Income Tax Appellate Tribunal - Delhi
American Express Bank Ltd. vs Income Tax Officer on 24 April, 2001
JUDGMENT
Diva Singh, J.M.
1. This is an appeal filed by the assesses against the order dt. 7th Dec., 1992, of Dy. CIT(A), Ranger-I, New Delhi. It pertains to the asst. yr. 1990-91. The assessee has raised the following grounds before us :
"On the facts and circumstances of the case, the learned Dy. CIT(A) is not justified ;
1. On not considering that under Section 201 of the Act, the ITO is not empowered to adjust the income calculated by the employer and, therefore, the order passed by ITO is in excess of his powers and, therefore, bad in law.
2. Without prejudice to the foregoing, in not upholding that the valuation of perquisite in respect of domestic servants should be done according to the Circular No 122, dt. 19th Oct., 1973, issued by the CBDT. As such, the perquisite value should not be the actual reimbursement of servant wages but Rs. 60 per month and consequent deletion of interest charged under Section 201(1 A) of the Act."
2. The authorised representative of the assessee Mrs. Preeti Goyal submitted that the case of the assessee is fully covered by the order of the Tribunal in assessee's own case and decision of the Mumbai Bench in the case of Associated Cement Company in ITA No. 2309/Mum/1997. Reliance was also placed upon the order of the Tribunal in Nestle India Ltd. v. Asstt. CIT (1997) 61 ITD 444 (Del), decisions of the Madhya Pradesh High Court in the case of CIT v. Manager Madhya Pradesh State Cooperative Bank Ltd. (1982) 137 ITR 230 (UP) and in the case of Gwalior Rayon Silk Co. Ltd. v. CIT (1983) 140 ITR 832 (MP). Reliance was also placed on a decision of the apex Court in the case of CIT v. Mahindra & Mahindra (2000) 242 ITR 187 (sic) and CIT v. Air Force Ltd. (2000) 242 ITR 185 (sic).
3. Our attention was invited to the impugned order and the submission was made that the amount being small i.e. namely Rs. 60 per month paid on account of domestic servants, the shortfall on this account in the valuation of perquisite does not invite the interest under Section 201(1A) as the assessee had a bona fide belief that the perquisite value was not to be added to the salary income while working out the tax deduction at source.
4. Learned Departmental Representative Mrs. Shikha Darbari, on the other hand, placed reliance on the orders of the authorities below and submitted that Rs. 60 per month was in fact a cash payment made by the employer to the employees for the purpose of maintaining so called domestic servant and no evidence in support of the details of or proof of any domestic servant had been filed by the assessee before the authorities below. Thus, in the face of a clear-cut cash payment, there could have been no bona fide belief on the part of the assessee-company in not including the same while working out the TDS payment.
5. In reply the learned authorised representative reiterated that the matter is fully covered by the order of the Tribunal in assessee's case and the amount being paltry in nature, the assessee-company would not be able to recover anything from the employees. As such, the order under Section 201(1) deserves to be quashed.
6. We have heard the rival submissions and perused the material placed on our files. The orders of the Tribunal and the decisions of the High Court and Supreme Court have been perused by us. At the outset, we would like to make it clear that the argument that the amount is small would not by itself carry much weight as the issue would be decided on the basis of principles of law. However, small or big the amount may be the principle applicable to the case should be the guiding light under whose illumination, the issue should be decided. Proceeding from here, the next proposition to be examined is the argument that the issue has already been decided by the order of the Tribunal in assessee's own case in the earlier assessment years. In this case, the next guiding principle which should be borne in mind is that the situation where assessee can be presumed to have a bona fide belief would vary from year to year and assessee to assessee and the facts on which such a conclusion can be arrived at cannot be presumed to be constant. Thus, in this background to consider that an order of the Tribunal in assessee's own case in asst. yr. 1987-88 wherein the shortfall in tax deduction at source in working out the perquisite in the hands of the employees would guide the issue in asst. yr. 1990-91 would be flogging the bona fide theory of the assessee beyond all practical and factual appreciation of law and fact. Nevertheless, the arguments put forth by the assessee in ITA No. 3202/90 in assessee's own case were as under:
"The assessee still not satisfied is in appeal before us. It has been contended that the calculation made by the AO on account of short deduction is misconceived. The view taken by the AO is contrary to various Tribunal and High Court decisions. It has further been contended that in any event the assessee had deducted the tax on the basis of bona fide estimate and, therefore, demand on account of short deduction was not justified. In this connection, reliance has been placed on the decision of Bombay Bench "C" of the Tribunal in the case of Glaxo India Ltd. (formerly Oil India Ltd.) Bombay v. 1st ITO, TDS Circle, Bombay in ITA No. 101 to 107/Bom/90 dt. 12h June, 1995. It has also been contended that the employees of the assessee are regular taxpayers and there is no loss to the Revenue.
