TMI Blog2013 (2) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... urred the amount given to him by the employer for the same purpose for which it was given to the employee. Thus for this reason the employer has paid FBT on a particular expenditure, it is considered as payment of income tax only on deemed income of the employee out of various expenditures incurred by the employer and hence, this is not relevant as to whether the employee has actually incurred those expenditures as intended by the employer in view of this fact that FBT was actually paid by the assessee-company on the impugned expenditure on uniform, washing allowance etc., the same cannot be considered as perquisites in the hands of the employees and therefore, there is no liability of the assessee-company to deduct TDS therefrom. See R & B Falcon (A) Pty Ltd. Versus Commissioner of Income Tax [2008 (5) TMI 2 - SUPREME COURT] - in favour of assessee. Non deduction of TDS on conveyance, maintenance, reimbursement expenditure (CMRE) to its employees every month based on their status, designation - Held that:- Employer is paying fringe benefit tax on CMRE cannot be ignored. Regarding this expenditure also this could not be shown or established by Revenue that FBT is not payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 9(1) (vii) covers rendering of services like in parking of training and carrying out drilling operations for exploration or exploitation of oil and natural gas. In the present case, it is not the case of the assessee that impugned payment was made for imparting of training. In the present case project of exploration of oil and natural gas is undertaken by the assessee and not by the recipient. The recipient has only provided technical services and therefore even after considering CBDT instruction No. 1862 dated 22-10-1990, the impugned payment is not covered by Explanation-2 to Section 9(1)(vii) - Thus no case could be made out by assessee that impugned payment is not for fees for technical services or that it falls within the Exclusionary clause as per Explanation-2 to Section 9(1)(vii) - no reason to interfere in the order of CIT(A) and this issue is decided against the assessee. - ITA No.184-185 & 1066/Ahd/2010, ITA No. 609-611/Aahd/2010 And ITA No. 1343/Ahd/2010 - - - Dated:- 16-11-2012 - Shri, A.K.Garodia And Shri Kul Bharat, JJ. By Assessee Shri S.N.Soparkar, SR-AR Mrs. Urvashi Shodhan, AR By Revenue Shri Ravinidra Kumar, CIT-DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was produced any time after wards. In view of these facts it can safely be concluded that the payment of the uniform allowance is clearly an allowance paid to pas an additional allowance in addition to salary/. From the above discussion and circumstances it is proved that the uniform allowance is part of salary. The amount of money paid in the name of Uniform Allowance even when the amount is not incurred for the purpose for which it is paid shows hat the amount of this allowance is intended to make payment in addition to the amount of salary paid. Thus the payment not based on actual incurring of expenditure. As the payment of the Uniform allowance appears to have been made even when employee does not wearing uniform also during the leave period, shows that the payment of uniform allowance is nothing but additional salary paid in form of an allowance and it deserves to be taxed as salary income u/s. 17(1) (iv) as it can not be allowed deduction under section 10(14) (vi) as expenditure is not proved as have been incurred. Before the Assessing Officer the assessee submitted that this being a reimbursement of expenses incurred by employee for the maintenance of uniform is not taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in support of this contention, reliance was placed on various judgments as noted below:- a) CIT v. Oil And Natural Gas Corporation Ltd. (2002) 254 ITR 121 (Guj) b) ITO v. Gujarat Narmada Valley Fertilizers Co. Ltd. (2001) 247 ITR 305 (Guj) c) CIT (TDS) v. Reliance Industries Ltd. (2009) 308 ITR 82 (Guj) He also submitted that as per the Board s Circular reported in 277 ITR (St) page 20 also, no TDS was required to be deducted in the facts of the present case. 6. As against this, Ld. CIT-DR of the Revenue supported the orders of authorities below on this issue. He further submitted that Question No. 74 as per CBDT Circular No.8 of 2005 dated 29-08-2005, which is available on page No.57 and 58 of the paper book submitted by the assessee, FBT is not payable on any expenditure incurred for meeting the employer s statutory obligation under the Employment Standing Order Act, 1948 because it falls within the scope of the exclusion in the Explanation to Clause-E of subsection- 2 of section 115WB and therefore, this expenditure for providing stitching uniform or equipment to the employees or incurred for the purpose of reimbursement of washing charges is exempt from FBT to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee to deduct TDS from this expenditure incurred for the welfare of the employees. In this regard, we feel that provisions of section-17(2) (vi) and section 115WB 2E with explanation are relevant and the same are reproduced below:- 17. (1) (2) *(vi) the value of any other fringe benefit or amenity (excluding the fringe benefits chargeable to tax under Chapter XII-H) as may be prescribed; 115WB (1) (2) The fringe benefit purposes, namely:- (E) employees welfare. [Explanation. For the purposes of this clause, any expenditure incurred or payment made to (i) fulfill any statutory obligation; or (ii) mitigate occupational hazards; or (iii) provide first is facilities in the hospital or dispensary run by the employer; or (iv) provide cr che facility for the children of the employee; or (v) sponsor a sportsman, being an employee; or (vi) organize sports events for employees, shall not be considered as expenditure for employees welfare;] 10. From the provisions of section 17 (2) (vi), we find that perquisites does not include the fringe benefit chargeable to tax under Chapter-XIIH. In Chapter-XIIH, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of