2009 (2) TMI 231 - AT - Income Tax

Summary

Issues Involved:
1. Whether the expenditure incurred on transport facility provided to employees is considered as 'perquisites' and liable for TDS u/s 192.
2. Whether the appellant is an 'assessee in default' u/s 201(1) for non-deduction of tax at source on the transport facility expenditure.
3. Whether the levy of interest u/s 201(1A) is justified.

Summary:

Issue 1: Expenditure on Transport Facility as 'Perquisites'
The CIT(A) confirmed the AO's order treating the transport facility expenditure as 'perquisites' in the hands of employees, thereby holding the appellant liable to deduct tax at source. The appellant argued that the transport facility provided from the nearest railway station to the office/residence is exempt under Explanation to s. 17(2)(iii) of the IT Act, 1961, and should not attract TDS provisions u/s 192. The ITAT concluded that the bus service provided free of cost by the employer is an amenity under s. 17(2)(iii) and, in light of s. 2(24)(iii), the value of any perquisite taxable under cl. (2) of s. 17 is income. However, the Explanation to sub-cl. (2) to s. 17 clarifies that the use of any vehicle provided by an employer for journey from residence to office and vice versa shall not be regarded as a benefit or amenity granted free of cost or at a concessional rate for the purposes of this sub-clause. Therefore, the expenditure on transport facility is not taxable as perquisite.

Issue 2: Assessee in Default u/s 201(1)
The CIT(A) upheld the AO's decision treating the appellant as 'assessee in default' for non-deduction of tax at source on the transport facility expenditure. The appellant contended that the transport facility is a perquisite exempt under Explanation to s. 17(2)(iii) and should not be clubbed with the transport allowance of Rs. 800 per month. The ITAT agreed with the appellant, stating that the transport facility provided by the employer is not taxable as perquisite and, therefore, the appellant cannot be treated as an 'assessee in default' u/s 201(1).

Issue 3: Levy of Interest u/s 201(1A)
The CIT(A) upheld the levy of interest u/s 201(1A) of the Act. The appellant argued that since the transport facility is not taxable as perquisite, the penalty u/s 201(1A) should be deleted. The ITAT concluded that since the transport facility is not taxable as perquisite and the appellant is not an 'assessee in default', the levy of interest u/s 201(1A) is not justified.

Conclusion:
The ITAT reversed the orders of the AO and CIT(A), allowing the grounds raised by the assessee. The expenditure on transport facility provided to employees is not considered as 'perquisites' and does not attract TDS provisions u/s 192. Consequently, the appellant is not an 'assessee in default' u/s 201(1) and the levy of interest u/s 201(1A) is not justified. The appeal filed by the assessee stands allowed.