ACIT, New Delhi V. M/s. Maruti Udyog Ltd., New Delhi

ITA 658/DEL/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6891 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 06-10-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 20-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REENA S PURI
• Section: 10(14); 201(1)

Judgement Text

ITA NOS. 657 & 658/DEL/2009 A.YRS. 2002-03 & 2004-05 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NOS. 657 & 658/DEL/2009 A.YRS. : 2002-03 & 2004-05 ACIT, CIRCLE - 50(1), R.NO. 503, 5 TH FLOOR, LAXMI NAGAR, DISTT. CENTRE, DELHI 110 092 VS. M/S MARUTI UDYOG LIMITED, 11 TH FLOOR, JEEVAN PRAKASH BUILDING, 25, K.G. MARG, NEW DELHI 110 001 (PAN: AAACM0829Q) (APPELLANT ) (RESPONDENT ) ASSEESSEE BY : S HRI AJAY VOHRA, ADV. DEPARTMENT BY : SMT. REENA S. PURI, C.I.T.(D.R.) ORDER PER SHAMIM YAHYA: AM THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 26.11.2008 PERTAINING TO ASSESSMENT YEARS 2002-03 & 2004-05. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCO ME TAX (APPEALS) ERRED IN HOLDING THAT A SCHEME OF VOLUN TARY RETIREMENT WAS IN CONFORMITY WITH RULE 2BA OF THE IT RULES. 2.1 IN THIS CASE THE ASSESSING OFFICER NOTED THAT IT HAS COME TO THE KNOWLEDGE THAT M/S. MARUTI UDYOG LTD. (MUL) HAD INTRO DUCED A NUMBER OF VOLUNTARY RETIREMENT SCHEMES (VRS) IN THE FINANCIAL YEAR 2001-02 AND IN THE OTHER FINANCIAL YEAR 2003-04. ASSESSING OFFICER ITA NOS. 657 & 658/DEL/2009 A.YRS. 2002-03 & 2004-05 2 PROCEEDED TO ANALYSIS THE SALIENT FEATURES OF THE V RS SCHEME AND CONCLUDED AS UNDER:- FROM THE READING OF THE ABOVE PROVISION, IT IS SEEN THAT THE BASIC REQUIREMENT FOR AVAILING EXEMPTION U/S. 10(1 0C) IS THAT THE SCHEMES HAVE TO BE IN ACCORDANCE WITH THE GUIDE LINES AS PRESCRIBED IN RULE 2BA OF INCOME TAX RULES. IN O THER WORDS, IN ORDER TO AVAIL THE BENEFIT OF SECTION 10(10C), THE VOLUNTARY RETIREMENT SCHEMES SHOULD BE FRAMED ACCORDING TO THE GUIDELINES AS PRESCRIBED IN RULE 2BA. IT WOULD MEA N THAT IN CASE THE GUIDELINES AS PER RULE 2BA ARE NOT ADHERED TO, NO EXEMPTION U/S. 10(10C) WILL BE AVAILABLE TO THE ASSESSEE. IN THE PRESENT CASE THE ASSESSEE COMPANY HAS MADE THE PAYMENTS IN VIO LATION OF SECTION 10(10C) AS MUCH AS (I) SALARY OF MORE TH AN 3 MONTHS HAVE BEEN PAID UNDER THE DIFFERENT CIRCULARS TO A N UMBER OF WORKERS (II) PAYMENT OF MORE THAN ` 5 LACS HAVE BEE N MADE TO A NUMBER OF EMPLOYEES (III) AS PER RULE 2BA THE SCHEME S HOULD BE APPLICABLE TO ALL EMPLOYEES, BUT IN