fringe benefit on which FBT is payable. As per sub-section 2 of section 115WB, it is provided that fringe benefit shall be deemed to have been provided by the employer to its employee if the employer has in the course of business incurred any expenditure on or made any payment for various purpose which includes employees welfare. As per clause-E of this sub-section, it does not come out that it has to be enquired and looked into whether the employee has incurred the amount given to him by the employer for the same purpose for which it was given to the employee. In our considered opinion, for this reason that the employer has paid FBT on a particular expenditure, it is considered as payment of income tax only on deemed income of the employee out of various expenditures incurred by the employer and hence, this is not relevant as to whether the employee has actually incurred those expenditures as intended by the employer. 11. In view of our above discussion and in view of this fact that FBT was actually paid by the assessee-company on the impugned expenditure on uniform, washing allowance etc., the same cannot be considered as perquisites in the hands of the employees and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be necessary or expedient. From this observation of the Hon ble apex court in this judgment and also from the relevant provisions of section 17 (2) (vi) and 115WB (2) as reproduced above, it becomes very clear that on fringe benefit like uniform and washing allowance etc., provided by assessee to its employees otherwise than for a statutory obligation, is liable to FBT and same is not liable to income tax in the hands of the employee because the same cannot be considered as perquisites as per the provisions of section 17(2)(vi) of the Act. Once we come to this conclusion, it is abundantly clear that no TDS is required to be deducted by the employer from such expenditure incurred by the employer for the benefits of the employees. Accordingly, in the present case, we hold that TDS was not required to be deducted by the assessee-company from this expenditure incurred by it on providing uniform, washing charges and washing allowance etc., So this ground of assessee s appeal is allowed. 13. In the result, the appeal of the assessee is allowed. Now we take up the appeal of Revenue arising out of same order of Ld. CIT(A) in ITA No.609/Ahd/2010. 14. The ground raised by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided the issue in favour of assessee and now Revenue is in appeal before us. 17. On this issue, argument from both sides are same. Argument of Ld. AR of the assessee in this that FBT is paid and therefore, it cannot be covered in perquisites as per sub-section 17(2) (vi) and therefore no TDS is required to be deducted by the assessee from such expenditure and the submission of Ld. DR of the Revenue was this that FBT is not required to be paid on this expenditure also and therefore, order of Ld. CIT (A) should be reversed and the order of Assessing Officer should be restored. 18. We have considered the rival submissions and perused the material on record and gone through the orders of authorities below. We find that this issue was decided by Ld. CIT (A) as per para-3.3 of his order, which is reproduced:- 3.3 I have considered the submission of the learned Authorized Representative, Remand Report of learned ACIT and reply of remand report of authorized representative and further considering the arguments of both the appellant and respondent and facts of the case. It is seen that the Conveyance Maintenance Reimbursement (CMRE) scheme was introduced in ONGFC to reimburse to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. The fact that the employer is paying fringe benefit tax on CME cannot be ignored. Thus, taking the overall picture of the CMRE, there is no hesitation to hold such reimbursement to employees coming under the scheme as not part of the salary and accordingly no TDS is attracted in the hands of the employer. Hence, I am of the view that the Assessing Officer was no justified by treating the assessee in default u/s. 201(1) and 201(1A) of the Act. Hence, the assessing officer is directed to delete the same, i.e., the levies u/s. 201(1) and 201(1A). We find that while deciding this issue in favour of assessee, this was stated by the Ld. CIT (A) that that the fact that employer is paying fringe benefit tax on CMRE cannot be ignored. Regarding this expenditure also i.e., CMRE, this could not be shown or established by Ld. DR of the Revenue that FBT is not payable on this expenditure. This expenditure is also not incurred to fulfill any statutory obligation or to mitigate occupational hazards or fall in any other exclusion as specified in Explanation to clause-E of sub-section-2 of section 115WB. This also is an admitted fact that FBT was paid by the assesseecompany on this expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in law and in facts and circumstances of the case in upholding the order passed by ACIT, TDS, Baroda whereby the appellant was held to be as an assessee in default for short deducting tax at source from the payment of hiring charges of crane and was called upon to pay the tax allegedly short deducted from it contractors u/s. 201(1) and interest thereon u/s. 201(1A) of Incometax Act, 1961. 26. It was agreed by both side that issue involved in ground No.1 of this appeal is similar to the issue involved in the remaining two appeals of assessee i.e., ITA No.184-185/Ahd/2010 and the same can be decided on similar line. While deciding those two appeals of the assessee, this issue was decided by us in favour of assessee as per Para No. 9 to 12 and on similar lines, in this appeal also, these issue as per ground No.1 is decided on similar basis in favour of assessee. Ground No.1 is allowed. 