TMI Blog2005 (1) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... ly reflected in the return filed in Form No. 24. The learned Assessing Officer brought this to the notice of the assessee by a specific letter dated23-12-1993. The same has been reproduced by the Assessing Officer in the order under section 201(1) of the Act. The learned Assessing Officer reminded the assessee by a letter dated18-1-1994requiring the assessee to furnish information on a number of points enumerated in that letter. According to the Assessing Officer, the assessee did not co-operate fully and only scant details were furnished. According to the learned Assessing Officer, even the final notice issued to the assessee on22-2-1994remained uncomplied with. 3. In the order under section 201(1), the Assessing Officer has held the assessee to be an assessee in default in respect of taxes as follows:- --------------------------------------------------- Sl Particulars Amount paid Short No. deduction --------------------------------------------------- A. Refreshment 6,53,649 2,92,830 expenses B. Shift 6,00,000 2,68,800 allowance c. Transport 6,74,461 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were made gradewise on monthly basis in the following manner:- ----------------------------------------- Grade City Office (Rs.) Airport (Rs.) ----------------------------------------- I 350 850 II 400 900 III 450 950 IV 500 1,000 V 550 1,050 VI 600 1,100 A B 300 700 ----------------------------------------- 5. The laundry allowance was reimbursement given to the staff rendering services at the airport as they were required to wear uniform provided by the assessee. Those were paid at the rate of Rs. 100 per month. The assessee argued that shift allowance, transport expenses and laundry expenses were exempt under Notifications dated27-3-1990,9-6-1989and29-3-1990. In reply the learned Assessing Officer clarified that under Notification dated27-3-1990transport expenses were exempt if given to those employees who were employed in running transport from one place to another. Secondly, according to the learned Assessing Officer, the Notification required that the amount must be wholly, necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, held that laundry allowance could be treated as exempt. The same was admittedly covered by the notification. The learned CIT (Appeals) noted that the assessee was required to mention these amounts in the salary certificate failing which the Assessing Officer did not even get an opportunity to examine its chargeability to tax. 7. In respect of air tickets, the assessee argued that it could not be treated as perquisite because it did not cost the assessee anything. According to the learned Assessing Officer, if an employee travelled in the employer's own aircraft that was a different matter, but if he travelled in the aircraft belonging to another airline, such benefit was liable to be taxed as arising due to employment. The learned Assessing Officer, therefore, in the absence of details, estimated the value of perquisite at Rs. 4 lakhs. The assessee pointed out that as per the agreement between the Indian Airlines and the assessee, the employees of the assessee-company were being issued tickets of Indian Airlines at the rate of 50 per cent of the price. Members of Armed Forces were receiving similar benefit. Employees of Indian Railways were given free passes. It was point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed CIT (Appeals) held that the assessee had already disclosed the amount and deducted tax at source and, therefore, the assessee could not be treated to be in default in respect thereof. Thus, the learned CIT (Appeals) partly allowed the assessee's appeal. Still aggrieved, the assessee is in appeal before us. 10. The learned AR for the assessee at the outset stated that pages 62 to 70 of the paper book had not been furnished before the Assessing Officer. Those were produced before the learned CIT (Appeals) but he refused to consider them on the ground that the same had not been furnished before the Assessing Officer. In that sense these papers amounted to fresh evidence before the Appellate Tribunal and the assessee requested that the same may be admitted and considered. 11. The learned AR stated that the following were expenses that were treated to be subject to deduction of tax at source by the authorities below:- (a) Reimbursement of refreshment expenses (b) Shift allowance (c) Reimbursement of transport expenses (d) Concessional air-tickets (e) Estimated addition of Rs. 30 lakhs on account of alleged payments to 12 Indian managers. 