CASE OF ASSESSEE DEDUCTOR, ADDITIONAL BENEFITS HAVE BEEN GRANTED TO ONLY THOS E EMPLOYEES WHO OPTED FOR EARLY RETIREMENT, IN VIEW OF THE CIRCU LAR FOLLOWED BY THE VRS SCHEME. IN VIEW OF THE ABOVE ASSESSEE COMPANY IS BEING T REATED AS AN ASSESSEE IN DEFAULT FOR NOT DEDUCTING AND DEPOS ITING THE TAX ON THESE PAYMENTS U/S 201(1A) OF THE INCOME TAX ACT . THE AVERAGE TAX IN THESE YEARS IS 30.60% AND 30% RESPEC TIVELY. THE TAX DEDUCTIBLE IN THE F.Y. 2001-02 ON ` 45,57,36,65 8/- COMES TO ` 13,94,55,417/-. ITA NOS. 657 & 658/DEL/2009 A.YRS. 2002-03 & 2004-05 3 SIMILARLY IN THE F.Y. 2003-04 TAX @ 30% ON ` 72,22,0 4,467/- COMES TO ` 21,66,61,340/-. SINCE THE PAYMENTS HAVE NOT BEEN MADE, INTEREST UNDER SECTION 201(1A) IS ALSO CHARGEA BLE. 2.2 UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) ELABORATELY CONSIDERED THE ASSESSEES SUB MISSIONS. LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT HE HA S CONSIDERED THE ASSESSING OFFICERS ORDER PASSED U/S 201(1) & 201(1 A) OF THE ACT AND THE VOLUMINOUS SUBMISSIONS MADE BY THE ASSESSEES COUN SEL. HE HELD THAT BEFORE ARRIVING AT THE CONCLUSION IT IS VERY IMPORTANT TO DISCUSS THE CIRCULAR NO. 640 ISSUED BY THE CBDT, NEW DELHI. FROM THE PERUSAL OF THE IMPUGNED ORDER, IT IS EVIDENT THAT AS SESSING OFFICER HAS MAINLY RELIED UPON FROM QUESTION NO. VII OF THE CIRCU LAR NO. 640 ISSUED BY THE CBDT AND IN VIEW OF THIS HE TREATED THE ENTI RE SCHEME AS NOT IN CONSONANCE WITH THE PROVISIONS OF LAW. HE FURTHER ADJUDICATED THAT SUCH PAYMENTS MADE BY THE COMPANY ATTRACTS TDS. THE ASSESSEE HAS FAILED TO DEDUCT TAX ON THESE PAYMENTS AND APPL YING THE PROVISIONS OF SECTION 201(1) AND 201(1A) TREATED TH E ASSESSEE COMPANY AS ASSESSEE IN DEFAULT FOR NOT DEDUCTING AN D DEPOSITING THE TAX ON SUCH PAYMENTS. IN THIS REGARD, HE FURTHER R EFERRED THE ASSESSEES SUBMISSIONS AND CASE LAWS AND HELD AS UND ER:- IN VIEW OF THE JUDGEMENT OF HONBLE GUJRAT HIGH COUR T IN THE CASE OF ARUN KUMAR MAKWANA REPORTED IN 286 ITR 502 AND OTHER DECISIONS OF THE ITAT NAMELY (1) VAISHALI A. SHELAR VS. ACIT, CIR-4, THANE [MUMBAI] (2008) REPORTED IN 1 13 ITD 0001 (2) ANANT KUMAR AGARWAL VS. ITO (LUCKNOW TM) (2008) REPORTED IN 113 ITD 0001T; IT IS DIFFICULT TO SUBSCRIBE TO THE VIEW HELD BY THE ASSESSING OFFICER. THE OR DER OF THE ITA NOS. 657 & 658/DEL/2009 A.YRS. 2002-03 & 2004-05 4 ASSESSING OFFICER IS CONTRARY TO THE PROVISIONS OF THE STATUE READ WITH RULE 2BA OF THE INCOME TAX RULES, 1962. THE PAYMENTS MADE BY THE COMPANY