27. Regarding ground No.2 of this appeal of the assessee, it was submitted by AR of the assessee that finding of Ld. CIT (A) in para-5.3.4 of his order is this that since the assessee has not provided the details regarding hiring charges paid for CMRE and others during the assessment proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 20.03.2009] 31. Brief facts are that certain payments were made by assessee and TDS was deducted by it u/s. 194C but the Assessing Officer was of the opinion that TDS was required to be deducted u/s. 194I in respect of payment for hiring of equipments i.e., xerox machine and hiring of car jeeps and for the remaining payments, TDS was to be deducted by the assessee u/s. 194J. The AO has noted in this manner that the assessee has deducted lesser amount of TDS and he worked out such short deduction of TDS by the assessee at Rs.5,84,47,382/- and he also worked out interest thereon u/s. 201A at Rs.35,66,787/- total Rs.6,20,14,169/-. Being aggrieved, assessee carried matter in appeal before Ld. CIT(A) who has deleted both these demands raised by the AO u/s. 201 and u/s. 201A and now, the Revenue is in appeal before us. 32. Ld. DR of the Revenue supported that order passed by Assessing Officer whereas Ld. AR of the assessee supported the order passed by Ld. CIT(A). He further submitted that as per page-1 of the order passed by Assessing Officer, three types payments are in dispute i.e. No.(i) seismic job service and short hole (ii) AMC-for EPINET, VRC Hardware, PSDM Sub System; AC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Reliance was also placed on the judgment of Hon ble Madras High Court rendered in the case of Skycell Communications Ltd. And Another v. DCIT And Others (2001) 251 ITR 53 (Mad) and also on one tribunal decision rendered in the case of Gujarat State Electricity Corporation Ltd. v. ITO (2004) 82 TTJ 456 (Ahd). As against this, Ld. DR of the Revenue supported the orders of authorities below and he placed reliance on the judgment of Hon ble jurisdictional High Court as rendered in CIT (TDS) v. Swayam Shipping Services P. Ltd. (2011) 339 ITR 647 (Guj). 34. We have considered the rival submissions and perused the materials on record and gone through the orders of authorities below and the judgments cited by both the sides. Regarding this aspect, we feel that provisions of Section 9(1)(vii) and Explanation-2 are very relevant and hence, the same are reproduced below:- (vii) income by way of fees for technical services payable by (a) the Government ; or (b) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed opinion, the impugned payment is not covered under exception carved out in Explanation- 2 to Section 9(1)(vii). As per CBDT instruction No. 1862 dated 22-10-1990 also, it is opined by Attorney General of India that Explanation-2 to Section 9(1) (vii) of the Act is covers rendering of services like in parking of training and carrying out drilling operations for exploration or exploitation of oil and natural gas. In the present case, it is not the case of the assessee that impugned payment was made for imparting of training. The second point of this Board instruction is that whether extraction or production of mineral oil can be termed as mining operations and in this regard, it was opined by the Attorney General of India that term mining project or like project would cover carrying out drilling operation for exploration or exploitation of oil and natural gas, but even then it has to be accepted that such project should have been undertaken by the recipient and in the present case, such project of exploration of oil and natural gas is undertaken by the assessee and not by the recipient. The recipient has only provided technical services and therefore, in our considered opinion, ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion, we find that on this aspect of the matter, no case could be made out by Ld. AR of the assessee that impugned payment is not for fees for technical services or that it falls within the Exclusionary clause as per Explanation-2 to Section 9(1)(vii) of the Act. Hence, on this aspect, we do not find any reason to interfere in the order of Ld. CIT(A) and this issue is decided against the assessee. 39. Regarding hiring of vehicles we find that this issue is squarely covered in favour of assessee by two judgments of Hon ble jurisdictional High Court rendered in the case of Swayam Shipping Services P. Ltd. (supra) and also another rendered in the case of CIT v. Shree Mahalaxmi Transport Co. (2011) 339 ITR 484 (Gul) and hence, respectfully following these two judgments of Hon ble jurisdictional High Court, we decide this aspect of the matter regarding hire charge paid for vehicle in favour of assessee. 40. Regarding remaining one aspect i.e. amount paid for AMC-for EPINET, VRC Hardware, PSDM sub-system; ACs; Lifts and UPS facility, we find that this issue is covered in favour of assessee by Tribunal s decision rendered in the case of Kandla Port Trust (supra) and respectfully foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is ground because when no ground is raised by Revenue in respect of TDS amount in respect of these two issues, interest thereon cannot be charged and same is rightly deleted by Ld. CIT(A). He further submitted that this ground is interconnected with ground No.2 of the appeal raised by assessee in its cross-appeal in ITA No.1066/Ahd/2010 and since the issue is required to be restored to the file of Assessing Officer/Ld. CIT(A), ground raised by revenue i.e. ground No.2 should also be restored back to AO/Ld. CIT(A) for fresh decision because order of Ld. CIT(A) is not a speaking order. On the other hand, Ld. DR of the Revenue strongly supported the order passed by Assessing Officer. 46. We have considered the rival submissions and perused the materials on record and gone through the orders of authorities below. We find that this issue is corrected with the issue raised by assessee raised as per ground No.2 raised in its cross-appeal in ITA No.1006/Ahd/2010 and while deciding that ground of the assessee s appeal, we have also restored back the entire matter to the file of Assessing Officer as per Para No. 28 above. 47. We also find that Ld. CIT(A) has discussed regarding this issu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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