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TMI Blog2011 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... p into the shoes of the AO and determine the actual income. - on the basis of the accounts maintained by the Assessee, the cost of education was less than Rs. 1,000/- per month per child and, therefore, the Assessee was also entitled to the benefit of the proviso to Rule3(5) of the Rules, 1962. - ITAT was correct in coming to the finding that these were not fit cases for passing orders under Section 201(1) and consequently levying interest under Section 201(1A) of the Act. X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in default as aforesaid. In this behalf, it is noted that the Assessing Officer did not apply his mind to the latter part of Rule 3(5) of the Rules, 1962 where the determination of the value of the perquisite is with reference to the "cost" of such education in a similar institution in or near the locality. In this behalf the latter part of Rule 3(5) of the Rules, which requires the AO to determine the cost of education in a similar institution in or near the locality was completely overlooked by the AO and therefore he proceeded on an entirely incorrect proposition. 5. The Assessee School carried the matter in Appeal before the Commissioner of Income Tax (Appeals)[CIT(A)]. The CIT(A) came to the conclusion that the interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irrespective of the total income of the teachers and the employees and the corresponding deductions under Section 88, if any, on account of expenditure incurred on the education of the wards had also not been taken into account. 7. On the facts and circumstances of the case the ITAT observed that "the intention and rationale of the provision is not to compute tax correctly but to facilitate recovery and collection of tax. What is required to be done under the provision is to estimate the income of the assesee under the head "salaries", compute tax on the estimated income and deduct such tax and deposit the same to the credit of the government". The ITAT further came to the conclusion that the tax to be deducted is merely an interim measu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se was not fit for passing orders under Section 201(1) and consequently under Section 201(1A). 8. In Gwalior Rayon Silk Co. Ltd.(supra) it was held that:- "The provisions of s.201 of the Act are attracted in the case of an employer only when that employer does not deduct tax at source or after deducting fails to pay the tax as required by the Act. A duty is cast on an employer to form an opinion about the tax liability of his employee in respect of the salary income. While forming this opinion, the employer is undoubtedly expected to act honestly and fairly. But if it is found that the estimate made by the employer is incorrect, this fact alone, without anything more, would not inevitably lead to the inference that the employer has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oubtedly expected to act honestly and fairly and, therefore, if it is found that the estimate made by the employer is incorrect, this fact alone, without anything more, would not inevitably lead to the inference that the employer has not acted honestly and fairly as held in the decision of Gwalior Rayon Silk Co. Ltd.(supra). Unless that inference can be reasonably raised against an employer, no fault can be found against him and it cannot be held that he has not deducted tax on the estimated income of the employee. Further, it is noticed that the AO without application of mind proceeded with the determination of the value of the perquisite based on the survey operations in many other schools without reference to the "cost" of such education ..... X X X X Extracts X X X X X X X X Extracts X X X X
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