2019 (1) TMI 293 - AT - Income Tax

Rectification of mistake - TDS u/s 192 - interest on tax not deducted at source u/s.201(1A) - assessee paid cash equivalent to its employees at the time of their retirement - plea of the assessee that its employees were employees of the State Government and therefore the entire payment to its employees towards unutilized leave period on retirement was exempt u/s.10(10AA)(i) - Held that - The power of the Tribunal u/s. 254(2) of the Act is only to rectify mistakes apparent on the face of the record. The Tribunal does not have power to review its own orders. Secondly, the decision cited by the learned counsel for the Assessee shows that the benefit of free supply of power was given to erstwhile employees of KEB who became employees of KPTCL on its creation. Therefore, they were also considered as eligible for all benefits that employee of the State enjoyed and that such concession was withdrawn only for future employees of KPTCL. Therefore, the belief of the Assessee that its employees were to be regarded as employees of State cannot be said to be not bonafide, at least to the extent of erstwhile employees of KEB. The obligation of the Assessee u/s.192 is only to make bonafide estimate of income of his employee under the head salaries. Such obligation cannot be tested on the parameters laid down on exercise of power by authorities under the Act exercising powers u/s.132 or u/s.147 of the Act. Apart from the above, we have already set out the circumstances under which belief was formed by the Assessee while deducting tax at source on salary paid to its employees. The correctness of such conclusion cannot be reviewed u/s.254(2) of the Act. The power of the Tribunal under section 254(2) is confined to rectifying any mistake apparent from the record. The Tribunal does not have inherent power of rectification or review or revision. Unless there is mistake apparent from the record in the sense of patent, obvious, clear error or mistake, the Tribunal cannot recall its previous order. If the error or mistake is one which could be established only by long-drawn arguments or by way of process of investigation and research, it is not a mistake apparent from the record. Failure of the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on the record, although it may be an error of judgment. The Tribunal cannot in exercise of its power of rectification look into some other circumstances which would support or not support its conclusion. The Tribunal cannot redecide the matter and it has no power to review its order. A decision on debatable point of law is not a mistake apparent from the record. - Decided against revenue

Issues Involved:
1. Whether KPTCL can be considered as "Assessee in Default" under Section 201(1) of the Income Tax Act, 1961 for not deducting tax at source.
2. Whether KPTCL is liable to pay interest on tax not deducted at source under Section 201(1A) of the Act.
3. Whether the employees of KPTCL can be regarded as employees of the State Government for the purpose of Section 10(10AA) of the Act.
4. The validity and limitation of orders passed under Sections 201(1) and 201(1A) of the Act.
5. The bona fide nature of KPTCL's estimate of its employees' income under the head "Salaries."

Detailed Analysis:

Issue 1: Assessee in Default under Section 201(1)
The Tribunal examined whether KPTCL could be considered as "Assessee in Default" for not deducting tax at source on payments made to its employees towards unutilized leave period on retirement. The Revenue argued that KPTCL, being a statutory corporation, should have deducted tax on amounts exceeding ?3 lakhs, as per Section 10(10AA)(ii) of the Act. KPTCL contended that its employees were State Government employees, hence exempt under Section 10(10AA)(i).

Issue 2: Liability to Pay Interest under Section 201(1A)
The Tribunal also considered whether KPTCL was liable to pay interest on the tax not deducted at source. The Revenue initiated proceedings under Sections 201(1) and 201(1A) to treat KPTCL as an Assessee in default and levy interest on the tax not remitted timely.

Issue 3: Employees of State Government
The Tribunal reviewed whether KPTCL's employees could be regarded as State Government employees. The Revenue's stance was that KPTCL, being a statutory corporation, did not qualify as a State Government entity, and hence its employees could not be considered State Government employees. The Tribunal referred to the ITAT Bangalore Bench's decision in the case of Central Food Technological Research Institute, which held that employees of statutory corporations are not State Government employees.

Issue 4: Validity and Limitation of Orders
KPTCL argued that the orders passed under Sections 201(1) and 201(1A) were invalid due to jurisdictional issues and were beyond the period of limitation. The Tribunal did not delve deeply into these propositions as it focused on the bona fide nature of KPTCL's actions.

Issue 5: Bona Fide Estimate of Income
The Tribunal considered whether KPTCL's estimate of its employees' income under the head "Salaries" was made in good faith. KPTCL maintained that it had a bona fide belief that its employees were State Government employees, and thus, the entire payment towards unutilized leave period was exempt. The Tribunal referred to the ITAT Bangalore's decision in the case of Indian Institute of Science, which supported the view that a bona fide estimate of income by the employer discharges the obligation under Section 192.

Conclusion:
The Tribunal concluded that KPTCL made a bona fide estimate of its employees' income, considering the historical background and the Revenue's past acceptance of KPTCL's tax deduction practices. It was held that KPTCL's belief that its employees were State Government employees was reasonable and bona fide. Consequently, the proceedings under Sections 201(1) and 201(1A) were quashed, and KPTCL was not treated as an Assessee in default.

Miscellaneous Petitions:
The Revenue's miscellaneous petitions alleged that the Tribunal's order contained mistakes apparent from the record, including claims that the DR was not given an opportunity to rebut arguments and that the Tribunal did not consider certain contentions and case laws. The Tribunal found no merit in these allegations, emphasizing that the conclusions were based on a thorough consideration of the facts and legal precedents. The MPs were dismissed, reaffirming the Tribunal's original decision.

Final Pronouncement:
The Tribunal pronounced the dismissal of the Revenue's miscellaneous petitions on January 4, 2019, upholding the decision that KPTCL's actions were bona fide and not liable under Sections 201(1) and 201(1A) of the Act.

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