UNDER THE VRS CAN; UNDE R NO STRETCH OF IMAGINATION, BE TREATED AS PROFIT IN LIEU OF SALARY. RESPECTFULLY FOLLOWING THE JUDGEMENT OF T HE GUJRAT HIGH COURT, IT IS HELD THAT THE SCHEME FLOATED BY T HE COMPANY IN THIS REGARD IS IN CONFORMITY WITH THE RULE 2BA AND PROVISIONS OF THE ACT. THE APPEAL OF THE ASS ESSEE IS, THEREFORE, ALLOWED. IT IS CLAIMED BY THE ASSESSEE THAT WHEREVER ANY PAYMENT IS MADE IN EXCESS OF ` 5 LACS AND PAYMENTS MA DE IN REGARD TO EARLY BIRD INCENTIVES, THE TAX HAS BEE N DEDUCTED BY THE COMPANY ON SUCH PAYMENTS AND PAID TO THE GOVT. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE QUANTUM OF SUCH AMOUNT AND ASCERTAIN WHETHER TDS HAS BEEN DEDUCTED AS PER THE PROVISIONS OF THE RELEVANT SECTION AND CHARGE INTEREST U/S 201(1A) FOR ANY DELAY OR S HORT DEDUCTION. 2.3 LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTH ER NOTED THAT ASSESSEE HAS RAISED A GROUND OF BEING TREATED AS AS SESSEE IN DEFAULT FOR ALLEGED SHORTFALL OF DEDUCTION AT SOURCE. IN T HIS REGARD, HE REFERRED TO THE ASSESSEES SUBMISSIONS AND CASE LAWS. LD. C OMMISSIONER OF INCOME TAX (APPEALS) FURTHER HELD AS UNDER:- I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE COUNSEL OF THE ASSESSEE. THE CASE OF THE ASSESSI NG OFFICER WAS THAT THE ENTIRE SCHEME OF VRS IS NOT IN CONFOR MITY WITH RULE 2BA AND PROVISIONS OF SECTION 10(10C) OF THE A CT. IT IS ITA NOS. 657 & 658/DEL/2009 A.YRS. 2002-03 & 2004-05 5 ALREADY HELD IN THE EARLIER PART THAT THE SCHEME IN TRODUCED BY THE COMPANY ADHERE TO THE VARIOUS GUIDELINES, RU LE 2BA AND PROVISIONS OF SECTION 10(10C) OF THE ACT. TH E ASSESSEE HAS SUBMITTED THAT WHERE EVER THE PAYMENT IS IN EXCE SS OF ` 5 LACS THE TDS HAS BEEN DEDUCTED BY THE COMPANY AND PAID TO THE GOVT. THE VARIOUS AUTHORITIES CITED BY THE COUNSEL MAKES IT AMPLY CLEAR THAT U/S 192(1) OF THE A CT THE EMPLOYER IS REQUIRED TO DEDUCT TDS ON THE ESTIMATED INCOME OF THE ASSESSEE. THE DELHI BENCH OF THE TRI BUNAL IN THE CASE OF NESTLE INDIA LTD. VS. ACIT REPORTED IN 61 ITD 444 HELD THAT THE ASSESSEE CANNOT BE TREATED AS AN ASSE SSEE IN DEFAULT UNDER SECTION 201(1) OF THE ACT IF THE ASSE SSEES CONDUCT IN NOT DEDUCTING TAX AT SOURCE WAS NOT M ALA FIDE. IN THAT CASE, THE ASSESSEE COMPANY UNDER A BONA FIDE BELIEF THAT SUCH REIMBURSEMENTS WERE EXEMPT UNDER SECTION 10(14) OF THE ACT. THE COMMISSIONER (APPEALS) SUST AINED THE INTEREST LEVIED UNDER SECTION 201(1) OF THE ACT HOLDING THAT THE ASSESSEE COMMITTED DEFAULT IN NOT DEDUCTING PROPER