TMI Blog1999 (9) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... filed its annual returns under section 206 of the Act for the financial Year 1995-96 on May 24, 1996. A survey was carried out at the premises of the assessee-company on July 19, 1996, by the Income-tax Officer (ITO) (TDS). As a result of the survey, the Income-tax Officer found that certain payments were made to the employees on which tax was not deducted at source though in accordance with the provisions of the Act, it was to be deducted. The employer, therefore, was liable to be dealt with under section 201 inasmuch as the assessee can be said to be a "deemed defaulter" as he had not deducted the tax at source. Details regarding payments which were made by the employer to the employees were as follows : -------------------------------------------------------------------------------- Period Particulars Rate Amount from Rs. -------------------------------------------------------------------------------- 1976 Vehicle allowance for Rs. 380 to 2,425 p.m. 2,47,90,929 vehicles of employees vehicle-wise 1-7-1986 Cash cant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employees and by not deducting the amount of tax, the employer had violated the provisions of section 201 of the Act. The employer was, therefore, liable to pay tax. Regarding interest, however, in paras 5 to 8, the appellate authority observed : "5. I have considered the issue raised by the Income-tax Officer and the arguments of the appellant. Prior to the assessment year 1974-75, deduction was given from salary to person who wanted a motor car, motor cycle, a moped or a cycle. As the Legislature treated the expenditure incurred on going from residence to office and back as expenditure in connection with the employment, such deduction was allowed. Administering these provisions prior to the assessment year 1973-74 was quite difficult and therefore with effect from the assessment year 1973-74, the Legislature introduced the concept of standard deduction in the cases involving assessment under the head 'Salary'. It is thus clear that the Legislature has provided deduction foregoing from residence to office and back in the form of standard deduction. Therefore, the argument that the expenditure was incurred on such travelling which was official is incorrect. Only expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the charging of interest is partly allowed." Against the order of the appellate authority, two appeals were filed before the Income-tax Appellate Tribunal. Before the Tribunal, it was argued by the assessee that the assessee was of the opinion that the payments made to the employees were not subject to payment of tax. Such opinion was based on the decisions of several High Courts. It was also contended that the Department also, all throughout, was of the view that such payments were not liable to tax. This was evident from the fact that though proceedings were initiated against the assessee in 1992-93, they were not pursued further. It was also argued that in respect of one employee-Kirit Ramniklal Raval, library book allowance of Rs. 2,200 which was added by the Income-tax Officer under section 143(1) was rectified by granting deduction and by holding that there was a mistake on the part of the Department as the allowance was not liable to be taxed. In the light of the facts and circumstances and relying upon various decisions, the Tribunal observed : "We are of the opinion that the Departmental authorities have not proved that the action of the assessee in not deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cond part is independent of the first part. Learned counsel submitted that the error of law which has been committed by the Tribunal was that in deciding the matter, the Tribunal invoked the concept of good faith on the part of the employer and by not holding the assessee liable even in respect of payment of tax as well as interest. This was not permissible. Counsel, therefore, submitted that the matter deserves consideration and it requires to be admitted. Mr. Shah, on the other hand, submitted that the provision must be read as a whole in its entirety with the object for which it has been enacted. He submitted that it cannot be disputed that liability to pay tax is not of the employer but of the employee. If it is so, the argument proceeded, it is incumbent on the part of the employer to consider the relevant provisions of law, decisions on statutory provisions by various High Courts as well as by the apex court and the fact as to whether the payment which has been made to the employees is otherwise taxable. If the payment is not taxable, obviously, there was no question of deduction of tax by the employer at source and the case would not fall within the mischief of section 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny to its employees could not be said to be salary under the Act and, hence, no deduction could be made, can it be said that such a finding raises a "substantial question of law" which requires to be determined by this court under section 260A of the Act ? He also submitted that this was coupled with the fact that with regard to certain payments, proceedings had been finalised and they were not held to be income under the Act. According to Mr. Shah, the finding that the company acted bona fide and honestly, is a finding of fact and obviously such finding cannot be challenged under section 260A of the Act. In that case, it cannot be said that there was violation of section 201 by the employer. If the contention of the Revenue is accepted, not only does the court hold the employer a "deemed defaulter" within the meaning of section 201 of the Act, but it interferes with a finding of fact regarding bona fide and honest belief on the part of the employer, which is not permissible. In the facts and circumstances of the case, in our opinion, no substantial question of law can be said to have arisen in this case in respect of the order passed by the Income-tax Appellate Tribunal. Though ..... X X X X Extracts X X X X X X X X Extracts X X X X
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