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TMI Blog2011 (4) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... ear - Once the income of the employees under the head 'salary' was estimated honestly and fairly, merely because there was short deduction of tax, the provisions of s.201 are not attracted - the employer cannot be made liable for the consequences set out in sec. 201 on account of the retrospective amendment to sec. 17(2). As decided in CIT & ANR. VERSUS 1. M/S. LARSEN & TOUBRO LTD. 2. ASEA BROWN BOVERI LTD.[2009 (1) TMI 11 - SUPREME COURT] employer is not under any statutory obligation under the income tax Act, 1961 or the Rules, to collect evidence to show that the employee had actually utilized the amount paid towards leave travel concession or conveyance allowance u/s 10(5). Nor is there any circular of the CBDT requiring the employer u/s 192 to collect and examine the evidence supporting the declaration submitted by the employee. Since in the instant case, the employer has acted on the basis of declarations given by the employees, therefore, there was no obligation on the part of the employer to deduct the tax at sources - Decided in the favour of assessee - ITA No. 980/Mum/2004 - - - Dated:- 8-4-2011 - R.V. Easwar, R.K. Panda, JJ. P.J. Pardiwala and Vasanti Pat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as prescribed by the relevant amended I T Act, 1961. However, the assessee has failed to do so. Further, the Hon'ble High Court has not granted any injunction restraining the ONGC from enforcing the amended I T Rules wherein the impugned notification was ratified by the Parliament and 22nd amendment to I T Rules was enacted. He, therefore, asked the assessee to furnish the details of perquisites provided to the employees during the year 2001-02 and the valuation thereof. 3.2 The assessee furnished the details as called for by the Assessing Officer and stated the basis of valuation of perquisites as under: i) Residential accommodation- 10% of salary -rent recovery ii) Conveyance reimbursement Rs. 2735/(variable) 800/- iii) Car advance Int.rate 10% - 5.5% iv) House building advance int.rate 10% to 5.5/6/8% v) Scooter advance Int.rate 10% - 5.5% vi) Computer advance Int.rate 1.3% - 7.5% vii) Furnishing advance Int.rate 13% viii) Holiday home as per actual 3.3 On going through the submissions, the Assessing Officer noted that an amount of Rs. 91,73,186/- on account of value of perquisites remained to be taken into consideration while working the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 which was admitted by the Hon'ble Bombay High Court, Referring to pages 60 and 61 of the paper book, he drew the attention of the Bench to the nature of the questions before the Hon'ble High Court. 5.1 Referring to pages 83 and 84 of the paper book he drew the attention of the Bench to the prayer before the Hon'ble High Court. Referring to page 47 of the paper book, he drew the attention of the Bench to the interim order dated 20.2.1996 passed by the Hon'ble High Court wherein the interim relief in terms of prayer (e) was granted. 5.2 Referring to page 85 of the paper book, he drew the attention of the Bench to clause 'e' of the prayer, which has been allowed by the Hon'ble High Court and which reads as under: "That pending the hearing and final disposal of this writ petition the respondents, their servants and agents be restrained by an order and injunction from adding the difference between 10% of the salary of any organisation officer and the deductions actually made from the salary income of such officers on account of being provided with a residential accommodation by the respondent organisation as value of 'perquisite' to the other salary income of such organisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e declarations but has fairly estimated the income for deducting tax u/s192. When the tax was not deducted only on that part of the allowance which is exempt while tax has been duly deducted and paid on the remaining portion, the assessee has acted bonafidely; therefore, the assessee cannot be treated as an assessee in default. He submitted that since the assessee in the instant case with bonafide belief has not deducted the tax at source on the perquisite value and since his action is not malafide, therefore, the assessee cannot be treated as an assessee in default and thereby liable to provisions of sec. 201(1)/201(1A). 