2018 (6) TMI 1115 - AT - Income Tax

Value of perquisite provided by the assessee company to its employees-assessee - default for non-deduction of tax at source from the amounts paid to the employees towards car running and maintenance expenses - Held that - The requisite details as specified in Clause (B) of sub-rule 2 of rule 3 of Income Tax Rules 1962 were not maintained by the assessee - the value of perquisite provided by the assessee company to its employees in the form of reimbursement of car running and maintenance charges was chargeable to tax in their hands and the assessee was liable to deduct tax at source from the said value. Since there was failure on the part of the assessee company to deduct tax at source from the value of the said perquisite, we are of the view that it was rightly treated by the A.O. as the assessee in default for such non or short deduction of tax at source under section 201(1) and interest under section 201(1A) was also correctly charged in accordance with law. - Decided against assessee.

Summary

Issues:
Assessment of default for non-deduction of tax at source from car running and maintenance expenses paid to employees.

Analysis:
The judgment involved two appeals by the assessee against the CIT(A)'s order upholding the Assessing Officer's decision to treat the assessee as in default for non-deduction of tax at source for A.Y. 2011-12 and 2012-13. The AO found that the assessee company failed to provide supporting evidence during a survey that car expenses were for official duties, leading to non-deduction of tax. The AO treated the assessee as in default and imposed interest. The CIT(A) upheld these orders, rejecting the assessee's argument that the expenses were for official duties and not subject to TDS.

The CIT(A) affirmed the AO's decision, stating that the assessee did not provide evidence that the car expenses were for official duties. The CIT(A) found the treatment of car allowances as exempt from TDS without proper documentation unjustified. The CIT(A) upheld the AO's orders under section 201(1)/201(1A) for both years, denying the assessee's appeal.

The ITAT Kolkata analyzed the case, noting that the assessee failed to maintain required details specified in the Income Tax Rules, making the value of perquisite provided to employees taxable. As the employer did not deduct tax at source from this perquisite, the ITAT agreed that the assessee was rightly treated as in default. The ITAT upheld the CIT(A)'s decision, confirming the AO's orders under section 201(1)/201(1A) for both years. Consequently, the appeals by the assessee were dismissed, affirming the default status.

In conclusion, the ITAT Kolkata upheld the decision to treat the assessee as in default for non-deduction of tax at source from car running and maintenance expenses paid to employees for official duties. The failure to maintain requisite details led to the perquisite being taxable, justifying the default status. The ITAT affirmed the CIT(A)'s decision and dismissed the appeals, maintaining the orders passed under section 201(1)/201(1A) for both assessment years.