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2021 (8) TMI 1053 - HC - Income TaxTDS Liability payment made by the LIC to its development officers? - Exempted Allowances u/s 10(14) - Salary - Order u/s 201 - ITO (TDS) held that in respect of 12 development officers of LIC there was a short deduction and non-deduction of the tax in the sum for the Financial Year 1999-2000 and that the said amount had to be paid by LIC to the Central Government - HELD THAT - After the aforesaid amendment to Section 10 (14) of the Act, the legal position, as explained in the CBDT circulars issued thereafter, is that the expenditure reimbursed by LIC would qualify for deduction under Section 10 (14) of the Act. If the expenditure is incurred by the Development Officer, he cannot claim deduction u/s 10 (14) of the Act. It appears that LIC devised a proforma for the development officer to fill up certifying the expenditure incurred by them for development of insurance business. A portion of the allowance thus granted was then treated as exempt under Section 10 (14) of the act. Way back on March 12th, 1997 the CBDT informed the Chairman LIC that such procedure was not in accordance with Section 10 (14) of the Act read with Rule 2 BB (i) of the IT Rules and that unless an allowance is notified u/s 10 (14) (i) of the Act no portion of it can qualify for tax exemption. The Court finds no ground made out for interference with the impugned orders of the ITO and the Commissioner.
Issues:
Challenge to order under Section 201 of the Income Tax Act, 1961 regarding short deduction and non-deduction of tax by LIC for development officers for the Financial Year 1999-2000. Analysis: 1. The petition by LIC challenges the order passed by the Income Tax Officer (TDS) under Section 201 of the Income Tax Act, 1961, regarding short deduction and non-deduction of tax for 12 development officers. The Court noted that more than the sought amount had already been recovered by the Department, leading to the vacation of the account attachment. 2. LIC contends that the impugned order was passed without a show cause notice, and a revision petition was filed before the Commissioner of Income Tax, who dismissed it. The Department argues that a survey revealed the short deduction, emphasizing the actual incurring of expenses for the duties of office or employment under Section 10(14) of the Act. 3. The Department highlights that CBDT circulars clarified the tax deduction requirements for conveyance and additional allowance, emphasizing the legal position post-amendment to Section 10(14) of the Act. The Court finds no grounds for interference with the ITO and Commissioner's orders, citing the CBDT instructions and the incorrect procedure followed by LIC. 4. The Court concludes that LIC's reliance on earlier circulars is misplaced, as post-amendment to Section 10(14), the expenditure reimbursed by LIC qualifies for deduction. The proforma devised by LIC for development officers did not align with the Act and Rules, as clarified by the CBDT, leading to the dismissal of the writ petition and vacation of the interim order. 5. In the absence of a rejoinder affidavit, the Court upholds the Department's contentions regarding the statutory obligation of LIC to deduct tax at source for the allowances granted to development officers, as per the provisions of the Income Tax Act, 1961. 6. The judgment dismisses the writ petition and vacates the interim order, directing the issuance of an urgent certified copy of the order as per rules.
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