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2020 (3) TMI 813 - HC - Income TaxTDS u/s 192 on salary - reimbursement / payments made to employees under the head of uniform allowance - addition u/s 201(1) read with section 201(1A) - as per AO there was no provision for granting exemption on the basis of self certification - None of the employees on his own has added the allowances received to his own income in his individual income tax return and has claimed exemption under section 10(14)(i) - HELD THAT - In terms of the Circular No.15 dated 8.5.1969, for the purpose of calculation of tax deductible at source under section 192, self-certification on the part of the employee that the conveyance was owned by him and being used by him for the purposes of employment was adequate. The present case relates to uniform allowance, which as noticed earlier is exempt from tax under section 10(14)(i) of the Act read with rule 2BB(1)(f) of the rules to the extent to which such expenses are actually incurred for that purpose. Under the Act, the liability to the employer is to deduct tax at source to the extent of the taxable income of the employee. If any part of such income is exempt, there is no liability to deduct tax at source from such income. Since liability to pay tax under the Act is of the individual employee and the liability on the part of the employer is only to deduct tax at source, Circular No.15 dated 8.5.1969 provides that self certification on the part of the employee is sufficient for the disbursing officer for calculation of the tax deductible at source. While the said circular relates to conveyances, the underlying principle can well be applied even in the case of uniform allowance. Therefore, if an employee gives a certificate certifying that he had incurred certain expenditure towards uniforms and maintenance thereof, insofar as the disbursing officer is concerned, that would be adequate while calculating the tax deductible at source. If the Assessing Officer has any doubt about the claim made by any individual employee, he can always take upon the issue during the course of assessment proceedings of such employee, inasmuch as, as rightly submitted by the learned counsel for the respondent, self certification is good enough for the employer not to deduct tax at source, it does not grant any immunity to the employee if the claim is incorrect. As held by this court in Commissioner of Income-tax v. Oil Natural Gas Corporation Ltd., 1998 (11) TMI 3 - GUJARAT HIGH COURT whether an employee actually incurs such amount for official purposes is relevant for assessment of such employee because the exemption operates in his terms and conditions of availing such exemption that is to be fulfilled by him. Whether the employee is able to substantiate his claim to exemption has no bearing on the estimate of income liable to tax to be made by the employer. Under the circumstances, there is no legal infirmity in the impugned order passed by the Tribunal in placing reliance upon the above circular for holding that self certification on the part of the employees was adequate for the assessee not to deduct tax from the reimbursement allowance towards expenditure incurred for uniforms. This court is of the view that the impugned order passed by the Tribunal does not suffer from any legal infirmity warranting interference -Income Tax Appellate Tribunal was right in law in confirming the order of the Commissioner of Income-tax (Appeals) deleting the additions made by the Assessing Officer under section 201(1) - Decided in favour of the assessee and against the revenue.
Issues Involved:
1. Whether the Income Tax Appellate Tribunal was right in confirming the order of the Commissioner of Income Tax (Appeals) deleting the additions made by the Assessing Officer under section 201(1) of the Income Tax Act, 1961, and consequential interest charged by the Assessing Officer in relation to the assessee’s payments to its employees under the head of uniform allowance. Issue-wise Detailed Analysis: 1. Survey and Findings by the Assessing Officer: On 22.11.2010, a survey was conducted at the office premises of the assessee - Oil and Natural Gas Corporation Limited. It was found that the assessee made payments under the head "uniform allowance" but did not include this allowance in the total salary payments nor deducted tax at source (TDS) on such income. The Assessing Officer noted that there was no provision for granting exemption on the basis of self-certification and that the reimbursement of uniform allowance was not treated as taxable. The Assessing Officer observed that the employer did not verify whether the employees had actually incurred such expenditure and that the system of self-certification was prevalent without any checks. He concluded that the reimbursement of ?3,92,67,843/- for 752 employees was taxable and required to be taxed as TDS was not deducted by the Drawing Disbursing Officer (DDO). 2. Appeal Before the Commissioner (Appeals): The assessee contended that the reimbursement is exempt under rule 2BB (1)(f) of the Income Tax Rules, 1962, read with section 10(14)(i) of the Act. The Commissioner (Appeals) held that there exists a circular of the Board enabling non-deduction of tax from the reimbursement of allowances on the strength of the certificate of utilization from the employees. He noted that similar issues had been decided in favor of the assessee in earlier years and thus, held that the assessee cannot be considered in default within the meaning of section 201(1) read with section 201 (1A) of the Act, deleting the payment of ?1,60,21,247/- raised under section 201(1) and 201(1A) of the Act. 3. Appeal Before the Tribunal: The revenue contended that the specified allowances under section 10(14)(i) of the Act are exempt to the extent these are actually incurred for that purpose and that the Commissioner (Appeals) erred in allowing uniform allowance without considering whether such claim fulfilled the conditions laid down under section 10(14)(i) of the Act. The Tribunal observed that the uniform given to an employee for using during duty hours is presumed to be used for the purpose of employment only. The Tribunal noted that there was a CBDT circular enabling non-deduction of tax from the reimbursement of allowances on the basis of the utilization certificate of the employee and accordingly dismissed the appeal. 4. Contentions by the Appellant (Revenue): The appellant argued that during the fringe benefit tax regime, the assessee treated uniform allowance as a perquisite and thus it cannot cease to be a perquisite. It was submitted that the reimbursement of uniform allowance for assessment year 2010-11 was not governed by the provisions of section 115WB(E) of the Act and hence, the Tribunal was not justified in relying on the earlier decision. It was further contended that in the absence of any uniform being prescribed, payment made in respect of uniform allowance is not exempt under section 10(14)(i) of the Act. 5. Contentions by the Respondent (Assessee): The respondent argued that whether or not a uniform has been prescribed is essentially a question of fact and that the court cannot be called upon to invoke such facts which were never before the Tribunal. It was submitted that self-certification is permissible as per Circular No.15 dated 8.5.1969 and that the Assessing Officer of the concerned employee can examine the validity of the claim of exemption under section 10(14)(i) of the Act. 6. Court's Analysis: The court noted that the sole issue raised by the Assessing Officer was that the assessee had claimed expenditure incurred towards uniform allowance as exempt under section 10(14)(i) of the Act on the basis of self-certification by the concerned employees without calling for any proof. The court observed that the decision of this court in Oil and Natural Gas Corporation Ltd. v. Assistant Commissioner of Income tax (TDS) was not applicable to the facts of the present case as the question of prescription of uniform or otherwise was not subject matter before the Tribunal in the present case. 7. Conclusion: The court held that there is no legal infirmity in the impugned order passed by the Tribunal in placing reliance upon Circular No.15 dated 8.5.1969 for holding that self-certification on the part of the employees was adequate for the assessee not to deduct tax from the reimbursement allowance towards expenditure incurred for uniforms. The substantial question framed by the court was answered in the affirmative, in favor of the assessee and against the revenue. The appeal was dismissed with no order as to costs.
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