TMI Blog2019 (1) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... arded as employees of State cannot be said to be not bonafide, at least to the extent of erstwhile employees of KEB. The obligation of the Assessee u/s.192 is only to make bonafide estimate of income of his employee under the head salaries. Such obligation cannot be tested on the parameters laid down on exercise of power by authorities under the Act exercising powers u/s.132 or u/s.147 of the Act. Apart from the above, we have already set out the circumstances under which belief was formed by the Assessee while deducting tax at source on salary paid to its employees. The correctness of such conclusion cannot be reviewed u/s.254(2) of the Act. The power of the Tribunal under section 254(2) is confined to rectifying any mistake apparent from the record. The Tribunal does not have inherent power of rectification or review or revision. Unless there is mistake apparent from the record in the sense of patent, obvious, clear error or mistake, the Tribunal cannot recall its previous order. If the error or mistake is one which could be established only by long-drawn arguments or by way of process of investigation and research, it is not a mistake apparent from the record. Failure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48/Bang/2018 [in ITA 2296/Bang/2017. MP 249/Bang/2018 [in ITA 2297/Bang/2017 MP 250/Bang/2018 [in ITA 2298/Bang/2017 MP 251/Bang/2018 [in ITA 2299/Bang/2017 MP 252/Bang/2018 And [in ITA 2300/Bang/2017 For The Applicant : Shri K.V. Aravind, Standing Counsel For The Respondent : Shri Tata Krishna Ravishankar, Advocates ORDER Per N V Vasudevan, Vice President These are Miscellaneous Petitions (MPs) filed by the Revenue u/s.254(2) of the Income Tax Act, 1961 [ the Act ] on the allegation that the order dated 02.05.2018 passed by the Tribunal in the aforesaid appeals suffers from mistakes apparent from record. The Revenue has prayed for the following reliefs in these MPs:- i) The Miscellaneous petition be kindly accepted; ii) The Hon'ble Tribunal's conclusion in para 22 that circumstances explained by the Ld. Counsel for KPTCL and the action of the revenue in not questioning KPTCL's action in the past several years after its formation etc. were definitely factors which weighed with KPTCL when it made estimate of its employees' income under the head salaries and the conclusion drawn therefore requires reconsideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect 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: 5. It is not in dispute that the Specified Limit in the case of employee other than an employee of the Central Government or a State Government i.e., employee falling within clause (ii) of Sec.10AA is ₹ 3,00,000 in salary to employees who retire, whether on superannuation or otherwise, after 1.4.1998 vide Notification No. 123/2002 dated 31-5-2002. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 were:- (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 nature of income within the meaning of Sec.17(1)(va) of the Act and therefore there was no obligation on the part of the Assessee to deduct tax at source; (iv) The provisions of Sec.10(10AA)(i) of the Act are applicable in the case of the Assessee as the employees of KPTCL are to be regarded as employees of State Government; (v) The provisions of Sec.201(1) 201(1A) of the Act are not attracted in the present case because the non deduction of tax at source by KPTCL was under the bonafide belief that it was not obliged to deduct tax at source on payments in excess of ₹ 3 lacs towards unutilized leave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Act stipulated that SEBs so constituted shall be a body corporate having perpetual succession and a common seal with power to acquire and hold property both movable and immovable and shall be capable of suing and be sued. That is how Mysore electricity Board came to be established on 1.10.1957 which was subsequently named as Karnataka State Electricity Board (KEB). Employees of State Government became employees of KEB. 15. 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employer to increase or reduce the amount of TDS for any excess or deficiency. We have already noticed that the fact that bills/evidence to substantiate incurring of expenditure on medical treatment up to ₹ 15,000/- and the availing of the LTC by the employees and the fulfilment of the conditions contemplated by Sec.10(5) of the Act for availing exemption by the employees so availing LTC, have not been disputed by the AO. Even assuming the case of the AO, that at the time of payment the Assessee ought to have deducted tax at source, is sustainable; the Assessee on a review of the taxes deducted during the earlier months of the previous year is entitled to give effect to the deductions permissible under proviso (iv) to Sec.17(2) or exemption u/s.10(5) of the Act in the later months of the previous year. What has to be seen is the taxes to be deducted on income under the head salaries as on the last date of the previous year. The case of the AO is that LTC and Medical reimbursement should be paid at the time the expenditure is incurred or after the expenditure is incurred by way of reimbursement and not at an earlier point of time. If it is so paid, then, even though the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 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. ACIT (1997) 61 ITD 444 (Del) Indian Airlines Ltd. v ACIT (1996) 59 ITD 353 (Mum) 19. The Tribunal thereafter proceeded to hold as follows:- 19. We have considered the rival submissions. In our view, the plea of the Assessee that it made a bona fide estimate of employee s salary by valuing the