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TMI Blog2006 (7) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... he prescribed form as required u/s 206 of the Act. Thus, for each financial year the prescribed return of TDS has to be filed by the tax deductor within the prescribed time-limit. The Assessing Officer was free to scrutinize these annual returns and to raise any queries if he had any doubt about the proper deduction of tax on the part of the assessee. In our view, the survey conducted on 11-12-2001 will not alter the legal position with regard to the time limit for passing of orders u/s 201(1) and 201(1A). Whether section 201(1) and 201(1A) have any applicability in case of short deduction of tax - HELD THAT:- We are unable to accept the arguments raised by the learned counsel for assessee. The Legislature has amended the relevant sections and the amended provisions have been consciously made effective with retrospective effect from 1-4-1962 i.e., right from the commencement of the Income-tax Act, 1961. In our view, whatever may be consequences, the law laid down by the Legislature has to be given effect. We, therefore, hold that for the assessment years under appeal short deduction of tax at source would also attract the provisions of section 201(1) and 201(1A). Applicability of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employer, the assessee bank is obliged to deduct tax at source under section 192 of the Act in respect of salaries and other amenities or perquisites granted to the employees. The dispute relevant for the present appeals pertains to the alleged default of non-deduction of tax on the value of the perquisites granted to the employees during the financial years 1995-96 to 2000-01 (referred to by the Assessing Officer as assessment years 1996-97 to 2001-02). During the above mentioned financial years, the assessee bank provided furniture to different categories of employees. The items of furniture included computer table & chair, vaccum cleaner, coir mattresses, cooking range, TV, washing machine, refrigerator, dining table with chairs, air conditioner etc. In respect of these various items of furniture and other appliances granted to the employees, the assessee bank charged standard rent based upon the first stage of pay scale of different categories of employees. During the financial years under appeal, the assessee bank was initially charging rent at the rate of 1 per cent of the first stage of the scale in which the employee was placed, on the basis of the internal circular dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mination in charging of standard rent and, therefore, no concession was given to the employees in respect of rent. It was submitted that in these circumstances, there is no perquisite under section 17(2) of the Act as held by the Hon'ble Calcutta High Court in the case of All India Vijaya Bank Officers' Association v. Vijaya Bank [2001] 250 ITR 500. It was also submitted before the Assessing Officer that under section 192, the assessee is required to deduct tax at source on the estimated income of an employee and that the only requirement of law is that such estimate should be honest and bona fide. 5. These submissions did not find favour with the Assessing Officer, who passed the impugned orders under sections 201(1) and 201(1A), treating the assessee bank as "assessee in default" and also charging interest. For the purpose of determining the value of perquisite in respect of furniture and other appliances, the Assessing Officer adopted the value as per the maximum entitlement of the employees, in view of the fact that no material was filed to show the cost of the furniture. The orders have been confirmed by the respective CIT(A) and that is why the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on the order of ITAT, Mumbai 'B' Bench dated 8-6-2005 in the case of Wockhardt Life Sciences Ltd for the assessment year 1999-2000. The learned counsel pointed out that the Tribunal has considered the following decisions of the Tribunal: Sl. No. Particulars Citation 1. Raymond Woollen Mills Ltd v. ITO [1996] 57 ITD 536 (Mum.) 2. Sahara Airlines Ltd v. Dy. CIT [2002] 83 ITD 11 (Delhi) 3. Mitsubishi Corpn. v. Dy. CIT [2003] 85 ITD 414 (Delhi) The learned counsel pointed that after a detailed discussion, the Tribunal in the case of Wockhardt Life Sciences Ltd, recorded its finding at para 17 in the following manner: "After taking into consideration of the ratio of the above decisions and taking into consideration the submissions of both the parties, we find that the orders passed by the Assessing Officer under section 201(1) and 201(1A) are barred by limitation. Undisputedly the tax was to be deposited before 31st March, 1994. However, the proceedings under section 201(1) and 201(1A) were initiated by the Assessing Officer in 2000. As the order was passed on 24-1-2000. It is beyond the period of limitation of 4 years, which has been held as reasonable p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of a honest and bona fide estimate, provisions of section 201(1) and 201(1A) cannot be invoked. It is argued that this is a settled position of law and he placed relevance on the following judicial pronouncements: Particulars Citation Gwalior Rayon Silk Co. Ltd v. CIT [1983] 140 ITR 832 (MP) CIT v. Nestle India Ltd [2001] 243 ITR 435 (Delhi) Hindustan Lever Ltd. IT Appeal No. 1957 1960/B /89 order dated 12-4-1997 11. The learned counsel invited our attention to the ratio of Hon'ble Madhya Pradesh High Court in the case of Gwalior Rayon & Silk Co. Ltd, which is reproduced below from the head notes: "The provisions of section 201 of the Act are attracted in the case of an employer only when that employer does not deduct tax at once 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian Bank Officers' Association v. Indian Bank [1994] 209 ITR 724 (Cal.) 13. The learned counsel has invited our attention to pages 55, 56 of the PB which contain copy of assessee's letter dated 7-8-2003 addressed to the