2014 (1) TMI 1592 - HC - Income Tax

Tax deduction at source on salaries - Held that - Relying upon the decision in Gwalior Rayon Silk Co. Ltd. Vs. Commissioner of Income Tax 1982 (9) TMI 53 - MADHYA PRADESH High Court - Where the regular assessment of an employee had been completed the Commissioner of Income Tax, TDS has no jurisdiction under Section 201 of the Act to demand further tax from the employer in respect of tax shortly deducted at source relating to such employees - The employer while making deduction of tax at source is only required to have a broad picture of the estimated income on which tax is to be deducted. He is not supposed to calculate the income minutely to precession - Decided in favour of assessee.

Summary

Issues:
1. Whether deductions under Section 80GGA could be allowed to the employees of the LIC for tax deduction at the source.
2. Whether the deduction on account of donations made to institutions for rural development programs was in contravention of departmental instructions.

Analysis:

Issue 1:
The case involved three petitions related to assessment years 2003-04, 2004-05, and 2005-06 concerning the deduction of tax at source by the petitioner, a drawing and disbursing Officer of the Life Insurance Corporation of India. The Assistant Commissioner of Income Tax found a shortfall in tax deduction and demanded payment from the petitioner. The main contention was whether the petitioner could allow deductions under Section 80GGA of the Income Tax Act to employees for tax deduction purposes. The court analyzed Section 192 of the Act, emphasizing the importance of deducting tax on the estimated income of the assessee under the head 'salaries.' It was held that the petitioner acted in accordance with the law by allowing deductions based on certificates issued by the prescribed authority and that the assessing officer's role was in final assessment, not in estimating income for tax deduction purposes.

Issue 2:
The second issue revolved around whether the petitioner's allowance of deductions for donations made to institutions for rural development programs was in contravention of departmental instructions. The court examined circulars related to tax deduction under Section 192 of the Act, noting that none of them provided guidance on deductions under Section 80GGA. It was held that since the circulars did not cover deductions under Section 80GGA, the petitioner did not violate any guidelines. Additionally, the withdrawal of certificates approving donations made by employees was raised by the department in a counter affidavit. However, the court held that such subsequent withdrawal did not affect the eligibility of employees for deductions under Section 80GGA, citing relevant case law.

The judgment ultimately quashed the impugned orders dated 28.3.2007 and 29.12.2008, ruling in favor of the petitioner without costs. The court highlighted the petitioner's bona fide actions in allowing deductions and emphasized that the assessing authority should have addressed any tax shortage during regular assessments of the employees, relieving the petitioner of any further liability for tax deductions at source.