TAX AT SOURCE ON THE AFORESAID ALLOWANCE. ON APPEAL, THE TRIBUNAL OBSERVED AS UNDER:- THE PENALTY UNDER SECTION 201 IS LEVIABLE IN A CAS E WHERE THE ASSESSEE FAILS TO DEDUCT ANY PAY THE TAX FOR GOOD AND SUFFICIENT REASONS. THE EXPRESSION GOOD AND SUFFICIENT REASONS IN TURN WOULD HAVE TO BE RE AD IN THE CONTEXT OF EXPRESSION ESTIMATED INCOME AS USED IN SECTION 192. THUS, THE ASSESSEE IS REQUI RED TO MAKE A FAIR AND HONEST ESTIMATION IN REGARD TO T HE SALARY. FAIR AND HONEST ESTIMATE WOULD BE BASED ON ITA NOS. 657 & 658/DEL/2009 A.YRS. 2002-03 & 2004-05 6 THE ASSESSEES BELIEF WHICH IS TO BE BONA FIDE ONE . THIS IS TO BE SEEN IN THE BACKDROP OF THE VARIOUS JUDICIAL DECISIONS ON THE PARTICULAR ALLOWANCE AND T HE CLARIFICATION ON THE BASIS OF WHICH THE ASSESSEE FO RMS A BELIEF THAT THE SAME IS EITHER TAXABLE OR NOT. T HE GOOD AND SUFFICIENT REASONS WOULD FURTHER SHOW TH AT THE BELIEF IN THIS RESPECT HAS TO BE BASED ON MAT ERIAL ON THE BASIS OF WHICH THE SAME IS FORMED. THIS SHOUL D NOT MERELY SUBSIST IN THE MIND OF THE ASSESSEE BEING BASED ON CONJECTURES AND SURMISES. THE EXPRESSION GOOD AND SUFFICIENT USED TOGETHER PROVIDES FOR A STRICT TEST IN THIS REGARD. THE ONUS IS ON THE A SSESSEE TO SHOW THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSEE COULD NOT HAVE DEDUCTED TAX FROM ALLOWANCE AS CONTEMPLATED UNDER THE PROVISIONS OF THE ACT. IT WAS NOT A CASE WHERE THE ASSESSEE HA D NOT DEDUCTED TAX FROM ALL THE ALLOWANCES. IT WAS CONFINED TO CONVEYANCE ALLOWANCE ALONE. IN THIS CONTEXT, WHETHER THE PARTICULAR ALLOWANCE IS TAXAB LE OR NOT, WOULD DEPEND ON THE VIEW ADOPTED BY THE ASSESSING OFFICER, WHILE FRAMING THE ASSESSMENT IN THE CASE OF THE EMPLOYEE AT THE TIME OF DEDUCTION OF TAX AT SOURCE. THE EMPLOYER IS REQUIRED TO HAVE A BROAD PICTURE OF THE ESTIMATED INCOME WHICH IS TO BE SUBJECTED TO TAX. THE DEPARTMENT COULD NOT SUCCESSFULLY SHOW THAT THE ASSESSEES CONDUCT IN NO T DEDUCTING TAX AT SOURCE IN THE INSTANT CASE WAS A MALA FIDE ONE FOR WHICH THE PENALTY WAS LEVIABLE IN ITS ITA NOS. 657 & 658/DEL/2009 A.YRS. 2002-03 & 2004-05 7 HANDS. THEREFORE, THE PENALTIES LEVIED UNDER SECT ION 201(1) WOULD NOT BE UPHELD. REVENUES REFERENCE APPLICATION UNDER SECTION 256(3 ) OF THE ACT HAS BEEN DISMISSED BY THE DELHI HIGH COURT VIDE C.I.T. VS. NESTLE INDIA LTD. REPORTED IN 243 ITR 435. THE HO NBLE COURT OBSERVED AS UNDER:- IN OUR VIEW, THE PROPOSED QUESTIONS ARE NOT FIT FO R REFERENCE TO THIS COURT. FROM THE AFORE-EXTRACTED PORTION