2006 (3) TMI 215 - AT - Income Tax

TDS u/s 194C - Assessee In Default - limitation - taxability of citizen tax - HELD THAT - Tribunal also found that even before the survey, the assessee was trying to resolve the dispute and they had prepared a letter which was handed over to the survey officials on the date of survey itself and had paid the tax and interest before the order under ss. 201(1) and 201(1A) was passed. It is not in dispute that the period under consideration was a particular period during which most of the foreign companies were in doubt about the taxability of the foreign component of the salary. It cannot be disputed that u/s 192, what the deductor is expected to do is to make a bona fide estimate of the salary and deduct tax therefrom. In the present case, the assessee has proved its bona fides to the hilt and thus, cannot be regarded as an assessee in default. The assessee's case is fully covered in its favour by several decisions of the Tribunal and hence we need not detain ourselves for long to discuss at length the issues before us. Thus, we hold the orders for financial years 1988-89 to 1994-95 to be invalid on grounds of limitation and for financial years 1995-96 to 1998-99, we hold the assessee not to be in default. Since orders for seven years are held to be invalid and since the assessee is held to be not in default for the remaining years generally, we need not go into the issue of taxability of housing norms . It is found that it is a statutory levy in Japan which is required to be withheld by the employers from the salaries of their employees. Thus, following the decision of the Mumbai Bench of the Tribunal in the case of Gallotti Raoul vs. Asstt. CIT 1997 (1) TMI 539 - ITAT MUMBAI , it is held that the income is diverted at source by way of an overriding title and hence, not liable to be included in the total income of the assessee. We see no infirmity in the order of the CIT(A) who has relied on the aforementioned order of the Tribunal. Therefore, the ground raised by the Department stands rejected. In the result, all the appeals by the assessee are allowed and those of the Department are dismissed.

Summary

Issues Involved:
1. Applicability of section 201(1) of the IT Act, 1961.
2. Treatment of "housing norm" as part of salary for tax deduction.
3. Validity of order under sections 201(1) and 201(1A) for financial years 1988-89 to 1994-95.
4. Interpretation of reasonable time limit for passing orders under section 201.
5. Consideration of conflicting views on time limits for statutory actions.
6. Taxability of citizen tax as a statutory levy in Japan.

Analysis:

1. The first three grounds of appeal concern the assessee's objection to being treated as an assessee in default under section 201(1) of the IT Act, 1961. The assessee also challenges the inclusion of "housing norm" in the salary subject to tax deduction at source. An additional ground is raised regarding the validity of the order passed under sections 201(1) and 201(1A) for financial years 1988-89 to 1994-95 based on the argument of limitation.

2. The learned counsel for the assessee argued that acts must be done within a reasonable period where no statutory time limit is prescribed, citing various tribunal decisions. The Departmental Representative, however, relied on specific judgments to support a different approach based on the necessity for a closer and more analytical consideration in certain cases.

3. The Tribunal examined multiple decisions supporting the proposition that acts without statutory time limits should be completed within a reasonable period. In this context, the Tribunal considered the conflicting views on the issue, ultimately deciding not to refer the matter to a Special Bench due to previous decisions by a larger Bench and the Supreme Court.

4. The Tribunal analyzed the views presented and emphasized the importance of considering the strength of arguments rather than numerical superiority. The Tribunal also highlighted the acceptance of the assessee's plea for not deducting tax at source on the foreign component of salary in penalty proceedings, supporting the assessee's case.

5. Regarding the taxability of citizen tax as a statutory levy in Japan, the Tribunal followed a precedent decision and held that the income diverted at source by way of an overriding title is not liable to be included in the total income of the assessee. Consequently, the appeals by the assessee were allowed, and those of the Department were dismissed.

This detailed analysis of the judgment covers the various issues raised in the appeal before the Appellate Tribunal ITAT DELHI-A, providing a comprehensive understanding of the legal reasoning and conclusions reached by the Tribunal.