9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (8) TMI 697 - AT - Income TaxTDS liability on payments made out of accumulated balances in the EPF a/c - AO estimated that 50% of the withdrawals were made before rendering five years of continuous service and, therefore, in view of Rule 8(1) the said withdrawals were liable to TDS in terms of Rule 10 of Part A of Fourth Schedule to the Income-tax Act - assessee contended withdrawals from EPF a/c under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 are covered u/s 10(11) of the Income-tax Act and not under the Fourth Schedule to the Income-tax Act - Held that - Inadvertently amendment in section 9 of Employees Provident Fund and Miscellaneous Provisions Act, 1952 could not be made replacing 1922 by 1961 . From this plea it is evident that ld. counsel wants the Tribunal to read something in the Act which is not there. Be that as it may, when Fourth Schedule has been incorporated in the Income-tax Act, 1961, dealing with cases of recognized provident fund, the Tribunal cannot go beyond that. The submission of ld. counsel primarily revolves around a case of casus omisus but the court cannot fill the gap and read 1961 instead of 1922 in the Employees Provident Fund and Miscellaneous Provisions Act, 1952, particularly when the said provision is not under consideration before us. Be that as it may, Tribunal is not empowered with such powers. Therefore, we hold that the provisions of section 10(11) are not applicable to the present proceedings but Schedule IV to the Income-tax Act is applicable, this being a case of recognized provident fund. We are also in agreement with ld. CIT(DR) that Rule 69 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 dealing with circumstances in which accumulation in the funds are payable to a member are much broader than Rule 8 of Part A of Fourth Schedule of the Income Tax Act and in no way repugnant to Rule 8,9 and 10 of Part A of Schedule IV. Rule 69 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 only specifies the circumstances in which the accumulation in the funds are payable to a member but that does not impinge upon the deduction of tax as per Rule 10 of Part A of Schedule IV to Income Tax Act. Rule 69 of the Employees Provident Fund scheme nowhere prohibits deduction of TDS from the accumulated balances to the members of the scheme. Therefore, there is no repugnancy between Rule 69 of EPF Scheme and Rules 8,9 and 10 of part A of Schedule IV. Considering the argument regarding there being no mechanism for deduction of TDS being prescribed in the Act and only after the introduction of section 192A w.e.f. 1.6.2015, tax deduction scheme has been prescribed. The submission of ld. counsel is that as far as section 192(4) is concerned, the same deals only with specifically recognized provident funds which are private in nature and for Employees Provident Fund Scheme 1952, the provisions for the first time have been made in section 192A. We do not find much substance in this plea of ld. counsel because as per Rule 10 of the Part A of Schedule IV, deduction is required to be made from the amount payable under Rule 9 as per provisions of Chapter XVII B by treating accumulated balance being income chargeable under the head salary . Whenever assessee fails to furnish the necessary information as required by deductor then the TDS is to be made at the maximum marginal rate and that is how the AO had made the TDS at maximum marginal rate. Therefore, it cannot be said that there was no mechanism prescribed for deduction of TDS in respect of payment of accumulated balance due to employees. However, it is true that with the insertion of section 192A from 1.6.2015, the position has become more clear in respect of Employees Provident Fund Scheme, 1952. As regarding computation of amount deduction of tax. In this regard we find considerable force in the submission of ld. counsel for the assessee that AO was not justified in estimating 50% of the withdrawals as being of employees who had rendered less than five years of continuous service thereby coming within the ambit of Rule 9 & 10 of Part A of Schedule IV of the Income-tax Act. We, therefore, set aside the order of ld. CIT(A) and restore the matter to the file of AO with a direction that assessee will furnish the required details before the AO in respect of withdrawals made by employees within 5 years of rendering continuous service with his employer. The AO will also take into consideration the effect of decision of Hon ble Supreme court in the case of Hindustan Coca Cola 2007 (8) TMI 12 - SUPREME COURT OF INDIA . Accordingly, if employee has included the accumulated balance in its total income, then the same is to be excluded while making the computation. Further, he will take guidance from the provisions of section 192A and, accordingly, no deduction should be made where the amount of such payment or, as the case may be, the aggregate amount of such payment to the payee is less than ₹ 30,000/-. The short deduction is to be computed @ 10% in all the cases where the PAN number is furnished by assessee in respect of the employees from whose income tax was to be deducted. - Decided in favour of assessee for statistical purposes.
Issues Involved:
1. Non-deduction of TDS on settlement or withdrawals of accumulated balances by the Employees Provident Fund Organization (EPFO). 2. Applicability of Section 10(11) vs. Fourth Schedule of the Income Tax Act, 1961. 3. Adequate opportunity and principles of natural justice. 4. Calculation of tax liability and interest under Sections 201(1) and 201(1A). 5. Introduction and implications of Section 192A w.e.f. 1.6.2015. Detailed Analysis: 1. Non-deduction of TDS on Settlement or Withdrawals: The main issue in all appeals is that the EPFO allowed settlement or withdrawal of accumulated balances without deducting tax as per the Income Tax Act, 1961. The Assessing Officer (AO) observed that taxable income accruing to an employee on account of such withdrawals was governed by Rule 8 & 9 of Part A of the Fourth Schedule to the Income Tax Act. 2. Applicability of Section 10(11) vs. Fourth Schedule: The assessee argued that EPFO was governed by Section 10(11) of the Income Tax Act, making such payments exempt from income tax. However, the CIT(A) found that the EPFO is a recognized provident fund (RPF) under Section 2(38) and not a statutory provident fund under the Provident Fund Act, 1925. Therefore, the withdrawals were taxable under the head "salary" as per Rule 8 of Part A of the Fourth Schedule. The Tribunal upheld this view, stating that recognized provident funds include those established under the Employees Provident Fund Act, 1952, and are subject to the Fourth Schedule. Section 10(11) applies only to funds under the Provident Fund Act, 1925, or those notified by the Central Government. 3. Adequate Opportunity and Principles of Natural Justice: The assessee contended that they were not provided adequate opportunity, violating principles of natural justice. The Tribunal noted that the AO had requested necessary information from the assessee, which was not fully provided. Therefore, the AO estimated 50% of withdrawals as taxable, which the Tribunal found to be unjustified. 4. Calculation of Tax Liability and Interest: The AO determined the total tax liability for non-deduction of tax and interest payable under Sections 201(1) and 201(1A). The Tribunal directed the AO to re-examine the withdrawals and compute the tax liability accurately, considering the details of employees who rendered less than five years of continuous service. The AO should also consider if the employees had already paid taxes on these amounts, as per the Supreme Court decision in Hindustan Coca Cola. 5. Introduction and Implications of Section 192A: The assessee argued that the mechanism for TDS on EPFO withdrawals was only introduced with Section 192A w.e.f. 1.6.2015. The Tribunal found that Rule 10 of Part A of the Fourth Schedule already required TDS on such withdrawals, treating them as income under the head "salary." However, the introduction of Section 192A clarified the position further. The Tribunal directed the AO to compute the short deduction of tax at 10% where PAN is furnished and to exclude amounts below ?30,000 as per Section 192A. The AO should also consider the maximum marginal rate where PAN is not provided. Conclusion: The Tribunal allowed the appeals for statistical purposes, directing the AO to re-compute the tax liability based on detailed information from the assessee and considering the provisions of Section 192A and the Supreme Court decision in Hindustan Coca Cola. The Tribunal emphasized the applicability of the Fourth Schedule to the Income Tax Act for recognized provident funds like the EPFO, rather than Section 10(11).
|