OF THE ORDER OF THE TRIBUNAL IT IS EVIDENT THAT THE TRIBUNALS FINDING THAT THE ASSESSEE HAD A GOO D AND SUFFICIENT REASON FOR NOT DEDUCTING TAX AT SOUR CE ON THE SAID AMOUNT IS FOUNDED ON THE FACT THAT IT WA S UNDER A BONA FIDE BELIEF THAT THE CONVEYANCE ALLOWANCE WAS NOT TO BE INCLUDED IN THE SALARY. THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IS A PURE F INDING OF FACT, WHICH DOES NOT GIVE RISE TO ANY QUESTION O F LAW. THE TRIBUNAL HAS NOT EXAMINED, AND RIGHTLY SO , THE QUESTION AS TO WHETHER THE SAID ALLOWANCE HAS TO BE ADJUDICATED AT THE TIME OF ASSESSMENT OF THE EMPLOYEE RECEIVING THE SAID ALLOWANCE AND HE CANNOT BE BOUND BY THE STAND OF HIS EMPLOYER ABOUT THE TAXABILITY OR OTHERWISE OF A PARTICULAR ALLOWANCE. DEDUCTION OF TAX AT SOURCE BY AN EMPLOYER IS ALWAYS A TENTATIVE DEDUCTION OF INCOME TAX SUBJECT TO REGULA R ASSESSMENT IN THE HANDS OF THE PAYEE/RECIPIENT.. ADVERTING BACK TO THE FACTS OF THE CASE, IT IS CLAI MED THAT THE APPELLANT THAT WHEREVER THE PAYMENT UNDER VRS IS MOR E THAN ` ITA NOS. 657 & 658/DEL/2009 A.YRS. 2002-03 & 2004-05 8 FIVE LACS OR EARLY BIRD OR OTHER INCENTIVES HAVE B EEN PAID, THE TDS HAS BEEN DEDUCTED THEREON BY THE COMPANY AND PAID TO THE GOVERNMENT. IN THE EARLIER PART A DIRECTION HAS AL READY BEEN GIVEN TO THE ASSESSING OFFICER TO WORK OUT THE LI ABILITY IF ANY ON THE BASIS OF THE TAX DEDUCTED BY THE COMPANY. THE COMPANY SUBMITTED THAT TDS HAS BEEN DEDUCTED ON SUCH PAYMEN TS ON THE BASIS OF FAIR ESTIMATE. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE APPELLANT COMPANY HAS FAILED TO DEDUCT AND PAY TAX FOR GOOD AND SUFFICIENT REASONS. THE GOOD AND SUFFIC IENT REASON WOULD FURTHER SHOW THAT THE BELIEF IN THIS RESPECT HAS TO BE MATERIAL ON THE BASIS OF WHICH THE SAME IS FORMED. ON THE FACTS OF THE GIVEN CASE AND IN VIEW OF CASE LAWS DISCUSS ED, THERE IS NO SCOPE TO TREAT THE APPELLANT AS ASSESSEE IN DEFAULT AS PROVIDED IN SECTION 201(1) OF THE ACT. THE APPELLANT HAS RAISED GROUND IN REGARD TO CHARGI NG OF INTEREST U/S 201(1A) OF THE ACT. THE CHARGING OF IN TEREST IS CONSEQUENTIAL IN NATURE. 3. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. 4. IT HAS BEEN URGED BY THE REVENUE THAT:- (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. C.I.T.(A) HAS ERRED IN HOLDING THAT TH E SCHEME OF VOLUNTARY RETIREMENT WAS IN CONFORMITY WITH RULE 2 BA OF THE IT RULES WITHOUT APPRECIATING THE FACTS THAT AMO UNT PAID/PAYABLE ON ACCOUNT OF VOLUNTARY RETIREMENT EXCE EDED THE AMOUNT EQUIVALENT TO THREE MONTHS SALARY FOR E ACH COMPLETED YEAR OF SERVICE. ITA NOS. 657 & 658/DEL/2009 A.YRS. 2002-03 & 2004-05 9 (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. C.I.T.