12. The learned AR stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mosphere. Had the assessee supplied tea/snacks, etc., during office hours directly to the employees the same would not have been treated as perquisite. Merely because the assessee reimbursed the expenses the nature of the same could not be different more so when there was reimbursement instead of actual catering on account of practical difficulties. The learned AR emphasized that those payments were calculated on the basis of the number of days an employee actually attended duty. The days which were holidays or on which the employee was on leave, etc., were not included which showed that the expenditure was in relation to refreshments to be consumed by the employees while on duty. The learned AR emphasized that the rates at which the refreshment expenses were reimbursed was on the basis of agreement in writing reached between the assessee and the employees union. 14. The learned AR argued that in terms of paragraph 5 of Circular No. 629, dated 31-7-1992, 197 ITR (St.) 65, there was no obligation cast upon the principal officer of the assessee-company to verify as to whether the allowance granted under section 10(74) was actually incurred by the employee. In cases where CBDT wante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew the rigors of such duty and as per the agreement with the employees' union, the company paid the amount subject to a cap to cover additional expenses incurred on tea, coffee, etc., by staff rendering duty in shifts. Shift allowance was a mere provision for necessities. It was important to take note of the fact that this allowance was paid on actual days worked on shifts and no fixed monthly sum was paid. The amounts paid were reasonable ranging from Rs. 15 to Rs. 30. The learned A.R. pointed out that in assessee's own case for financial years 1986-87 to 1991 -92 and 1993-94, the learned CIT (Appeals)-V had as per his order dated 31-10-1996 excluded payment of shift allowance for the purpose of treating the assessee in default. The learned AR argued that all other arguments given in relation to reimbursement of refreshment expenses more or less applied to payment of shift allowance also. 17. In relation to reimbursement of transport expenses, the learned AR explained that it was paid to the employees in respect of travelling between residence and office and back. In addition, sales staff was paid for outdoor duties, i.e., travel from office to the places where sales calls were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see in that behalf. The issue was covered in favour of the assessee by the order of the ITAT,Delhiin the case of KLM Royal Dutch Airlines v. Asstt. CIT [1998] 62 TTJ (Delhi) 268 and Indian Airlines v. Asstt. CIT in TDS Appeal Nos. 13 to 20 (Delhi) of 1995 for financial years 1989-90 to 1992-93. 19. The learned AR also disputed estimated addition of Rs. 30 lakhs in respect of 12 Indian managers. There was no material to hold that any other payment not covered by refreshment, shift and transport payments had been made by the assessee. The addition was entirely in the realm of estimate and, therefore, the orders of the authorities below were liable lo be quashed in that respect. 20. The learned AR of the assessee also referred to Tribunal decision in Nestle India Ltd. v. Asstt. CIT [1997] 61 ITD 444 (Delhi). He stated that although that decision pertained to conveyance allowance but insofar as the decision dealt with bona fide belief of the employer the same was applicable on the facts of the asseessee's case as well. The learned AR pointed out that Hon'ble Delhi High Court have in the judgment in CIT x. Nestle India Ltd. [2000] 243 ITR 435 approved the decision of the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses. 9. Reimbursement of Refreshment Expenses All employees will be paid refreshment expenses as under:- Grade A B Rs. 30 per working day present Grade I to VI Rs. 45 per working day present. 10. Shift Allowance All employees employed at the Airport rendering services in shifts will be entitled to a Shift Allowance as under:- Grade A B Rs. 15 per working day present. Grade I to VI Rs. 22.50 per working day present." 24. The learned A.R. argued that there was no option with the assessee not to make the payment. Hence whatever was the terminology used, the payment was consideration paid by the assessee to its employees for services rendered. Hence, these payments fell to be considered under section 17(3)(ii). There was clear finding of the learned CIT (Appeals) in that respect. There was justification as to why the learned CIT (Appeals) did not accept the theory of reimbursement because those payments were already 'fait accompli'. 