1997 (7) TMI 198 - AT - Income Tax

Summary

Issues Involved:
1. Deduction of tax at source on transportation reimbursement u/s 192.
2. Deduction of tax at source on free/concessional tickets provided to employees u/s 17(2)(iii).
3. Levy of interest u/s 201(1A) for short deduction of tax at source.

Summary:

1. Deduction of Tax at Source on Transportation Reimbursement u/s 192:
The primary issue was whether the transportation reimbursement paid by the assessee to its employees was subject to tax deduction at source u/s 192. The assessee, a Dutch Airlines, reimbursed its employees for transportation expenses incurred for commuting between residence and office, subject to a ceiling. The AO held that these reimbursements were taxable and the assessee had made short deductions on account of TDS. The CIT(A) upheld the AO's decision regarding transportation reimbursement, leading to the assessee's appeal.

The Tribunal found that the assessee had a bona fide belief that the transportation reimbursement did not constitute salary and thus was not subject to TDS u/s 192. The Tribunal noted that the assessee had been operating under this belief for a long time without any objections from the Revenue. The Tribunal cited various precedents, including the Delhi Bench order in the case of Nestle India Ltd., supporting the assessee's position. Consequently, the Tribunal held that the penalty levied u/s 201(1) was not justified and allowed the assessee's appeals.

2. Deduction of Tax at Source on Free/Concessional Tickets Provided to Employees u/s 17(2)(iii):
The Revenue appealed against the CIT(A)'s decision that the assessee was not liable to deduct tax at source on free/concessional tickets provided to its employees for travel on carriers other than the assessee's own carriers. The AO had considered these tickets as perquisites and held the assessee liable for TDS.

The CIT(A) ruled that the benefit of concessional tickets did not flow from the assessee-employer but from other airlines, and thus, the assessee was not required to deduct tax at source. The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's judgment in Emil Weber vs. CIT and the Delhi Bench order in the case of Indian Airlines. The Tribunal dismissed the Revenue's appeal on this ground.

3. Levy of Interest u/s 201(1A) for Short Deduction of Tax at Source:
Both the assessee and the Revenue appealed against the CIT(A)'s order directing recalculation of interest u/s 201(1A) due to short deductions of tax at source. The Tribunal, having allowed the assessee's appeals on the primary issues and dismissed the Revenue's appeal, consequently allowed the assessee's appeals against the levy of interest and dismissed the Revenue's appeal.

Conclusion:
The Tribunal ruled in favor of the assessee on all counts, holding that the transportation reimbursement was not subject to TDS u/s 192 due to a bona fide belief, and that the assessee was not liable for TDS on free/concessional tickets provided by other airlines. Consequently, the levy of interest u/s 201(1A) was also not justified.