1999 (5) TMI 60 - AT - Income Tax

Summary

Issues Involved:
1. Determination of the value of perquisite on account of gas, electricity, and water.
2. Short deposit of tax at source for the financial years in question.

Issue 1: Determination of the Value of Perquisite on Account of Gas, Electricity, and Water

- Background: The primary issue raised in the appeals was whether the value of perquisites such as gas, electricity, and water should be determined based on the actual amount spent by the company or at 6.25% of the salary of the employees as prescribed under Rule 3(d)(ii) of the Income-tax Rules.

- Findings by ITO: The ITO noted that for certain employees, the value of these perquisites was taken at 6.25% of the salary without evidence that the accommodation was used for official purposes. The appellant claimed that senior executives used part of their residence for official purposes. This claim was found vague and rejected due to lack of evidence, leading to the actual amount spent being treated as perquisite for inclusion in the salary income for TDS purposes.

- CIT(A) Decision: The CIT(A) upheld the ITO's view, emphasizing the absence of evidence to attribute any part of the expenditure on gas, electricity, and water for official purposes.

- Arguments by Assessee: The counsel for the assessee argued that the Tribunal had previously accepted partial use of residence for official purposes in the case of Mr. Deepak C. Shriram, a working director. Therefore, the perquisite value should be taken at 6.25% of the salary. The counsel also contended that such adjustments should be made in the assessment of the employee concerned, not under section 201 of the Income-tax Act.

- Tribunal's Decision: The Tribunal found that the department had a strong case in the absence of evidence for official use of the residence by senior employees (excluding Mr. Deepak C. Shriram). In Mr. Shriram's case, the Tribunal had previously accepted partial official use for earlier assessment years. However, for the current appeals, the appellant needed to provide evidence for the relevant years. The matter was restored to the ITO for further consideration.

Issue 2: Short Deposit of Tax at Source

- Background: The ITO noted discrepancies in the tax deducted and remitted to the Government account for both financial years in question. The employer company deducted tax but refunded part of it to employees due to excess deductions in earlier months, which was not permissible under the Act.

- CIT(A) Decision: The CIT(A) rejected the appellant's contention that section 192(3) authorized such adjustments, stating that the Act did not permit the employer to refund already deducted tax by depositing a lesser amount to the Government account. The CIT(A) upheld the ITO's decision to treat the employer as an assessee in default for the amounts refunded to employees.

- Arguments by Assessee: The counsel for the assessee argued that section 192(3) allowed for overall adjustments of TDS at the end of the financial year, taking into account total deductions and deposits rather than on an employee-wise basis. The counsel cited a decision of the Andhra Pradesh High Court to support the argument that a shortfall in deduction did not constitute a default under section 201.

- Tribunal's Decision: The Tribunal examined the provisions of section 192(3) and other relevant sections, concluding that adjustments should be made on an individual employee basis, not collectively for all employees. The Tribunal upheld the CIT(A)'s decision, stating that the company's action of refunding TDS to some employees was not permissible. The Tribunal also noted that interest under section 201(1A) was mandatory for any shortfall in TDS, and the question of reasonable cause or bona fide belief was not applicable for interest but could be considered for penalties under section 221(1).

Conclusion:

The appeals were partly allowed for statistical purposes. The Tribunal upheld the department's stance on both issues, emphasizing the need for evidence in attributing perquisites for official purposes and the correct interpretation of TDS provisions under section 192(3). The matter regarding Mr. Deepak C. Shriram was sent back to the ITO for further consideration based on evidence for the relevant years.