5.7 Referring to pages 122 to 126 of the paper book, he drew the attention of the Bench to the news paper reports; according to which the interim stay has been granted for non deduction of tax at source on perquisite value and allowances as required by the IT Act and notification which was issued by CBDT during Sep 2001. He submitted that due to prevailing uncertainty the assessee obtained opinion from a renowned lawyer Shri S E Dastur, who has opined that in view of the stay granted by the Hon'ble High Court the question of deducting tax at source as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the CIT(A) submitted that when the survey was conducted on 4.12.2002 nothing prevented the employer to deduct tax at source till the injunction is granted by the Hon'ble Bombay High Court. Since the assessee is a Public sector undertaking and since law was very clear; therefore, there was no need to take any opinion from any counsel. Since the assessee has failed to deduct the tax at source as per statutory law, the CIT(A) was justified in upholding the action of the Assessing Officer in charging tax for the short deduction and interest u/s 201(1)/201((1A) respectively of the act. Accordingly, he submitted that the order of the ld CIT(A) should be upheld. 7. We have considered the rival arguments by both the sides, perused the orders of the Assessing Officer and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the Assessing Officer, relying on the amendment to Rule 3 of Income Tax Rule 1962 by the Income Tax (Twenty Second) Amendment Rules 2001 w.e.f 1.4.2001, held that the assessee has not valued the perquisites for deduction of tax at source. He, therefore, was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deducting tax at source on the perquisites value. 9. We find, the Vishakhaptnam Bench of the Tribunal in the case of ONGC Rajahmundry (supra) while discussing an identical issue at pages 13 to 16 of its order has held as under: 13. The main issue arsing for consideration in these matters, relates to non-deduction of tax at source u/s 192 in respect of perquisite/amenities provided to its employees by the assessee. It is an admitted fact that the Association of Scientific and Technical Officers of ONGC of India filed a writ petition, being WP No.6962 of 2002 before the Madras High Court challenging the constitutional validity of s. 17(2)(vi) of the act, as inserted by the Finance Act, 2001 and also Rule 3 of the I T Rules, 1962, as substituted by the Income Tax (Second Amendment)Rules 2001. The Madras High Court by its order dated 8.3.2002 granted interim stay on the operation of the above provisions. We find that S.17(2)(vi) of the Act was introduced by Finance Act, 2001 with effect from 1.4.2002. It was notified by the Govt of India in SO No.940(5) dated 25.9.2001. The Madras High Court granted interim stay on the operation of these provisions on 8.3.2002. So, as on 1.4.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on the estimated income of the employee under the head 'salary' for that financial year in which payment was made. For the financial year 2002-03, the payments have already been made before 31.3.2003, on which date, the interim stay of the Madras High Court was in operation. It is not the case of the revenue that any part of arrears related to financial year 2002-03 i.e. relevant to Assessment Year 2003-04, was pending to be paid by the assessee to its employees. In these circumstances, strictly speaking, as contended by the ld counsel for the assessee, the provisions of s. 192(1) of the Act do not make it obligatory for the assessee to deduct in the subsequent assessment year. 15. We have also carefully gone through the judgments of various High Courts referred to by the ld counsel for the assessee. All the High Courts say that the employer has to estimate the income of the year fairly and honestly and deduct tax thereon. Once the income of the employees under the head 'salary' was estimated honestly and fairly, merely because there was short deduction of tax, the provisions of s.201 are not attracted. The Andhra Pradesh High Court in the case of P V Rajagopal (supra) examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alidity of Rule 3 has held that in the absence of any 'deeming fiction' in the Act, it is open to the assessee to contend that there is no concession in the matter of accommodation provided by the employer to the employees and the case is not covered by section 17(2)(ii) of the act. In other words, even after the substitution of Rule 3 with effect from 1.4.2001, in the absence of any specific provision under the Act, it was open to the assessee not to deduct tax at source relating to the accommodation given to the employees on the ground that no concession in rent has been given to the employees. This contention of the assessee has been in fact held by the Apex Court in the case of Arun Kumar (supra). To overcome the above decision, the law has been amended by Finance Act, 2007 with retrospective effect from 1.4.2002. The retrospective amendment merely takes away the above argument, which was available to the assessee. Once the salary is paid by the employer after deducting tax at source as per the law prevailing on the date of paying the salary, then any subsequent amendment in law brought about retrospective cannot require the employer to deduct tax at source for the past per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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