TMI Blog2018 (8) TMI 910X X X X Extracts X X X X X X X X Extracts X X X X ..... by quashed. - Decided in favor of assessee. - ITA 2223/BANG/2017 to ITA 2300/BANG/2017 - - - Dated:- 2-5-2018 - SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER For the Appellant- Shri A Shankar, Advocate Shri K.K Chaitanya, Advocate For the Respondent- Shri B.R Ramesh, JCIT ORDER PER BENCH : In these group of appeals filed by M/s Karnataka Power Transmission Corporation Ltd.(hereinafter referred to as KPTCL or Assessee), against different orders of CIT(A), the only issue involved is as to whether KPTCL can be considered as Assessee in Default under the provisions of Section 201(1) of the Income Tax Act, 1961(Act) for not deducting tax at source and whether KPTCL is liable to pay interest on tax not deducted at source u/s.201(1A) of the Act? 2. The issue arises for consideration on the following facts and circumstances. KPTCL paid cash equivalent to its employees at the time of their retirement. Under Section 17(1)(va) Salary includes-(va) any payment received by an employee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- (10AA) (i) any payment received by an employee of the Central Government or a State Government, as the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise; (ii) any payment of the nature referred to in sub-clause (i) received by an employee, other than an employee of the Central Government or a State Government, in respect of so much of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise as does not exceed ten months, calculated on the basis of the average salary drawn by the employee during the period of ten months immediately preceding his retirement whether on superannuation or otherwise, subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government: 4. It is not in dispute that the Specified Limit in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduct tax at source was Sec.10(10AA)(ii) and not Section 10(10AA)(i) of the Act. 9. Both the AO and the CIT(A) rejected the plea of KPTCL and that is how KPTCL is in appeal before the Tribunal. The appellants in these appeals are the various divisions of KPTCL situate at various Districts in the State of Karnataka. One set of the divisions of KPTCL was represented by Mr.A.Shankar, Advocate and the other set of divisions of KPTCL was represented by Mr.K.K.Chaitanya, Advocate. The revenue was represented by Shri B.R Ramesh, Senior DR. 10. Five propositions were canvassed on behalf of KPTCL by the learned counsels for KPTCL challenging the orders of CIT(A) confirming the action of the AO in holding KPTCL to be an Assessee in default u/s.201(1) of the Act. They are: (i) Assumption of jurisdiction by the respondent in all these appeals is bad in law and hence the orders passed u/s.201(1) 201(1A) of the Act are invalid. (ii) The orders passed u/s.201(1) 201(1A) of the Act are beyond the period of limitation and hence barred by time. (iii) The payments in question for which KPTCL was treated as Assessee in default for not deducting tax at source were not in the natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1957 which was subsequently named as Karnataka State Electricity Board (KEB). Employees of State Government became employees of KEB. 13. In view of losses incurred by KEB, Government of Karnataka came out with general policy proposing fundamental and radical reforms in the power sector. Accordingly, Karnataka Electricity Reforms Act, 1999 (KERA) was enacted by the Karnataka State Legislature which advocated division of the functions of generation, transmission Distribution of electricity and each function to be performed was entrusted to various statutory corporations. The function of generation of electricity was transferred to Visweshwaraiah Vidyuth Nigama Limited way back in 1970. By Section 14(3) of KERA, KPTCL was incorporated and the function of transmission and distribution of electricity was transferred to KPTCL. Subsequently the distribution function was given to four independent distribution companies in 2002 viz., BESCOM, MESCOM, HESCOM, GESCOM. Employees of KEB became employees of KPTCL. 14. It is the plea of KPTCL that after its inception till AY 2012-13 it has been deducting TDS by considering its employees as employees of State Government in view of the histo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 to avoid a possible plea that may be taken in such cases by holding that any payment post retirement will also be chargeable to tax under income from other sources, if it is not chargeable under the head income from salaries. To highlight the legal position that deeming provisions should receive strict construction in fiscal statute, the learned counsel referred to the decision of the Hon ble Supreme Court in the case of V.M.Salgaocar Bros.(P) Ltd. Vs. CIT 243 ITR 383(SC). 17. The learned counsel for the Assessee pointing out the above circumstances submitted that u/s.192(1) of the Act the obligation of the employer is only to deduct tax on the estimated income of the Assessee under the head Salaries for that financial year. If the estimate is made bonafide and tax deducted on such bonafide estimate then there can be no proceedings treating the person responsible for deducting tax at the time of payment, as Assessee in default . The learned Counsel for KPTCL placed reliance on a decision of the ITAT Bangalore Bench in the case of Indian Institute of Science Vs. DCIT ITA No.1589/Bang/2014 for AY 2010-11 order dated 27.2.2015 on identical facts. In the aforesaid decision, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. We have very carefully considered the rival submissions. We are of the view that the facts and circumstances of the present case are identical to the case of Indian Institute of Science(supra) decided by the ITAT Bangalore Bench. In the said case the deduction of tax at source was u/s.192 of the Act. The question was valuation of perquisites in the form of rent free accommodation provided to employees of a statutory corporation such as the Assessee. The Assessee in that case took similar plea of bonafide belief as raised by KPTCL in the present proceedings. The Tribunal considered the submissions and firstly found that the law on the issue of bonafide belief in the matter of estimating of income under the head salaries for the purpose of Secc.192 of the Act, was explained in a decision of ITAT Bangalore in the case of ACIT Vs. Infosys BPO Ltd. 150 ITD 132 (Bang) in the following manner: 26. It is no doubt true that TDS is to be made at the time of payment of salary and not on the basis of salary accrued. Sec.192(3) of the Act permits the employer to increase or reduce the amount of TDS for any excess or deficiency. We have already noticed that the fact that bills/eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure is restricted to expenditure actually incurred by the employees, or ₹ 15,000/- whichever is lower. The exemption is granted even if the payment precedes the incurrence of expenditure. The requirements/conditions of section 10(5) and proviso to section 17(2) are meticulously followed before extending the deduction/exemption to an employee. No tax can be recovered from the employer on account of short deduction of tax at source under section 192 if a bona fide estimate of salary taxable in the hands of the employee is made by the employer, is the ratio of the following decisions. CIT vs. Nicholas Piramal India Ltd (2008) 299 ITR 0356 (BOMBAY); CIT v. Semiconductor Complex Ltd [2007] 292 ITR 636 (P H) CIT vs. HCL Info System Ltd. [2006] 282 ITR 263 (Del) CIT v Oil and Natural Gas Corporation Ltd [2002] 254 ITR 121 (Guj) ITO v Gujarat Narmada Valley Fertilizers Co. Ltd [2001] 247 ITR 305 (Guj) CIT v Nestle India Ltd (2000) 243 ITR 0435 (DEL) Gwalior Rayon Silk Co. Ltd. v. CIT [1983] 140 ITR 832 (MP) ITO v G. D. Goenka Public School (No. 2) [2008] 306 ITR (AT) 78 (Del) Usha Martin Industries Ltd. V. ACIT (2004) 086 TTJ 0574 (KOL) Nestle India Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
