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2014 (4) TMI 277 - HC - Income TaxScope of salary for the purpose of TDS – Conveyance allowance - Whether conveyance allowance is given for coming from house to office/factory and back instead of providing a vehicle for transportation is liable to be treated as salary for the purpose of deduction of tax at source – Held that:- The Tribunal rightly was of the view that the amount that is paid not being of wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit - The conveyance allowance paid to defray expenses connected with journeys from residence to office and back cannot be treated as an allowance paid for defraying expenses wholly, necessarily and exclusively in the performance of the duty - amounts are being paid on a lump sum fixed basis without there being any correlation to the expenses actually incurred. Relying upon Dr. Reddy Laboratories Ltd. v. ITO [1995 (12) TMI 93 - ITAT HYDERABAD-A] - the conveyance allowance paid to defray expenses connected with journeys from residence to office and back, cannot be termed as an allowance paid for defraying expenses 'wholly, necessarily and exclusively' in the performance of the duties - it is only to the extent such expenses are actually incurred, that exemption would be available under section 10(14) in respect of even an allowance notified by the Central Government in that behalf - the conveyance allowance is clearly taxable under the head 'Salary' and as such the assessee could not have excluded the conveyance allowance paid, while computing the tax deductible at source, from the salaries paid by it to its employees – Decided against Assessee. Interest debited to recoup the interest - Whether in a case where interest is debited to the account of an Indian company by bank to recoup the interest charged to it by the discounting bank would it entail deduction of tax at source u/s 195 of the Act by the Indian company – Held that:- The assessee had privity of contract only with the Allahabad Bank and the amounts were paid to Allahabad Bank - It cannot be said that the assessee had any obligation to the American Express Bank and in that view of the matter it cannot be said that the transaction would fall within section 9(1)(5) of the Act - In the circumstances there was no obligation on the assessee to make TDS deduction under section 195 of the Act – Relying upon GE India Technology Centre P. Ltd. v. CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA ] - the obligation to deduct the tax with respect to the foreign remittances would arise only when the sum paid is chargeable under the provisions of the Act - there was no payment by the assessee, in the facts of the case neither section 9 nor section 195 of the Act itself has no application – Decided in favour of Assessee. Payment of tax and interest u/s 201 of the Act - Whether items which are subject matter of dispute, controversy and legal interpretation could at all be considered for the purpose of passing order under section 201 of the Income-tax Act demanding payment of tax and interest – Held that:- There was no reference of section 201 of the Act in case of short payment - The first circular No. 685, dated June 17, 1994 categorically states that it is the satisfaction of the disbursing authority whether to take into consideration the conveyance allowance for the purpose of tax deduction at source - satisfaction of disbursing authority is liable for security by the Income-tax Officer during regular assessment proceedings - in the second Circular speaks about interest liability under section 201(1A) of the Act, apart from proceedings under section 221 or prosecution under Chapter XXII of the Act – Relying upon PV. Rajagopal And Others Versus Union of India And Others [1998 (4) TMI 127 - ANDHRA PRADESH High Court] - for the purpose of payment of tax no proceedings u/s 201 of the Act could have been made – Decided against Assessee.
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