that ONGC failed to produce any other evidence, such as the circular dated 05.12.1987, to substantiate its claim of a prescribed uniform.

4. ONGC's Compliance with Tax Deduction Norms:
The Tribunal and the Assessing Officer found that ONGC did not comply with the tax deduction norms as it failed to deduct tax at source on the uniform allowance, which was not exempt under the given conditions. The Tribunal also dismissed ONGC's request for a remand to produce additional evidence, as sufficient opportunities had already been provided.

Conclusion:
The appeals were dismissed, affirming that ONGC did not prescribe a uniform during the relevant period, and thus, the uniform allowance did not qualify for exemption under Section 10(14)(i) of the Income Tax Act. Consequently, ONGC was required to deduct tax at source on such payments. The Tribunal's decision was based on the lack of evidence supporting ONGC's claim and the clear distinction between a dress code and a uniform. The judgment emphasized the necessity for employers to adhere to statutory requirements for tax deductions and the importance of providing adequate evidence to support claims for exemptions.