CIT(A), the text of this letter may be reproduced below: State Bank of India was established by an Act of Parliament that is State Bank of India Act, 1955. Section 43 of the State Bank of India Act inter alia provides as follows: "43(1) The State Bank may appoint such number of Officers, advisers and employees as it considers necessary or desirable for the efficient performance of its functions, and determine the terms and conditions of their appointment and service. (2) The officers, advisers and employees of the State Bank shall exercise such powers and perform such duties as may by general or special order, be entrusted or delegated to them by the Central Board." That the State Bank of India Supervising the Staff Service Rules were framed under the aforesaid enabling provision i.e., section 43 of the State Bank of India Act which provides the terms and conditions of service. The said rule was substituted by State Bank of India Officers ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odation to the officers. The said accommodation may be furnished or unfurnished. It is the discretion of the employee officer whether he will take the furniture or not. Entitlement to the furniture up to certain amount varies from grade to grade of the officers. In anyone grade, the officers are entitled to the furniture up to a specific amount. Uniform rent is collected from all officers who are similarly situated. There is no case of provision of amenity at concessional rate. The Calcutta High Court in the Vijaya Bank scase held that the provision of furniture to the Bank officer is not a perquisite. It relied on several cases including the judgment of the Division Benches. Bona fide belief The bona fide belief of the Bank that it was not required to deduct tax at source on furniture provided to employees is on the basis of the decision of the Calcutta High Court in the case of All India Vijaya Bank Officers' Association v. Vijaya Bank (250 ITR 500) and other High Court decisions. It is submitted that the facts in the case of Vijaya Bank is identical with those of the Bank. Accordingly, the Bank cannot be treated as an assessee in default under section 201 of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Bank. The circular states that the casual labourer provided to officers is not by way of perquisites to the officer, i.e., in the nature of personal servant for the officer but is in the nature of casual labourer employed for proper upkeep of the official residence, furniture, fittings etc. provided to him by the Bank." 15. Ms. Rubby Srivastava, DR attending on behalf of the department, forcefully supported the orders of the revenue authorities. With regard to the claim that the orders for the assessment years 1996-97 to 1998-99 have become time-barred, she submitted that the peculiar circumstances under which, action has been taken by the Assessing Officer have to be kept in mind. It is pointed out that relevant orders have been passed consequent to the survey conducted by the department on 11-12-2001. It is argued that only during the course of survey, the department came to know that tax was not being properly deducted by the assessee-bank and therefore, action was taken under section 201(1) and 201(1A). It is submitted that after the survey, the relevant orders have been passed latest by 25-10-2002. The learned DR submitted that this issue has been examined by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o decided against the appellant for assessment year 1997-98." 16. Deriving support from the order of the learned CIT(A), the learned DR submitted that the orders passed by the Assessing Officer cannot be said to be time-barred. 17. Regarding the contention that section 201(1) and 201(1A) are not applicable in a case where the default is only for short deduction, the learned DR submitted that the law has been amended with retrospective effect from 1-4-1962 and therefore, the assessee cannot escape its liability. It is pointed that the cases relied upon by the learned counsel for assessee are related to preamendment period and therefore, the same are not applicable. The learned DR also vehemently contended that there is no question of the assessee being under any bona fide belief. It is argued that rule 3 of the IT Rules is mandatory as held by the Hon'ble Supreme Court in the case of K.S. Sundaram v. CIT [2001] 251 ITR 781. The learned DR also pointed out that under rule 3(B), where accommodation is furnished, the fair rent for furniture (including TV sets, radio sets, refrigerator and other household appliances etc.) has to be calculated at 10 per cent per annum of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be rendered bad in law. The learned DR has urged that facts of the present case are different and therefore, the decision of the Coordinate Bench is not applicable. The first argument on this point is that the relevant orders have been passed consequent to a survey conducted by the Department on 11-12-2001. In our view, merely because a survey was conducted by the department, the orders passed by the Assessing Officer after the expiry of the period of limitation, cannot be validated. All the material facts were already available with the department as the assessee bank has consistently, followed the same method over a period of almost 50 years. The details relating to TDS in respect of employees have to be filed by the employer every year in the prescribed form as required under section 206 of the Act. Thus, for each financial year the prescribed return of TDS has to be filed by the tax deductor within the prescribed time-limit. The Assessing Officer was free to scrutinize these annual returns and to raise any queries if he had any doubt about the proper deduction of tax on the part of the assessee. In our view, the survey conducted on 11-12-2001 will not alter the legal posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of demand. Since the date of demand itself was taken as the proceedings for recovery, the question of limitation did not apply at all in this case." 20. Section 231, prior to its omission by the Direct Tax Laws (Amendment) Act, 1987, with effect from 1-4-1989, stood as under:- "Save in accordance with the provisions of section 173 or subsection (7) of section 220, no proceedings for the recovery of any sum payable under this Act shall be commenced after the expiration of three years from the last day of the financial year in which the demand is made, or, in the case of a person who is deemed to be an assessee in default under any provision of this Act, after the expiration of three years from the last day of the financial year in which the assessee is deemed to be in default." 