2003 (11) TMI 637 - HC - Income Tax

Summary

Issues:
1. Correctness of order rejecting claim for leave travel allowance and conveyance allowance.
2. Setting aside tax and interest levied for short deduction of tax at source.
3. Verification of expenses for leave travel allowance exemption based on employee declaration.

Issue 1: Correctness of order rejecting claim for leave travel allowance and conveyance allowance

The respondent, a public limited company, filed its return for the assessment year 1994-95, claiming deductions for leave travel allowance and conveyance allowance paid to its employees. The assessing officer rejected these claims. The Commissioner (Appeals) also upheld the rejection. Subsequently, the assessee appealed to the Tribunal, which set aside the Commissioner's order. The revenue appealed to the High Court, questioning the correctness of the Tribunal's decision.

Issue 2: Setting aside tax and interest levied for short deduction of tax at source

The primary question raised was whether the Tribunal was correct in setting aside the tax and interest levied under sections 201(1) and 291(1A) of the Income Tax Act due to short deduction of tax at source from employees. The High Court referred to a similar case involving Larsen & Toubro Limited and relied on a Supreme Court decision in UCO Bank v. Commissioner of Income Tax. Following these precedents, the High Court ruled in favor of the assessee, leading to the rejection of the appeals by the revenue.

Issue 3: Verification of expenses for leave travel allowance exemption based on employee declaration

Another question raised was whether the assessee could rely solely on employee declarations without verifying if the expenses for leave travel allowance met the criteria specified in the Act and Rules. The Tribunal had allowed the exemption based on the lack of proof of malafides in the declarations. The High Court's decision in a similar case and the Supreme Court precedent guided the ruling in favor of the assessee, resulting in the rejection of the revenue's appeals.

In conclusion, the High Court upheld the Tribunal's decision in favor of the assessee, citing relevant legal precedents and interpretations of the Income Tax Act. The appeals by the revenue were rejected, and no costs were awarded in this matter.