25. Referring to the declaration made by the employees, the learned DR pointed out that some of those declarations pertained to a period prior to the agreement with the employees. At any rate, the same were se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of reimbursement of actual expenses and not "allowance" within the meaning of section 10(14). The learned AR of the assessee admitted that those payments did not fall within the ambit of clause (i) of sub-section (14), as the payments were granted to the employees of the assessee to meet their personal expenses. The same could, if at all, fall in the ambit of clause (ii) of sub-section (14) of section 10. According to him as those payments were in the nature of reimbursement and not an allowance, section 10(74) did not have any application. In our opinion, the learned AR has approached the question at the wrong end. The issue before us, as already stated, is whether or not these payments would be considered to be "Salary" as defined under section 17 of the Act. Section 10(14) has the effect of exempting certain payments from an employer to his employee to the extent prescribed from chargeability of tax. If provisions of section 10(74) do not apply, the entire payments would be chargeable to tax in the hands of the employees unless any of these payments may be found to be not covered by the definition of "Salary" as given under section 17(1) of the Act. We are, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1989 3. Notification No. GSR 606 (E), dated9-6-1989 4. Notification No. S.O. 259(E), dated27-3-1990 5. Notification No. S.O. 267(E), dated29-3-1990 31. During the course of hearing before us no case has been made out by the assessee that any of the payments under consideration, except transport expenses in relation to sales staff, have been exempted under any of the Notifications enumerated as above. In short, the assessee has not claimed that any part of the payments in question has been specifically exempted by the provisions of section 10(14). The case of the assessee, however, before us is that the assessee was under a bona fide belief that these payments were not chargeable to tax in the hands of employees whom they were paid and, therefore, the assessee was not required to deduct tax at source. Relying upon the decisions of the Income-tax Appellate Tribunal in the cases of Indian Airlines v. Asstt. CIT [1996] 59 ITD 353 (Bom.); KLM Royal Dutch Airlines v. Asstt. CIT [1998] 62 TTJ (Delhi) 268 and Nestle India Ltd. v. Asstt. CIT [1997] 61 ITD 444 (Delhi), the learned authorized representative of the assessee has pleaded before us that the provisions of sections 201(1) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. v. CIT [1992] 193 ITR 457 (Cal.), the Hon'ble High Court rejected the assessee's arguments and upheld the bank being treated as assessee in default. In the judgment in CIT v. Kumudam Publications (P.) Ltd. [1991] 188 ITR 842 (Mad.), Kumudam Publications Pvt. Ltd. argued that payments made by it to another private limited company for the purpose of printing the periodicals did not fall in the purview of section 194C of the Act for deduction of tax at source. Nonetheless Hon'ble High Court upheld the assessee being treated the assessee in default. 34. In the case of Ravindra D. Amin v. CIT [1994] 208 ITR 815 (Guj.), the assessee claimed that the amount of Rs. 5,21,964 was not deemed dividend within the meaning of section 2(22)(e) and section 194 and, therefore, the assessee was not liable to deduct tax at source. However, on assessee's plea being found not tenable, the assessee was treated assessee in default within the provisions of section 201(1). From these decided cases it would appear that the question as to whether an assessee, who did not deduct tax at source while making payment of a particular sum, should be treated an assessee in default or not depends on the correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apart from the judgment of Hon'ble Delhi High Court referred to in the preceding paragraph, the Courts have held levy of interest under section 2O1(1A) to be mandatory in the following cases also: Bennet Coleman Co. Ltd. v. Mrs. V.P. Damle, Third ITO [1986] 157 ITR 812 (Bom.); Pentagon Engg. (P.) Ltd. v. CIT [1995] 212 ITR 92 (Bom.); CIT v. Rathi Gum Industries [1995] 213 ITR 98 (Raj.); CIT v. Dhanalakshmy Weaving Works [2000] 245 ITR 133 (Ken); CIT v. K.K. Engg.Co.[2001] 249 ITR 447(Ker.); Grindlays Bank Ltd. v. CIT [1992] 193 ITR 457 (Cal.); CIT v.AssamSmall Industries Development Corpn. Ltd. [1996] 219 ITR 324 (Gauhati); and Kanoi Industries (P.) Ltd. v. Asstt. CIT [2003] 261 ITR 488 (Cal.). 39. Respectfully following the judgments enumerated above, we hold the assessee to be liable to pay interest under section 201(1A) in respect of all such payments made by it during the financial year in respect of which the assessee was required to deduct tax at source but the tax was not deducted. Reverting to the amounts enumerated at page 3 of this order, we find that the assessee has been able to point out that transport allowance paid to sales staff was exempt under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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