21. A conjoint reading of the aforesaid section and the Hon'ble Kerala High Court's decision in the case of Secretary, Sultan Battery Co-op. Housing Society Ltd. makes it clear that section 231 imposed a bar on any recovery of any sum payable under the Income-tax Act after the expiry of the prescribed period. A recovery can commence only pursuant to any orders passed under section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be saddled with substantial financial liability in respect of the deduction of tax at source during the financial years, which are subject-matter of these appeals. It has been argued that the amendment has been introduced by the Finance Act, 2001 whereas the assessee had already deducted tax at source for all these years prior to that amendment. We are unable to accept the arguments raised by the learned counsel for assessee. The Legislature has amended the relevant sections and the amended provisions have been consciously made effective with retrospective effect from 1-4-1962 i.e., right from the commencement of the Income-tax Act, 1961. In our view, whatever may be consequences, the law laid down by the Legislature has to be given effect. We, therefore, hold that for the assessment years under appeal short deduction of tax at source would also attract the provisions of section 201(1) and 201(1A). 24. We now go to the merits as also the arguments raised by Sri Dastoor that under section 192, the assessee is obliged to deduct tax at source on the estimated income of the employees and if such estimate is honest and bona fide, the provisions of section 201(1) and 201(1A) cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that if the rate charged by the employer from all the employees, who were similarly placed, was uniform and there was no discrimination, it cannot be said that there was a concession in providing the amenity. The Hon'ble Calcutta High Court referred to its earlier decision in the case of All India Vijaya Bank Officers' Association. In this case, the applicability of rule 3(b) was also considered by the Hon'ble Calcutta High Court. It would be appropriate to reproduce below the ratio of this decision from the head notes:- "The respondent was a nationalised bank which provided residential accommodation to some of its officers charging standard rent as fixed under the Regulations framed by the bank. By a circular dated October 14,1992, the bank informed its branches that the standard rent recovered by the bank in the case of accommodation provided to the employees, was not a fair rent value that it was a perquisite to be calculated in accordance with rule 3(b) of the Income-tax Rules, 1962. On a writ petition filed by the association of officers of the bank, a single Judge held in favour of the employees. On appeal to a Division Bench by the Department. Held, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey were paying less than 10 per cent of the salary, is putting the cart before the horse. The question of perquisite must be determined before the question of computing the value of such perquisite arises. By following the method of valuation provided, the income-tax authorities cannot then determine the existence of the perquisite. Furthermore, to read a portion of the rule relied upon by the income-tax authorities in the manner contended, would be at variance with the provisions of section 17(2) of the Act. The rule cannot be permitted to be read in a manner beyond the powers conferred under the substantive provision of the Act". 27. The aforesaid Single Judge decision has been confirmed by the Hon'ble Calcutta High Court in the case of All India Vijaya Bank Officers 'Association. The Hon'ble Madhya Pradesh High Court in the case of Officers' Association, Bhilai Steel Plant and the Hon'ble Andhra Pradesh High Court in case of Steel Executives Association have also taken similar view. In all the above mentioned cases, it has been consistently held that no perquisite would arise under section 17(2)(iii), if uniform standard rent is charged from employees s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l accommodation, furniture, fixture and other appliances, which are owned by the assessee-bank. In our view with regard to allotment of the furniture and reimbursement of expenditure as mentioned above, the assessee bank was clearly under a bona fide belief that it was properly complying with the provisions of section 192. We have already referred to Hon'ble Madhya Pradesh High Court decision in the case of Gwalior Rayon Silk Co. Ltd and Hon'ble Delhi High Court decision in the case of Nestle India Ltd and to the ITAT's decision in the case of Hindustan Lever Ltd. In these cases, it has been held that a duty is cast on an employer to form an opinion about the tax liability of his employees in respect of salary income. The employer is expected to act honestly and fairly. Unless any inference can be drawn that the employer did not act honestly and fairly, it cannot be said that the employer has not deducted proper tax on the estimated income of the employees. The employer is required to have a broad picture of the estimated income, which is to be subjected to tax. The department must show by bringing some material on record, that non-deduction of tax at source was mala fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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