Income Tax Appellate Tribunal - Kolkata
Usha Martin Industries Ltd. vs Asstt. Cit on 25 July, 2002
Equivalent citations: (2004)86TTJ(KOL)574
ORDER
G. Chowdhury, J.M. The assessee has filed this appeal against the order passed by the Commissioner (Appeals) for the assessment year 1995-96 by which the finding of the assessing officer that the assessee was defaulter under section 201/201(1A) of the Act was upheld.
2. On examination of the TDS certificate filed in Form No. 16A, it was noticed by the assessing officer that the leave travel allowance (in short 'LTA') which was being given by the assessee-company to its employees was claimed as exempted under section 10(5) of the Act. The assessing officer was of the view that the assessee was not keeping supporting evidence of the journey conducted by the employees. The assessee submitted a copy of the proforma. which was being filled up by the employees at the time of receiving the LTA before the assessing officer. It was submitted that there is no such requirement under the Act or Rules to demand copies of the railway tickets from the employees. However, the assessing officer did not accept the contention of the assessee and held the assessee as in default under section 201 of the Act, The assessing officer also charged interest under section 201(1A) of the Act. The amount of tax and interest was Rs. 3,00,610 plus Rs. 90,174 = Rs. 3,90,784. By the impugned order, the first appellate authority upheld the finding recorded by the assessing officer.
3. The learned counsel appearing on behalf of the assessee has submitted a written submission before the Tribunal. According to the learned counsel, the assessee-company was engaged in the business of manufacture and sale of wire rods, wire ropes, etc. where several hundreds of employees were engaged. The assessee duly filed annual return for the taxes deducted at source from the salaries paid to its employees in Form No. 24. According to the assessee, LTA paid to the employees being exempted under section 10(6) of the Act, no tax was deducted from that amount. Our attention was drawn to specimen form which was being filled up for disbursing the LTA to the employees. According to the learned counsel, in the said form place of journey, distance, date of journey and arrival, fare, class of ticket were mentioned which were duly signed by the employees concerned and also departmental head. Therefore, after being prima facie satisfied about the genuineness of the claim of LTA, money was disbursed to the employees. There is no provision under the Rules or Act that copies of the railway tickets have to be taken from the employees concerned. When the employees are certifying about the journeys performed and no other material was brought on record, therefore, under the bona file belief the assessee did not deduct tax from the LTA paid to its employees. Neither in past nor in future the assessee-company insisted for any evidence from the employees concerned and no such action was taken earlier by the assessing officer. Our attention was drawn to the Circular No. 690, dated 1-9-1994, issued by the CBDT reported in (1994) 209 ITR 96 (St). Nowhere in the circular it has been provided that the employer shall obtain the evidence from its employees for the purpose of granting LTA and, thereafter only the amounts will be exempted under section 10(5) of the Act. The circular is binding on the officers of the department. The learned counsel has drawn our attention to the provision of section 192(1) of the Act where an employer is to deduct income-tax from the salary paid by it on the amount payable at the average rate of income-tax on the estimated income of the employees. The learned counsel placed reliance on the decision of the M.P. High court in the case of Gwalior Rayon Silk Co. Ltd. v. CIT (1983) 140 ITR 832 (MP) where it has been held that a duty is cast on the employer to deduct and pay tax on the estimated income of its employees. The employer has to form an opinion about the tax liability of its employees in respect of salary income. Such opinion has to be formed honestly and fairly. If the action of the employer is not based on honest opinion, then only provision of s. 201(1) can be attracted to hold the assessee as in default. It was submitted that this decision was followed by the Tribunal in the case of Indian Airlines Ltd. v. Assistant Commissioner (1996) 59 ITD 353 (Mum) and further in the case of Nestle India Ltd. v. Assistant Commissioner (1997) 61 ITD 444 (Del). The learned counsel has submitted that a decision of the Hyderabad Bench of the Tribunal in Dr. Reddy's Laboratories v. Income Tax Officer (1996) 58 1TD 104 (Hyd) did not consider this aspect of the matter whether the action of the employer was bona fide or not while the legislature under section 192 of the Act has provided that the employer is to deduct tax on the estimated income of the assessee and the decision of the Madhya Pradesh High Court held that such estimate should be an honest estimate, The learned counsel has submitted that under the proviso to section 10(5), such exemption shall not exceed the amount of expenses actually incurred for the purpose of such travel. However, no material was brought on record by the assessing officer that the entire amount of LTA paid by the assessee-company was fictitious and not utilised by the employees. On the other hand, the learned departmental Representative submitted that under section 10(5) of the Act, LTA is to be allowed as exempted upto the amount actually utilised by the employees. In the present case, since the assessee has failed to prove that the amounts were actually utilised by its employees, hence the assessee was rightly treated as in default under section 201(1) of the Act. He further submitted that there has been an amendment with effect from 1-4-1962 in section 201 of the Act by which default will arise for not deducting the whole or any part of the tax.