In these circumstances, the Tribunal came to the conclusion that :
"In these circumstances, it cannot be said that assessee has consciously defaulted by making short deductions. We are, therefore, of considered view that it is not a fit case for recovery of tax under 201 r/w Section 102. We are supported in our view by decision of Tribunal in the case of Glaxo India Ltd. (supra) as also following decisions referred to in the said order:
(1) CIT v. Manager, Madhya Pradesh State Co-op. Development Bank Ltd. (supra);
(2) Gwalior Rayon Silk Co. Ltd. v. CIT (supra);
(3) CIT v. Shri Synthetics Ltd. (1985) 151 ITR 634 (MP);
(4) CIT v. Kannen Davan Hill Products Co. Ltd. (1987) 161 ITR 477 (Ker);
(5) CIT v. Life Insurance Corporation (1987) 166 ITR 191 (MP); and (6) Mahindra & Mahindra Ltd. ITA No. 9889/Bom/83 dt. 14th March, 1995.
7. Reliance has also been placed on the RA filed by the Revenue against this order where RA was dismissed by the Tribunal in the following terms : "In our considered view, whether the tax deduction made by the assessee was on the basis of a bona fide working or not is a question of fact on which no reference would lie to the High Court. We therefore, decline to draw up the statement of the case:
8. The order of the Tribunal in Associated Cement Co. Ltd. Mumbai in ITA No. 2309/Mum/87 for asst. yr. 1993-94 has also been relied upon wherein the assessee-company had paid salary to its employees and had deducted tax at source on the basis of estimated incomes of the respective employees. The Tribunal came to the conclusion that:
"Let us see the provisions of Section 201. As observed by the Andhra Pradesh High Court (supra), Section 201 is penal in nature. Therefore, the provision of section shall also have to be construed very strictly. A fair reading of Section 201 indicates that it just serves the purpose of creating a fiction whereunder a person is deemed to be in default. In addition to this section does not confer any further power of any nature whatsoever on the taxing authority. It simply prescribes a particular situation viz. that when the company fails to deduct or after deducting fails to pay the tax it shall be deemed to be an assessee in default. Similar fictions are created under Section 218 for default in demand of advance tax and under Section 220 for default in payment of regular tax. The deeming provisions incorporated in these sections may lead us to Section 221. However, going back to Section 201, with which we are concerned in this appeal, it is sufficient to observe that the fair reading thereof does not take one beyond the legal fiction created therein. It is therefore not possible to reject the contention of Shri Vyas, the learned counsel for the assessee-company, that Section 191 r/w Section 201 does not authorize the taxing authority to collect tax from the payer of the income if tax has not been deducted by him at source. The object of Chapter XVII, as mentioned earlier, is to accelerate the pace of collecting tax, but where the tax is not deducted, the primary liability to pay such tax remains with the person receiving the income. It is only when the payer of the income has deducted tax, tax to the extent has to be paid by him under Section 200. Under Section 201(2) tax which is deducted but not paid to the Government, it shall be a charge upon the assets of the person who deducted the tax. The present case is not such where the company deducted the tax and did not pay it to the Government, Section 205 fortifies the view we are taking. Under the said provisions the bar against a direct demand on the assessee is only to the extent to which tax has been deducted by the payer of the income. It obviously means that there is no bar against a direct demand from the assessee in respect of the tax which is not deducted by the payer of the income. Section 201 does not contain express provision as are contained in Section 206C(6), Section 179 and Section 16(1) of the Act. In view of the above discussion, it is clear that tax which is not deducted under Chapter XVII cannot be recovered from payer of the income and that such tax has to be recovered from payer of the income and that such tax has to be recovered from the assessee direct." At para 14, the Tribunal further held as under:
"In the present case upon the completion of the assessment of the assessee employee nothing prevents the Department from passing re-assessment order under Section 147 after including above two items in dispute and recover tax penalty and interest from them such absurd reasons resulting in double taxation must be avoided. Accordingly, the third argument raised by Shri Vyas also requires to be accepted.
