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TMI Blog2018 (8) TMI 910X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in respect of any period of leave not availed of by him. Under Section 192 of the Act, "Any person responsible for paying any income chargeable under the head "Salaries shall, at the time of payment, deduct income- tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made on the estimated income of the assessee under this head for that financial year. KPTCL as an employer was bound to deduct tax at source on the salaries paid to its employees by including the payment received by an employee in respect of any leave period not availed by the employee. Section 201(1) & (1A) of the Act lays down consequences if tax is not deducted at source when there is a requirement to deduct tax at source laid down under any provisions of the Act and it reads thus: "Section-201: Consequences for failure to deduct or pay. (1) Where any person, including the principal officer of a company,- (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e limit applicable in this behalf to the employees of that Government: 4. It is not in dispute that the Specified Limit in the case of employee other than an employee of the Central Government or a State Government i.e., employee falling within clause (ii) of Sec.10AA is Rs. 3,00,000 in salary to employees who retire, whether on superannuation or otherwise, after 1-4-1998 Vide Notification No. 123/2002 dated 31-5-2002. 5. As can be seen from the above provisions that if the employee to whom payment is made for unutilized leave period is an employee or Central or State Government then the entire payment so made is exempt and therefore an employee in such circumstances is not obliged to deduct tax at source on such payment. If on the other hand the person to whom such payment is made is not a Central or State Government employee then only Rs. 3 lacs is exempt and the remaining sum is taxable and the employer has to deduct tax at source on payment in excess of Rs. 3 lacs towards unutilized leave period. 6. Sec.10(10AA) does not define as to who is to be regarded as employee of Central or a State Government. The revenue's case is KPTCL is not State Government but a statutory corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KPTCL was treated as "Assessee in default" for not deducting tax at source were not in the nature of income within the meaning of Sec.17(1)(va) of the Act and therefore there was no obligation on the part of the Assessee to deduct tax at source; (iv) The provisions of Sec.10(10AA)(i) of the Act are applicable in the case of the Assessee as the employees of KPTCL are to be regarded as employees of State Government; (v) The provisions of Sec.201(1) & 201(1A) of the Act are not attracted in the present case because the non deduction of tax at source by KPTCL was under the bonafide belief that it was not obliged to deduct tax at source on payments in excess of Rs. 3 lacs towards unutilized leave period as it believed that its employees were employees of State Government and therefore the applicable provisions will be only Sec.10(10AA)(i) of the Act. 11. We have heard the parties on proposition (iv) and (v) alone as there are decisions of ITAT Bangalore Bench on identical facts and identical issues. As far as proposition No. (iv) is concerned, it was submitted by the learned DR that this Tribunal in the case of Central Food Technological Research Institute Vs. The ITO (TDS), Mysor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by considering its employees as employees of State Government in view of the historical background under which KPTCL came into existence. The revenue has accepted in the past the manner in which tax was deducted at source by KPTCL by considering the employees of KPTCL as employees of State Government. It was pointed out that it is only in AY 2012-13, that the revenue took the stand that employees of KPTCL were not to be regarded as employees of State Government because employment under KPTCL cannot be equated with an office or post in connection with the affairs of such State. It was for the first time that the revenue took the stand that Statutory Corporations such as KPTCL, were not to be regarded as State Government. It has also been contended that the Assessee has been filing return of TDS for AY 2013-14 in the status of Statutory body (State Govt.) in form No.27A. 15. The learned counsel for KPTCL drew our attention to the Tripartite Agreement dated 31.7.1999 under the provisions of Sub-Section 2 of Section 15 of the Karnataka Electricity Reform Ordinance, 1999 between the Government of Karnataka and KEB and KEB Employees Union, wherein on corporatization of the transmission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10-11 order dated 27.2.2015 on identical facts. In the aforesaid decision, the Tribunal took the view that the estimate of income under the head salary made by the Assessee on the belief that its employees were to be equated with State Government employees was a bonafide estimate and therefore the Assessee has discharged its obligation u/s.192 of the Act and hence proceedings u/s.201(1)( & 201(1A) of the Act were to be quashed. Reliance was also placed on the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Kotak Securities Ltd. 340 ITR 333 (Bombay) wherein the Hon'ble Bombay High Court took the view that when the question whether there was an obligation to deduct tax at source or not on a particular payment, is highly debatable then the Assessee cannot be held to be a defaulter for not deducting tax at source and consequently no disallowance u/s.40(a)(ia) of the Act for non deduction of tax at source should be made. 18. The learned DR submitted that no attempt whatsoever was made by KPTCL to show that the estimate of income under the head salaries made by it was bonafide. According to him there is always an option u/s.197 of the Act for the Assessee to approach th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iciency. We have already noticed that the fact that bills/evidence to substantiate incurring of expenditure on medical treatment up to Rs. 15,000/- and the availing of the LTC by the employees and the fulfilment of the conditions contemplated by Sec.10(5) of the Act for availing exemption by the employees so availing LTC, have not been disputed by the AO. Even assuming the case of the AO, that at the time of payment the Assessee ought to have deducted tax at source, is sustainable; the Assessee on a review of the taxes deducted during the earlier months of the previous year is entitled to give effect to the deductions permissible under proviso (iv) to Sec.17(2) or exemption u/s.10(5) of the Act in the later months of the previous year. What has to be seen is the taxes to be deducted on income under the head 'salaries' as on the last date of the previous year. The case of the AO is that LTC and Medical reimbursement should be paid at the time the expenditure is incurred or after the expenditure is incurred by way of reimbursement and not at an earlier point of time. If it is so paid, then, even though the payment would not form part of taxable salary of an employee, the employer has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 004) 086 TTJ 0574 (KOL) Nestle India Ltd. v. ACIT (1997) 61 ITD 444 (Del) Indian Airlines Ltd. v ACIT (1996) 59 ITD 353 (Mum)" 21. The Tribunal thereafter proceeded to hold as follows: "19. We have considered the rival submissions. In our view, the plea of the Assessee that it made a bona fide estimate of employee's salary by valuing the perquisites in the form of residential accommodation provided to the employees by valuing the same as if employees were employees of Central Govt. has to be accepted. In this regard, it is clear from the records that the position with regard to the assessee not being a Central govt. was brought to its notice by the department only in the proceedings initiated in 2013. Even thereafter, the Assessee has been taking a stand that its employees or employees of Central Govt. As held in several decision referred to by the ld.counsel for the Assessee, the obligation of the Assessee is only to make a bonafide estimate of the salary. In our view, in the facts and circumstance of the present case, assessee has made such an estimate. The Assessee's obligation u/s.192 is therefore properly discharged and hence proceedings u/s.201(1) & 201(1A) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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