4. After hearing both the sides, we find that the grievance of the revenue is that the assessee is not entitled for exemption under section 10(5) of the Act in respect of LTA paid to its employees. The assessee submitted the details of such LTA before the assessing officer. The assessee has also submitted the form which is to be fill up by an employee before making such payment. In the said form, we find that names, destination covered in journey, dates and places of journey, fares of bus or train were to be provided by the employees and thereafter, the employees have to put signatures certifying that they had undertaken the journeys and the amounts mentioned in the said forms are actually incurred by them. In the assessment order, we find that the assessing officer disallowed relief to the assessee on the ground that the assessee did not obtain further supporting evidence from the employees in support of the journeys. Accordingly,. it was held that the amounts of LTA were not spent for the journeys performed by the employees. From the said order, we do not find that any material was brought on record by the assessing officer to show that the entire expenditure incurred by the assessee on account of LTA was false. There is no evidence to dislodge the declaration given by the employees in the prescribed forms. There is no dispute that, under similar circumstances, exemption was allowed by the revenue in the earlier years and on the basis of similar declaration given by the employees. Under section 201 of the Act, the assessee is to be treated as in default where he fails to deduct whole or any part of tax. Duty has been cast on the assessee for deduction of such tax under section 192 of the Act. The provisions of section 192 of the Act is quoted below :
"(1) Any person responsible for paying any income chargeable under the head 'Salaries' shall, at the time of.payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year"
By perusal of the said provision, it is clear that an employer is to deduct average rate of income-tax computed on the basis of estimated salary income of the employees. The Hon'ble Madhya Pradesh High Court in the case of Gwalior Rayon Silk (P) Ltd. (supra) has held that the provisions of section 201 of the Act are attracted in the case of an employer when he fails to deduct the tax on estimated income of his employees and the employer shall form this opinion acting honestly and fairly. This decision has been followed by the Mumbai Bench of the Tribunal in the case of Indian Airlines Ltd. (supra) and the Delhi Bench of the Tribunal in the case of Nestle India Ltd. (supra). Under the aforesaid circumstances, now we have to examine whether the action of the assessee in this case was honest or fair. We have already noticed that under similar circumstances, exemptions under section 10(5) of the Act are.allowed to the assessee in respect of LTA paid to its employees in earlier years. The requirements in support of the journey were obtained by the assessee from its employees by filing up the forms called as leave travel assistance bills where detailed particulars of journey have been mentioned. These bills are duly certified by the employees concerned when they have actually undertaken the journey. On the basis of these documents, the assessee paid the LTA to its employees. It is true that copies of the tickets or ticket numbers have not been provided in the said bills. However, on similar circumstances and on the basis of similar information, the exemptions were being allowed in the earlier years. Further, no material was brought on record by the assessing officer in support that the entire payment of LTA by the assessee is bogus because not a single penny was utilised by its employees. Further, we find that there is no provision in the law that ticket numbers have to be obtained from the employees concerned. The whole idea is that when the assessee-employer is disbursing the amounts, he has to be satisfied about the fact that the amounts were actually expended by the employees concerned. In the present case, as we have noticed, the assessee was being allowed exemption in respect of LTA on the basis of similar circumstances and similar type of information collected from the employees. Therefore, there is no occasion to hold that in this year the action of the assessee was not bona fide and if that is so, according to the decision of the Madhya Pradesh High Court (supra), the estimate made by the assessee is honest and fair. In case it is to be held by the revenue that the entire amounts of LTA were not utilised by the employees, in that event, some material has to be brought on record in support of that finding which has not been done in the present case. We have perused the decision of the Hyderabad Bench of the Tribunal in the case of Dr. Reddy's Laboratories Ltd. (supra). In that case, some fixed amounts of allowance was paid to the employees without any verification whether the amounts were incurred for travel or not. In that event, it was held that the amounts were not exempt under section 10(5) of the Act. Whether the action of the employer is bona fide or not was not examined by the Tribunal in that case. Therefore, the facts involved in both the cases are not similar whereas the decision of the Mumbai Bench of the Tribunal in the case of Indian Airlines Ltd. (supra) and of the Delhi Bench of the Tribunal in the case of Nestle India Ltd. (supra) followed the decision of the Madhya Pradesh High Court and held that the action of the employer was bona fide. Considering the aforesaid circumstances of the case, in our opinion, in the present case also, the action of the assessee cannot be said to be mala fide, particularly when in the earlier years exemption was allowed to the assessee. Accordingly, we hold that the assessee cannot be treated as in default under section 201 of the Act. Consequently, the interest under section 201(1A) cannot be levied.
5. In the result, the appeal filed by the assessee is allowed.