9. Similarly, the assessee has placed reliance on the order of the Delhi Bench of the Tribunal in Nestle India's case (supra) wherein the assessee-company did not deduct tax at source from conveyance allowance paid to its employees on a bona fide belief that such reimbursements were exempt under Section 10(14). The levy of penalty under Section 201 by the AO was quashed. In this case, the facts of the case were that it was not a case where the assessee had not deducted tax from all allowances. It was confined to conveyance allowance alone and in this context whether the particular allowance is taxable or not the Tribunal came to the conclusion would depend on the view adopted by the AO while framing assessment in the case of the employee at the time of deduction of tax at source and accordingly, the assessee could be presumed to have good and sufficient reasons as envisaged under Section 192 of the Act and thus, the assessee was required to make a fair and honest estimate in regard to the salary.
10. Reference has also been placed upon the decisions of the M.P. High Court in the case of CIT v. Manager Madhya Pradesh State Cooperative Development Bank Ltd. (supra) the facts of which are distinguishable. Reliance has also been placed upon another decision of the Madhya Pradesh High Court in the Gwalior Rayon Silk Co. (P) Ltd. v. CTT (supra) in which their Lordships held :
"The provisions of Section 201 of the Act are attracted in the case of an employer only when that employer does not deduct tax at source or after deducting fails to pay the tax as required by the Act. A duty is cast on an employer to form an opinion about the tax liability of his employee in respect of the salary income. While forming this opinion, the employer is undoubtedly expected to act honestly and fairly. But if it is found that the estimate made by the employer is incorrect, this fact alone, without anything more, would not inevitably lead to the inference that the employer has not acted honestly and fairly. Unless that inference can be reasonably raised against an employer, no fault can be found with him. It cannot be held that he has not deducted tax on the estimated income of the employee."
11. Thus, having examined the position of law, it is necessary to advert to the position of facts before us. It is seen that all these cases are not applicable to the issue before us and in all these cases the belief of the assessee was held to be the bona fide belief where the particular amount reimbursed to the assessee the perquisite value of the same was held by the AO to be salary and it was the bona fide belief of the assessee-company that the same was not part of the salary. The position is diametrically different before us as here the question is not of reimbursement of the amount of Rs. 60 per month per domestic servant. The amount is a cash payment and there is no element of reimbursement in the same as no evidence has been led either before the AO or before the CIT and the contention of the Departmental Representative has not been rebutted nor any attempt has been made to rebut the same that it was a cash payment made directly to the employee and as such we are of the view that the said decisions of the Tribunal and judgments of the High Court would not come into play. The scheme of these provisions contained in Section 194 to Section 206(c) and Section 221 are very clear and the scheme behind these sections is that the legislature laid down that even while some payment by way of income are being made to an employee, an obligation is cast upon the payer to deduct tax at source at the rates in force. Upon the person paying the tax a duty is cast to make honest and bona fide estimate of the income which has been earned and to deduct the tax at source and the bona fide belief which the assessee may form in a given circumstance would be a question of fact and would vary from year to year and case to case. The assessee-company where it is directly paying cash which is not reimbursement of any actual expenditure incurred by the assessee would in no circumstances be presumed to be under a bona fide belief that is a perquisite not to be included in salary and would clearly be a case of cash payment to an employee and hence salary. Thus, we are of the view that in the circumstances no interference is called for in the impugned order. As such, the grounds raised by the assessee are rejected.
12. In the result, the appeal filed by the assessee is dismissed.