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TMI Blog2014 (2) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... or application of Rule 3(2), Table II(2) - due to declaration by employees of having utilized CMRE for official work – the appellant cannot be treated as assessee in default u/s 201(1) even for AY 2010-11 - As far as assessments of employees in A.Y. 2010-11 are concerned, tax liability is to be determined on case to case basis by applying Rule 2BB(l)(c) – thus, appellant cannot be treated as assessee in default u/s.201(1) for non-deduction of tax at source from CMRE payments for A.Y.s when FBT was in force, i.e. 2006-07 to 2009-10 as well as AY 2010-11, when FBT was not in force – the order of the CIT(A) upheld – Decided against Revenue. Scope of taxable income in addition to the salary u/s. 17(1) (iv) of the Act - Whether the AO was justified in treating assessee as assessee in default u/s. 201(1) for non-deducting tax from the amount of advance disbursed under a Scheme to the employees by considering it to be from salary – Held that:- As per rule 3(7)(vii) of Income Tax rules where employer provides movable assets to its employees for their personal use perquisite value to be taxed as salary is determined @ 10% per annum of the actual cost of asset - the position remained same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 3. The learned CIT (Appeals) has erred in law and in facts and circumstances of the case in not deleting the demand for interest u/s, 201(1A) which was raised by the ACIT (TDS), Baroda, in respect of uniform reimbursements. 4. Without prejudice, the learned CIT (Appeals) has erred in law and in facts and circumstances of the case in upholding the ACIT (TDS), Baroda's action in raising demand for tax on uniform reimbursements and interest thereon ignoring the fact that the demand so raised by the ACIT (TDS), Baroda; included demand in respect of those employees from whom tax had already been deducted by the appellant itself." 3. The facts in respect of this ground have been summarized by Ld. CIT(A) as under:- "Appellant was paying uniform allowance to its employees for last several years in quarterly/half yearly installments. During survey U/S.133A conducted in appellant's offices at Baroda and Ankleshwar, it was found that none of the employees wore any uniform. Even in post survey proceedings conducted by ACIT(TDS) u/s.201(1), none of the employees who appeared wore any uniform. ACIT(TDS) further pertained from Shri R. P. Bhatt, Sr. Finance Accounts Officer, ONGC, Kha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t source from uniform allowance payments to employees due to the same constituting their salary income." 4. Before Ld. CIT(A) assessee made following submission as summarized by Ld. CIT(A):- "Uniform allowance was granted to employees in monetary terms on quarterly basis in advance. Thereafter, employees were required to submit certificate of actual expenses incurred in prescribed form at the end of the year. Uniform allowance was taxable in the hands of employees. However, the same was exempt in view of section 10(14)(i) read with Rule 2BB up to actual expenditure. Appellant could not be treated as assessee in default even if it was ultimately held that amount reimbursed to employees or any part thereof was taxable in their hands since appellant could not be expected to go beyond declarations submitted by the employees. In this regard, reference was made to decision in the case of CIT vs. Larsen Tubro Ltd (2009) 221 CTR 620 (SC) to contend that assessee employer was not responsible to maintain any kind of details or evidence of actual amount utilized by the employee. "Uniform" means a standard style of dress worn by staff members of an office, hotel, home etc. and it should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed in ONGC during the period under consideration and this fact was well within the knowledge of appellant. Conclusion drawn by the ACIT(TDS) that additional salary in the garb of 'uniform allowance' was being paid is therefore, on sound footing. Since the payment in question was not towards purchase or maintenance of "uniform', it cannot be covered under Rule 2BB(l)(f)read with section10(14)(i). Appellant's contention that tax at source was not deducted from payments in the nature of uniform allowance, due to the same being exempt u/s.10(14)(i) read with Rule 2BB based on declarations furnished by employees is not tenable since appellant was well aware that there was no "uniform' prescribed and question of any allowance to maintain the same did not arise. Since the allowance paid was not towards the maintenance of uniform by employees, there being no uniform prescribed in ONGC, the whole debate regarding 'uniform allowance' being liable to FBT or not is irrelevant. As held above, the payment in question was additional salary to employees in the garb of "uniform allowance'. Such direct payment of additional salary is not liable to FBT under any of the clauses of section 115WB eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is taxable income in addition to the salary taxable u/s. 17(1) (iv) of the Income-tax Act." 8. Facts relating to ground No. 1 have been summarized by Ld. CIT(A) as under:- "ACIT(TDS) referred to the CMRE scheme as per ONGC order dated 24.10.2008 under which employees were paid CMRE for use of their private vehicles in official work. ACIT(TDS) observed that despite payment of CMRE to employees for official work, there was heavy expenditure by appellant in hiring taxis and buses. ACIT(TDS) referred to 254 ITR 121, i.e. decision in appellant's case for A.Y.1995- 96, wherein CMRE was claimed to be an allowance covered u/s. 10(14) and not reimbursement due to which it could not be, as per ACIT(TDS), covered under provisions of FBT. Appellant's contention in this regard was that CMRE was a fringe benefit uptill F.Y.2008-09 due to which TDS was not applicable and from F.Y.2009-10, TDS was being made as per Rule 3 of Income tax Rules. ACIT(TDS) held that treatment of CMRE by the appellant over various years was self contradictory, which proved that there was no actual reimbursement and money was paid only to remunerate the employees. ACIT(TDS) did not find CMRE to be meeting basic cri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of a declaration by the employee every month that he or she incurred expenditure stated in the declaration on running and maintenance of the vehicle for official work. Appellant paid CMRE at fixed rates on the basis of such declarations without any verification. CMRE was therefore not reimbursement of actual expenditure' on running of personal vehicles. There could be cases of employees claiming full CMRE without spending it entirely on running and maintenance of personal vehicles. CMRE would not constitute "fringe benefit' under clauses (F) (H) of section 115WB(2) to the extent it was not incurred towards "conveyance' or 'repair, running, maintenance etc. of motor cars'. Payment of fringe benefit tax on CMRE by appellant would not therefore extinguish liability to tax in employee's hands in respect of such unutilized CMRE portion. It is to be noted that even in FBT era, any allowance granted to meet the expenditure incurred on conveyance in performance of duties of an office was prescribed for the purpose of section 10(14)(i) of the Act under Rule 2BB(l)(c) of the I.T. Rules; however only to the extent to which such expenses were actually incurred for that purpose. Whether C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of hearing both the parties agreed that the issue involved in this ground is covered by the order of Hob'ble Jurisdictional High Court dated 12th August, 2013 in assessee's own case in favour of assessee and against the revenue, therefore we are not inclined to interfere with the order passed by Ld CIT(A) and the same is hereby upheld. This ground taken by revenue in all these appeals is dismissed. 11. The facts in respect of ground No. 2 have been summarized by Ld. CIT(A) as under:- "Appellant's submission before the ACIT(TDS) was that the household goods and furniture etc, .covered under the Scheme was ONGC's property and advance paid to the employees for purchasing these movable assets in the name of employer, i.e. ONGC did not constitute their salary Income, As per appellant, use of such assets and their transfer for a consideration less than their value constituted perquisite in the hands of employees, value of which was required to be computed as per Rule 3. ACIT(TDS) noted that purpose of scheme was to replace Interest Free Lump Sum Advance Scheme and under the scheme, personal disposable income to employee was increased. ACIT(TDS) was of the view that though bill o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the same as income in their hands. Had the employer directly purchased the movable assets rather than footing the same through advance payment to its employees, the same would not have been taxable at all as per Rule 3. Just because advance was paid to the employees in order to purchase assets of their choice, the same could not change nature of transaction, as ultimate ownership of assets belonged to employer itself. Regarding observation of ACIT(TDS) that interest free advances were given to employees to increase personal disposable Income, appellant submitted that the assets were purchased in the name of employer and thus, there was no interest free advance to the employees or increase in their personal disposable Income. Regarding ACIT(TDS)'s observation whether furniture etc. was actually purchased and allegation regarding the Scheme being a tool to claim depredation by ONGC, appellant submitted that ACIT(TDS) had not brought any case of non purchase of assets on record and claim of depreciation by appellant was as per law. Regarding observations of ACIT(TDS) about winning in lottery etc., appellant submitted that the advance was not in the nature of income." 13. After tak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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