(A) HAS ERRED IN HOLDING THAT TH E SCHEME OF VOLUNTARY RETIREMENT WAS IN CONFORMITY WITH RULE 2 BA OF THE IT RULES WITHOUT APPRECIATING THE FACTS THAT PA YMENT OF MORE THAN ` 5 LACS PER EMPLOYEE HAS BEEN MADE TO A NUMBER OF EMPLOYEES. (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE A S WELL AS IN LAW, THE LD. C.I.T.(A) HAS ERRED IN HOLDING THAT TH E SCHEME OF VOLUNTARY RETIREMENT WAS IN CONFORMITY WITH RULE 2 BA OF THE IT RULES WITHOUT APPRECIATING THE FACTS THAT AS PER RULE 2BA THE SCHEME SHOULD BE APPLICABLE TO ALL EMPLOYEE S, BUT IN CASE OF ASSESSEE DEDUCTOR, ADDITIONAL BENEFI TS (VSS) HAVE BEEN GRANTED TO ONLY SOME OF THE EMPLOYEES. (IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. C.I.T.(A) HAS ERRED IN TREATING THE AS SESSEE AS NOT IN DEFAULT BY HOLDING THAT THE SCHEME OF VOLUNT ARY RETIREMENT WAS IN CONFORMITY WITH RULE 2BA OF THE IT RULES. HE HAS FAILED TO APPRECIATE THAT ADDITIONAL BENEFI TS GRANTED TO SOME OF THE EMPLOYEES IN THE GRAB OF VSS FLOATED BY ASSESSEE ON SAME DAY AND A FEW DAYS AFTER VRS CANNO T BE TREATED AS SEPARATE AND DISTINCT FROM VRS, BUT ONLY A PART OF IT. 4.1 LD. COUNSEL OF THE ASSESSEE ON THE OTHER HAND SUPPORTED THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS ). WE HAVE ITA NOS. 657 & 658/DEL/2009 A.YRS. 2002-03 & 2004-05 10 CAREFULLY CONSIDER THE SUBMISSION. WE FIND THAT AS SESSING OFFICER HAS HELD THAT GUIDELINES AS PER RULE 2BA ARE NOT ADHERE D TO AND NO EXEMPTION U/S 10(10C) WILL BE ALLOWABLE TO THE ASSES SEE. HE FURTHER NOTED THAT IN THE PRESENT CASE THE ASSESSEE COMPANY HAS MADE THE PAYMENTS IN VIOLATION OF SECTION 10(10C) IN AS MU CH AS :- (A) SALARY OF MORE THAN 3 MONTHS HAVE BEEN PAID UNDER THE DIFFERENT CIRCULARS TO A NUMBER OF WORKERS (B) PAYMENT OF MORE THAN ` 5 LACS HAVE BEEN MADE TO A NUMBER OF EMPLOYEES (C) AS PER RULE 2BA THE SCHE ME SHOULD BE APPLICABLE TO ALL EMPLOYEES, BUT IN CASE OF ASSESSEE DEDUCTOR, ADDITIONAL BENEFITS HAVE BEEN GRANTED TO ONLY THOS E EMPLOYEES WHO OPTED FOR EARLY RETIREMENT, IN VIEW OF THE CIRCULAR FOLLOWED BY THE VRS SCHEME. 