perquisites in the form of residential accommodation provided to the employees by valuing the same as if employees were employees of Central Govt. has to be accepted. In this regard, it is clear from the records that the position with regard to the assessee not being a Central govt. was brought to its notice by the department only in the proceedings initiated in 2013. Even thereafter, the Assessee has been taking a stand that its employees or employees of Central Govt. As held in several decision referred to by the ld.counsel for the Assessee, the obligation of the Assessee is only to make a bonafide estimate of the salary. In our view, in the facts and circumstance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents advanced by the learned counsel for the Assessee. If the learned DR does not choose to address arguments in rebuttal to the arguments of the learned counsel for the Assessee, it cannot be said that the Tribunal did not give opportunity to the revenue. In any event, the conclusions of the Tribunal are not based on the arguments of the learned counsel for the Assessee as we have explained in the earlier paragraphs 3 to 19 of this order. We therefore hold that there is no merit in the allegations contained in paragraph-17 of the MPs. 21.2 In Paragraph-18 of the MPs, it has been alleged that the learned DR was not allowed to argue on contention of the learned counsel for the Assessee regarding obligation of the payer of salary to deduct tax at source only on an estimate. There is a reference to a decision of the Hon ble Karnataka High Court in the case of Patil Vijayakumar Vs. Union of India 151 ITR 48 (Karn.) in paragraph-18 of the MPs. The learned counsel for the Revenue even in the arguments advanced in these MPs could not point out the relevance of the aforesaid decision to the issue that was decided by the Tribunal, viz., whether the estimate made by the Assessee of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that the said decision was rendered in the context of Sec.271C penalty for failure to deduct tax at source. The defence to such an action was bonafide belief of the Assessee that it was not liable to deduct tax at source on home salary paid to expatriate employees outside India. The Hon ble Supreme Court observed on the scope of Sec.201(1) 201(1A) of the Act in para-34 of its judgment and only observed that liability u/s.201(1) is in the nature of vicarious liability. From these observations it cannot be inferred that the Hon ble Supreme Court has held that in an action u/s.201(1) of the Act, the payer cannot plead bonafide estimate of income under the head salaries as a defence. On the other hand, the Tribunal in its order at paragraph 20 referred to several decisions wherein it has been held that estimate of income under the salary, if it is bonafide , then the payer cannot be treated as an Assessee in default . We are therefore of the view that there is no merit in allegations in paragraph-24 of the MPs. Besides the above, there is also an allegation that the Learned DR was prevented from assisting the Hon ble Bench by differentiating the cases relied by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e two set of employees formed a distinct class and therefore could be treated differently and that there was no violation of Article 14 of the Constitution. It is the contention of the learned standing counsel that in the light of this decision rendered as early as 26.7.2006 in the case relating to the Assessee would show that the Assessee must be having sufficient knowledge that its employees cannot be equated with employees of State Government and therefore the plea of bonafide belief while estimating income of employee ought not to have been accepted by the Tribunal. 23. We are unable to accept the contention of the learned DR for the reason that, firstly in the MP u/s.254(2) of the Act, it is not open to the parties to advance new arguments that were not addressed when the appeal was originally heard. The power of the Tribunal u/s. 254(2) of the Act is only to rectify mistakes apparent on the face of the record. The Tribunal does not have power to review its own orders. Secondly, the decision cited by the learned counsel for the Assessee shows that the benefit of free supply of power was given to erstwhile employees of KEB who became employees of KPTCL on its creation. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here must be application of mind to the material and thereafter bonafide and honest opinion has to be formed. According to him in the present case, the Assessee did not have any material based on which he formed bonafide belief that its employees are employees of State. 27. We have considered the above submission and are of the view that the same is without any merit. The above are cases where challenge to the action by authorities who were vested with power to take particular action invading the right of privacy or for initiating proceedings for levy of tax. It may not be appropriate to read the observations of the Hon ble Court in the context of the present case. The obligation of the Assessee u/s.192 is only to make bonafide estimate of income of his employee under the head salaries. Such obligation cannot be tested on the parameters laid down on exercise of power by authorities under the Act exercising powers u/s.132 or u/s.147 of the Act. Apart from the above, we have already set out the circumstances under which belief was formed by the Assessee while deducting tax at source on salary paid to its employees. The correctness of such conclusion cannot be reviewed u/s.254(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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