4.2 LD. COMMISSIONER OF INCOME TAX (APPEALS) IN HIS A PPELLATE ORDER HAS NOTED THAT ASSESSING OFFICER HAS ONLY CONSIDER ED THE QUESTION NO. 7 OF THE CIRCULAR NO. 640 ISSUED BY THE CBDT IN T HIS REGARD. LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS REPRODUCED THE ABOVE CIRCULAR. IN THE SAID CIRCULAR IN QUESTION NO. 6 IS THAT WHERE THE AMOUNT RECEIVABLE ON ACCOUNT OF VOLUNTARY RETIREMEN T EXCEEDS RUPEES FIVE LAKHS IN CASE OF AN EMPLOYEE, WHETHER THE ENTIR E AMOUNT RECEIVABLE OR ONLY THE EXCESS OF THE AMOUNT ABOVE RU PEES FIVE LAKHS IS TO BE SUBJECT TO INCOME TAX? ANSWER: ONLY THE AMOUNT REPRESENTING THE EXCESS ABOVE THE LIMIT OF RUPEES FIVE LAKHS IS TO BE SUBJECTED TO INC OME TAX. ITA NOS. 657 & 658/DEL/2009 A.YRS. 2002-03 & 2004-05 11 4.3 FURTHERMORE, LD. COMMISSIONER OF INCOME TAX (APPEA LS) HAS REFERRED THE HONBLE GUJRAT HIGH COURT DECISION IN THE CASE OF ARUM KUMAR MAKWANA : 286 ITR 502. IN THE SAID ORDER IT WAS HELD THAT IT IS NOT THE INTENTION OF THE LEGISLATURE THAT EVERY SC HEME MUST PROVIDE OF PAYMENT OF AMOUNT EQUIVALENT TO (I) THREE MONTHS SAL ARY FOR EACH COMPLETED YEAR OF SERVICE OR (II) SALARY AT THE TIME OF RETIREMENT MULTIPLIED BY THE BALANCE MONTHS OF SERVICE LEFT BEF ORE THE DATE OF HIS RETIREMENT ON SUPERANNUATION. ONLY CONDITION OF RULE 2BA IS THAT AMOUNT RECEIVABLE SHOULD NOT EXCEED THIS LIMIT. IT WAS FURTHER HELD THAT RULE 2BA DOES NOT PROVIDE AT ALL THAT THE AMOUN T REPRESENTING THE LOWER OF THE TWO LIMITS SPECIFIED IN CLAUSE (VI) OF RULE 2BA; AMOUNT UPTO ` 5 LACS QUALIFIES FOR EXEMPTION U/S 10(10C). FROM THE ABOVE JUDGEMENT OF THE HONBLE COURT IT IS EVIDENT THAT P AYMENT UPTO ` 5 LACS HAVE TO BE ALLOWED AND GIVEN THE NECESSARY D EDUCTION. ASSESSEE HAD SUBMITTED THAT WHEREVER ANY PAYMENT IS MADE IN EX CESS OF ` 5 LACS THE PAYMENT ON EXCESS AMOUNT TAX HAS BEEN DEDU CTED BY SUCH COMPANIES AND PAID TO THE GOVERNMENT. HENCE LD. CO MMISSIONER OF INCOME TAX (APPEALS) HAS DIRECTED THE ASSESSING OF FICER TO VERIFY THE QUANTUM OF SUCH AMOUNT AND ASCERTAIN THAT THE TDS HAS BEEN DEDUCTED AS PER THE PROVISION OF RELEVANT SECTION A ND CHARGE INTEREST U/S 201(1A) FOR ANY DELAY OR SHORT DEDUCTION. WE F IND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS)S IN HIS ORDER IN THIS REGARD IS IN CONFORMITY WITH THE HONBLE GUJRAT HIGH COURT DECISIO N CITED ABOVE AND IT DOES NOT NEED TO INTERFERE IN THE SAME. 4.4 ANOTHER ASPECT WHICH THE LD. COMMISSIONER OF IN COME TAX (APPEALS) HAS ADDRESSED THAT ASSESSEE HAS ACTED IN A BONA FIDE AND FOR GOOD AND SUFFICIENT REASONS. IN THIS REGARD, DECIS ION OF THE DELHI BENCH OF THE TRIBUNAL IN NESTLE INDIA PVT. LTD. 61 ITD 44 1 HAS BEEN REFERRED ITA NOS. 657 & 658/DEL/2009 A.YRS. 2002-03 & 2004-05 12 IN THE LD. COMMISSIONER OF INCOME TAX (APPEALS)S OR DER IN WHICH IT HAS BEEN HELD THAT ASSESSEE CANNOT BE TREATED IN DEFAULT U/S 201(1A) OF THE ACT WHEN THE CONDUCT OF THE ASSESSEE FOR NO T DEDUCTING TDS WAS NOT MALAFIDE. 4.5 REVENUE HAS APPEALED AGAINST THE ABOVE ORDER HO NBLE DELHI HIGH COURT IN THE CASE OF C.I.T. VS. NESTLE INDIA LTD. REPORTED IN 243 ITR 435 HAS DISMISSED THE REVENUES APPEAL BY HOLDING AS UNDER:- IN OUR VIEW, THE PROPOSED QUESTIONS ARE NOT FIT FO R REFERENCE TO THIS COURT. FROM THE AFORE-EXTRACTED PORTION OF THE ORDER OF THE TRIBUNAL IT IS EVIDENT THAT THE TRIBUNALS FINDING THAT THE ASSESSEE HAD A GOO D AND SUFFICIENT REASON FOR NOT DEDUCTING TAX AT SOUR CE ON THE SAID AMOUNT IS FOUNDED ON THE FACT THAT IT WA S UNDER A BONA FIDE BELIEF THAT THE CONVEYANCE ALLOWANCE WAS NOT TO BE INCLUDED IN THE SALARY. THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IS A PURE F INDING OF FACT, WHICH DOES NOT GIVE RISE TO ANY QUESTION O F LAW. THE TRIBUNAL HAS NOT EXAMINED, AND RIGHTLY SO , THE QUESTION AS TO WHETHER THE SAID ALLOWANCE HAS TO BE ADJUDICATED AT THE TIME OF ASSESSMENT OF THE EMPLOYEE RECEIVING THE SAID ALLOWANCE AND HE CANNOT BE BOUND BY THE STAND OF HIS EMPLOYER ABOUT THE TAXABILITY OR OTHERWISE OF A PARTICULAR ALLOWANCE. DEDUCTION OF TAX AT SOURCE BY AN EMPLOYER IS ALWAYS A TENTATIVE DEDUCTION OF INCOME TAX SUBJECT TO REGULA R ASSESSMENT IN THE HANDS OF THE PAYEE/RECIPIENT.. ITA NOS. 657 & 658/DEL/2009 A.YRS. 2002-03 & 2004-05 13 4.6 IN VIEW OF THE ABOVE SAID CASE LAW ASSESSEE CLA IMED THAT WHEREVER ANY PAYMENT IS MADE IN EXCESS OF ` 5 LACS H AS BEEN MADE IN REGARD TO EARLY BIRD INCENTIVES, THE TAX HAS BEEN D EDUCTED BY THE COMPANY ON SUCH PAYMENTS AND PAID TO THE GOVT. THI S ASPECT HAS ALREADY BEEN REMITTED TO THE ASSESSING OFFICER FOR VERIFICATION OF THE VERACITY OF THE STATEMENT. THUS, IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER THAT COMPANY HAS FAILED TO DEDUCT AND PAID THE TAX FOR GOOD AND SUFFICIENT REASONS. ASSESSEE HAS CLEARLY DE MONSTRATED THAT IT HAD GOOD SUFFICIENT REASONS FOR NON-DEDUCTION OF TA X FOR PAYMENT OF VRS UPTO ` 5 LACS. UNDER THE CIRCUMSTANCES, WE ALS O DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) IN THIS REGARD AND UPHOLD THE SAME. 5. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/10/2010. SD/- SD/- [A.D. JAIN] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 22/10/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES