Appeal details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 94816 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 11 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
17-12-2015
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
D
Next Hearing Date
11-12-2015
Assessment Year
2008-2009
Appeal Filed On
02-01-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: S H RI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER GUJARAT ALKALIES & CHEMICAL LTD , NEAR IPCL COMPLEX, PO PETROCHEMICALS, DIST. BARODA - 391346 PAN: AACG8896M (APPELLANT) VS THE ADDITIONAL COMM. OF INCOME TAX, RANGE - 1, BARODA (RESPONDENT) THE DCIT, CIRCLE - 1(1) BARODA (APPELLANT) VS GUJARAT ALKALIES & CHEMICAL LTD, NEAR IPCL COMPLEX, PO PETROCHEMICALS, DIST. BARODA - 391346 PAN: AACG8896M (RESPONDENT) I T A NO . 09 / A HD/20 12 A SSESSMENT YEAR 200 8 - 09 ITA NO. 321 /AHD/ 20 12 ASSESSMENT YEAR 200 8 - 09 ITA NO S . 461 & 462 /AHD/20 12 ASSESSMENT YEAR 200 8 - 09 & 2009 - 10 I.T.A NO S . 09,321,461 & 462 /AHD/20 12 A.Y. 2008 - 09 & 2009 - 10 PAGE NO GUJARAT ALKALIES & CHEMICALS LTD VS. ACIT 2 GUJARAT ALKALIES & CHEMICAL LTD, NEAR IPCL COMPLEX, PO PETROCHEMICALS, DIST. BARODA - 391346 PAN: AACG8896M (APPELLANT) VS THE ADDITIONAL COMM. OF INCOME TAX, TDS RANGE, BARODA (RESPONDENT) REVENUE BY : S H RI ALBINU S TIRKEY , SR. D . R. ASSESSEE BY: S H RI SUNIL TALATI , A.R. DATE OF HEARING : 11 - 12 - 2 015 DATE OF PRONOUNCEMENT : 1 7 - 12 - 2 015 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS IS A SET OF FOUR APPEALS. THE FIRST ASSESSMENT YEAR 2008 - 09 INVOLVES THREE OF THEM. THE ASSESSEE AND REVENUE HAVE FILED CROSS APPEALS ITA NOS. 9 & 321/AHD/2012 AGAINST THE ORDER OF CIT(A) - I, BARODA DAT ED 03 - 11 - 2011 IN CASE NO. C AB - I/25/10 - 11 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . THE ASSESSEE S NEXT APPEAL ITA 461/AHD/2012 ARISES AGAINST THE ORDER DATED 21 - 12 - 2011 PASSED BY C IT(A) - IV, BARODA IN CASE NO. CAB/IV - 121/11 - 12 IN PROCEEDI NGS U/S. 201(1) AND (1A) OF THE ACT. THE NEXT ASSESSMENT YEAR 2009 - 10 INVOLVES ASSESSEE S APPEAL ITA 462/AHD/2012 AGAINST AN IDENTICAL ORDER OF THE VERY DATE PASSED BY THE SAME CIT(A) IN SIMILAR PROCEEDINGS. FIRST WE COME TO I.T.A NO S . 09,321,461 & 462 /AHD/20 12 A.Y. 2008 - 09 & 2009 - 10 PAGE NO GUJARAT ALKALIES & CHEMICALS LTD VS. ACIT 3 QUANTUM CROSS APPEAL AS INDI CATED HEREINABOVE FOR THE SAKE OF CONVENIENCE AND BREVITY. ASSESSEE S APPEAL ITA 09/AHD/2012 AND REVENUE S APPEAL ITA 321/AHD/2012 2. THE ASSESSEE S APPEAL IS STATED TO BE INVOLVING THREE SUBSTANTIVE ISSUES INTER ALIA CHALLENGING LOWER APPELLATE OR D ER C ONFIRMING DISALLOWANCE OF RS. 11,74,000/ - RELATING TO AMORTIZATION OF LEASE RENTAL TREATED AS CAPITAL EXPENDITURE INSTEAD OF REVENUE AS CLAIMED, SECTION 80IA DEDUCT I ON DISALLOWANCE OF RS. 105.52 LACS BY HOLDING THAT THE NECESSARY CONDITIONS STIPU LA TED THER EIN HAVE NOT BEEN FULFILLED AS CONFIRMING ADDITION TO BOOK PROFIT BY RS. 2,13,29,879/ - QUA PROVISION FOR BAD AND DOUBTFUL DEBTS. IT FILES A CHART BEFOR E US WHOSE CORRECTNESS IS NOT DOUBTED AT REVENUE S BEHEST ON FACTS OR LAW. IT IS TO BE SEEN THE ASSESSE E S FIRST GROUND STANDS CONSIDERED/REJECTED BY A CO - ORDINATE BENCH OF THE TRIBUNAL IN ITS OWN CASE ITA 4462/AHD/2007 IN ASSESSMENT YEAR 2004 - 05. THE SECOND SUBSTA NTIVE OF SECTION 80IA DEDUCTION IS STATED TO BE DECIDED IN ITS FAVOUR BY ANOTHER CO - ORDINATE BENCH OF THE TRIBUNAL IN ITS OWN CASE ITA NOS. 179 TO 181/AHD/2010 FOR ASSESSMENT YEARS 2005 - 06 TO 2007 - 08. THE PARTIES IN AGREEMENT THAT THIRD ISSUE OF BAD AND DOUBTFUL DEBTS STANDS ADJUDICATED AGAINST ASSESSEE IN ITS OWN CASE PERTAINING TO ASSESSMENT YE AR 2004 - 05. I.T.A NO S . 09,321,461 & 462 /AHD/20 12 A.Y. 2008 - 09 & 2009 - 10 PAGE NO GUJARAT ALKALIES & CHEMICALS LTD VS. ACIT 4 3 . WE HAVE HEARD BOTH PARTIES. THERE IS NO DISPUTE THAT ASSESSEE S F IRST AND THIRD GROUND OF AMORTIZATION OF LEASE RENTALS HAVE BEEN ADJUDICATED IN REVENUE S FAVOUR BY A CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSMENT YEAR 2004 - 05 HEREINABOV E. THE SECOND SUBSTANTIVE GROUND OF SECTION 80IA DEDUCTION HAS SUCCEEDED IN ASSESSMENT YEARS 2005 - 06 TO 2007 - 08. W E DO NOT VENTURE INTO A DETAILE D DISCUSSION IN THIS FACTUAL BACKDROP OF THE ISSUES INVOLVED IN THIS ASSESSEE S APPEAL. WE FOLLOW FINDINGS O F THE ABOVE STATED CO - ORDINATE BENCH DECISION TO DECIDE ASSESSEE S FIRST AND THIRD SUBSTAN T IV E GROUND AGAINST IT AND THE SECOND ONE OF SECTION 80IA DEDUCTION IN ITS FAVOUR. ASSESSEE S APPEAL ITA 09/AHD/2012 PARTLY SUCCEEDS. 4 . WE COME TO REVENUE S APPE AL NOW. IT RAISES TWO SUBSTAN T I VE GROUNDS IN CHALLENGING THE CIT(A) S ORDER DELETING ADDITION OF RS. 33,58,000/ - (WRONGLY PLEADED AS RS. 13, 53,98,760/ - ) ON ACCOUNT OF CORPORATE DEBT RESTRUC TUR ING TREATED AS CAPITAL EXPENDITURE AND THAT OF ANOTHER DISALLO WANCE OF RS. 13,53,98,760/ - MADE ON ACCOUNT OF REPLACEMENT OF RE - MEMBRANING CELLS. THE ASSESSING OFFICER TREATED BOTH THESE CLAIMS CAPITAL EXPENDITURE. A PERUSAL OF THE NECESSARY CHART FORMING PART OF THE CASE FILE READS THAT THE FIRST ISSUE OF CORPORATE DEBT RESTRUC TURING HAS BEEN DECIDED BY A LEARNED CO - ORDINATE BENCH IN ASSESSEE S FAVOUR IN ASSESSMENT YEAR 2004 - 05 (SUPRA) THEREBY HOLDING THE SAME TO BE REVENUE EXPENDITURE IN NATURE. THIS IS SUBJECT TO A RIDER THAT IT SHALL BE PROPORTIONATELY ALLOWABLE AS COMPUTED BY THE ASSESSING OFFICER. NECESSARY REMAND I.T.A NO S . 09,321,461 & 462 /AHD/20 12 A.Y. 2008 - 09 & 2009 - 10 PAGE NO GUJARAT ALKALIES & CHEMICALS LTD VS. ACIT 5 DIRECTIONS HAVE ALSO BEEN ISSUED TO ASSESSING AUTHORITY. WE DRAW SUPPORT THEREFROM AND FOLLOW PRINCIPLE OF CONSISTENCY. THE REVENUE S ARGUMENT SEEKING TO TREAT ASSESSEE S CDR CLAIM AS CAPITAL EXPEND ITURE IS REJECTED . WE RELY ON CO - ORDINATE BENCH DECISION AS INDICATED HEREINABOVE AND LEAVE IT FOR THE ASSESSING OFFICER TO CALCULATE THIS CORPORATE RESTRUCTURING EXPENDITURE AS ADOPTED IN ASSESSMENT YEAR 2004 - 05. THIS FIRST SUBSTANTIVE IS PARTLY ACCEPTE D FOR STATISTICAL PURPOSES. COMING TO SECOND GROUND OF DISALLOWANCE OF A SUM OF RS. 13,53,98,760/ - MADE ON ACCOUNT REPLACEMENT OF REMEMBRANING CELLS, THE ASSESSEE HAS ALREADY SUCCEEDED BEFORE THE HON BLE JURISDICTIONAL HIGH COURT IN ITS OWN CASE TAX APPEA L NO. 798 OF 2010 DECIDED ON 19 - 01 - 2015 REJECTING THE VERY SUBSTANTIAL QUESTION F RAMED IN ASSESSMENT YEAR 1999 - 2000. THERE IS NO EXCEPTION POINTED OUT BEFORE US. WE RESPECTFULLY FOLLOW THE SAME AN D UPHOLD THE LOWER APPELLATE FINDINGS UNDER CHALLENGE. RE VENUE S APPEAL ITA 321/AHD/2012 IS PARTLY ACCEPTED FOR STATISTICAL PURPOSES. 5. THIS LEAVES US WITH ASSESSEE S APPEALS ITA 461/AHD/2012 RELATING TO SECTION 201(1) AND (1A) PROCEEDINGS. IT RAISES THREE SUBS TAN TIVE GROUNDS OF MEDICAL REIMBURSEMENT, STORAG E CHARGES AND THAT OF INTEREST OF RS. 1,61,462/ - . ONLY THE FIRST SUBSTANTIVE GROUND OF MEDICAL REIMBURSEMENT IS ARGUED IN THE COURSE OF HEARING. 6. THIS ASSESSEE - COMPANY MANUFACTURES CHEMICALS. THE DEPARTMENT CARRIED OUT A SURVEY SO AS TO VERIFY COMPL IANCE OF TDS PROVISION ON 16 - 07 - 2005. THE ASSESSEE WAS FOUND TO HAVE CLAIMED I.T.A NO S . 09,321,461 & 462 /AHD/20 12 A.Y. 2008 - 09 & 2009 - 10 PAGE NO GUJARAT ALKALIES & CHEMICALS LTD VS. ACIT 6 SECTION 10 DEDUCTION UNDER THE HEAD MEDICAL REIMBURSEMENT ALLOWANCE TO THE TUNE OF RS. 15,000/ - PER EMPLOYEE . IT HAD OBTAINED INDEMNITY BONDS FROM ITS EMPLOYEES/OFFICERS TO THE EFFECT THAT T HEY WOULD DECLARE THE MEDICAL REIMBURSEMENT CLAIM TO BE ACTUALLY SPENT AS WELL AS PURCHASE OF GENERAL MEDICINES. AND ALSO THE ACTUALLY SPENT UPON WAS CLAIMED TO BE MORE THAN THE REIMBURSEMENT BEING MADE @ RS. 1250 PER MONTH FOR OFFICERS, RS. 965/ - AND RS. 850/ - FOR OTHER STAFF MEMBERS SUBJECT TO PRO RATA DEDUCTION IN CASE OF ABSENCE PERIOD. THE ASSESSING OFFICER DID NOT AGREE TO ASSESSEE S NON DEDUCTION OF TDS PERTAINING TO ITS MEDICAL REIMBURSEMENT IN QUESTION. HE QUOTED SECTION 17(2)(VI)(V) TO STIPULAT E REIMBURSEMENT BASED ON ACTUAL EXPENDITURE. HE OBSERVED THAT THERE WAS EVIDENCE PROVING ACTUAL MEDICAL REIMBURSEMENT MONEY TO HAVE BEEN SPENT. THE IMPUGNED FIXED MEDICAL ALLOWANCE STOOD TREATED AS PAYMENT OF REMUNERATION ONLY. THE ASSE S SING OFFICER A CCORDINGLY TREATED ASSESSEE TO BE IN DEFAULT U/S. 201(1) & (1A) TO THE TUNE OF RS. 31,77,780/ - AND RS. 9,69,224/ - ; RESPECTIVELY. 7. THE ASSESSEE PREFERRED APPEAL. THE CIT(A) UPHOLDS ASSESSING OFFICER S ACTION AS UNDER: - A(VIII). THE ORDER U/S 201(1) AND 2 01(1A) OF THE ACIT(TDS), BARODA AS WELL AS ABOVE SUBMISSION OF THE APPELLANT HAVE BEEN CONSIDERED. THE APPELLANT IN ITS ABOVE SUBMISSION HAS STATED THAT IT WAS PAYING MEDICAL REIMBURSEMENT OF RS. 1250/ - TO THE OFFICERS AND RS. 965/ - AND RS. 865/ - TO THE ST AFF MEMBERS (I.E. OTHER THAN THE OFFICERS) AS PER THE GRADES. IT IS SUBMITTED BY THE APPELLANT THAT IT IS DEBITING THE AMOUNTS TO MEDICAL REIMBURSEMENT TO EMPLOYEES IN THE BOOKS OF ACCOUNTS. THE APPELLANT HAS REFERRED TO PROVISIONS OF SECTION 17(2)(VIII) O F THE I.T. ACT. AS PER THE APPELLANT REIMBURSEMENT IS I.T.A NO S . 09,321,461 & 462 /AHD/20 12 A.Y. 2008 - 09 & 2009 - 10 PAGE NO GUJARAT ALKALIES & CHEMICALS LTD VS. ACIT 7 TREATED AS NON - TAXABLE AMOUNT TO THE EMPLOYEES U/S 17(2) TO A LIMIT OF RS. 15000/ - PER ANNUM AGAINST SELF DECLARATION OF THE EMPLOYEES REGARDING EXPENDITURE INCURRED IN FULL TOWARDS MEDICAL TREATMENT O F SELF AND DEPENDENT MEMBERS OF FAMILY. THE APPELLANT HAS ALSO ATTACHED A FORM WITH REGARD TO SELF DECLARATION OF THE EMPLOYEE ALONGWITH HIS ABOVE SUBMISSION DTD. 19.12.2011. BUT THIS ENTIRE SUBMISSION OF THE APPELLANT IS NOT FOUND TO BE TENABLE IN VIEW OF THE FACT THAT ITS SUBMISSION ITSELF IS CONTRADICTORY. THE APPELLANT AT ONE PLACE HAS STATED THAT IT IS PAYING MEDICAL REIMBURSEMENT TO ITS EMPLOYEES AND AT ANOTHER PLACE IT HAS STATED THAT SUCH MEDICAL REIMBURSEMENT ARE PAID TO THE EMPLOYEES ON THE BASIS OF SELF DECLARATION AS MADE BY THEM. THIS SUBMISSION OF THE APPELLANT CLEARLY SHOWS THAT MEDICAL ALLOWANCES ARE PAID TO THE EMPLOYEES NOT ON THE BASIS OF ACTUAL INCURRENCE OF EXPENSES. THE MEDICAL REIMBURSEMENTS ARE MADE TO THE EMPLOYEES MERELY ON THE BASI S OF SELF DECLARATION OR ON THE BASIS OF PRODUCTION OF INDEMNITY BOND AS MADE BY THEM. FURTHER, ON PERUSAL OF FORMAT AS ATTACHED BY THE APPELLANT ALONGWITH HIS ABOVE SUBMISSION FOR PAYMENT OF MEDICAL REIMBURSEMENT IT IS SEEN THAT THE EMPLOYEES M ADE DECLARATION AS UNDER : 'WITH REFERENCE TO CIRCULAR NO. GACL/PER/00/06 DID. 16 TH FEB. 2006, THE COMPANY MAKES REIMBURSEMENT OF MEDICAL EXPENSES UPTO A PRESCRIBED LIMIT FOR THE PERIOD FROM _____ TO _______ IN THIS CONNECTION, I HEREBY DECLARE THAT THE AMOUNT HAS BEEN ACTUALLY SPENT BY ME FOR THE MEDICAL TREATMENT AS WELL AS PURCHASE OF GENERAL MEDICINES. THE AMOUNT SO SPENT IS MORE THAN THE REIMBURSEMENT NOW BEING MADE TO ME. I DECLARE THAT THE DETAILS OF EXPENSES AND EVIDENCE THEREOF ARE AVAILABLE WI TH ME AND SHALL PRODUCE THE SAME AS WHEN REQUIRED BY THE COMPANY.' FROM THE ABOVE DECLARATION IT CAN BE SEEN THAT THE DETAILS OF EXPENSES INCURRED AND EVIDENCES WITH REGARD TO THE SAME ARE NOT PRODUCED BY THE EMPLOYEES TO THE PERSONNEL DEPARTMENT FOR ACTU AL VERIFICATION AND MEDICAL ALLOWANCES ARE PAID BY THE APPELLANT TO THEM MERELY ON THE BASIS OF SELF DECLARATION IN THE ABOVE FORMAT OR ON THE BASIS OF PRODUCTION OF INDEMNITY BOND . THE FIXED MEDICAL ALLOWANCES ARE PAID BY THE APPELLANT TO ITS EMPLOYEES L IKE ANY OTHER I.T.A NO S . 09,321,461 & 462 /AHD/20 12 A.Y. 2008 - 09 & 2009 - 10 PAGE NO GUJARAT ALKALIES & CHEMICALS LTD VS. ACIT 8 ALLOWANCES WHICH ARE PURELY TAXABLE. THE APPELLANT HAS REFERRED TO THE PROVISIONS OF SECTION 17(2)(VIII) OF THE ACT IN RESPECT OF HIS CLAIM IN ITS ABOVE SUBMISSION. BUT THIS SECTION 17(2)(VIII) CLEARLY STATES THAT ANY SUM PAID BY THE EMPLOYER IN RESPECT OF ANY EXPENDITURE 'ACTUALLY INCURRED' BY THE EMPLOYEES ON HIS MEDICAL TREATMENT OR TREATMENT OF ANY MEMBER OF HIS FAMILY. THE WORDS USED IN THIS SECTION 17(2)(VIII) ARE EXPENDITURE ACTUALLY INCURRED BY THE 'EMPLOYEE' AND THIS IS VERY VITAL ASP ECT OF THE CASE. THE MEDICAL ALLOWANCES ARE REQUIRED TO BE REIMBURSED BY THE EMPLOYER TO THE EMPLOYEE ON THE BASIS OF EXPENSES ACTUALLY INCURRED WHERE AS IN THE CASE OF APPELLANT MEDICAL ALLOWANCES ARE GIVEN TO THE EMPLOYEES ONLY ON THE BASIS OF DECLARATIO N. IN VIEW OF THIS I FULLY AGREE WITH THE VIEW OF THE A.O THAT THE FIXED MEDICAL ALLOWANCES ARE A TAXABLE ITEM AND, THEREFORE, THE APPELLANT WAS REQUIRED TO DEDUCT THE TAX AT SOURCE ON PAYMENTS OF SUCH MEDICAL ALLOWANCES AT APPLICABLE RATES. AT THIS PLACE IT CAN BE MENTIONED THAT THE APPELLANT HAS NOT BEEN ABLE TO PRODUCE EVIDENCES OF HAVING ACTUALLY INCURRED THE EXPENDITURE BY THE EMPLOYEES EITHER DURING THE COURSE OF POST SUR VEY PROCEEDINGS BEFORE THE ACIT (TDS), BARODA OR DURING THE COURSE OF APPELLANT PR OCEEDINGS BEFORE THE UNDERSIGNED. THE ONLY BASIS FOR MAKING PAYMENTS FOR MEDICAL ALLOWANCES IS THE SUBMISSION OF INDEMNITY BOND AS MADE BY THE EMPLOYEES OR ON THE BASIS OF THEIR SELF DECLARATION. THERE IS NO ACTUAL VERIFICATION OF THE EXPENSES AS MADE BY T HE EMPLOYER AS CLAIMED BY THE EMPLOYEES FOR GETTING THEIR MEDICAL ALLOWANCES. A(IX). CONSIDERING THESE FACTS, I HOLD THAT THE APPELLANT WAS LIABLE TO DEDUCT THE TAX AT SOURCE ON THE PAYMENTS MADE TO ITS EMPLOYEES DURING THE YEAR UNDER CONSIDERATION ON AC COUNT OF MEDICAL ALLOWANCE AS PER PROVISION OF SECTION 192 OF THE I.T. ACT WHICH IT HAS FAILED TO DO AND, THEREFORE, THE ACIT(TDS), BARODA HAS CORRECTLY WORKED OUT NON DEDUCTION OF TA X AT SOURCE ON SUCH PAYMENT AT RS. 31,77,780/ - U/S 201(1) A ND HAS CHARGE D THE INTEREST OF RS. 9,69,224/ - U/S 201(1A) AND, THEREFORE, SUCH ACTION OF THE ACIT(TDS), BARODA IS CONFIRMED . THE ABOVE GROUND OF APPEAL OF THE APPELLANT RELATED TO THIS ISSUE IS DISMISSED. THE APPELLANT HAS STATED THAT THE TAX HAS BEEN DEDUCTED BY IT O N THE PAYMENTS AS MADE TO THE EMPLOYEES ON ACCOUNT OF MEDICAL ALLOWANC ES WHEREVER THE AMOUNTS EXCEED RS . 15,000/ - . IN THIS REGARD THE ACIT (TDS), BARODA IS DIRECTED TO VERIFY THE CLAIM OF THE APPELLANT AND WHEREVER THE TAX IS DEDUCTED BY THE APPELLANT AT A PPLICABLE RATE ON PAYMENTS MADE ON ACCOUNT OF MEDICAL ALLOWANCE, SUCH AMOUNTS WILL BE EXCLUDED FROM I.T.A NO S . 09,321,461 & 462 /AHD/20 12 A.Y. 2008 - 09 & 2009 - 10 PAGE NO GUJARAT ALKALIES & CHEMICALS LTD VS. ACIT 9 THE TOTAL PAYMENTS FOR THE PURPOSE OF CALCULATING NON DEDUCTION OF TAX AT SOURCE U/S 201(1). IN THIS REGARD THE ACIT (TDS), BARODA WILL ENSURE THAT THE OPPO RTUNITY OF BEING HEARD IS ACCORDED TO THE APPELLANT. 8. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE STRONGLY ARGUES IN SUPPORT OF ITS BONAFIDE EXPLANATION TENDERED IN LOWER PROCEEDINGS. THE REVENUE S SUBMISSIONS SEEK CONFIRMATION OF THE IMPUGNED DE MANDS. THERE IS NO DISPUTE ON FACTS. THE ASSESSEE - COMPANY HAS REIMBURSED MEDICAL ALLOWANCES TO ITS EMPLOYEES ON FURNISHING OF INDEMNITY BOND AND DECLARATION THAT THE ACTUAL MONEY SPENT ON MEDICAL TREATMENT AND GENERAL MEDICINES IS MORE THAN THE AMOUNT IN QUESTION COMING TO MAXIMUM OF RS. 15,000/ - . THERE IS NO ISSUE THAT THIS FIGURE OF RS. 15,000/ - FORMS THE THRESHOLD AMOUNT FOR BEING TREATED AS A PREREQUISITE U/S. 17(2)(VIII) OF THE ACT. THIS IS THE REVENUE S CASE THAT ASSESSEE S EMPLOYEES HAVE NOT BEEN ACTUALLY REIMBURS ED THIS AMOUNT. OR THAT THE SAM E IS EXCESSIVE SO AS TO BE PAID IN THE GARB OF REMUNERATION. BOTH THE LOWER AUTHORITIES HOLD THE ASSESSEE TO BE AN AS SESSEE IN DEFAULT FOR ITS FAILU RE TO DEDUCT TDS U/S. 192 OF THE ACT. WE FIND IN THESE F ACTS THAT A CO - ORDINATE BENCH OF THE TRIBUNAL (2005) 1 SOT (MUM). SAVANI FINANCIALS LTD VS. ITO HOLDS THAT AN EMPLOYER S ASSESSEE DEDUCTING TDS U/S. 192 OF THE ACT CANNOT BE TREATED AS THE ONE IN DEFAULT IF FOUND TO BE ACTING HONESTLY AND FAIRLY. AND THAT SUCH AN ESTIMATED DEDUCTION OF TDS FOUND TO BE INCORRECT, THIS FACT ALONE WITHOUT ANYTHING MORE DOES NOT LEAD TO AN ADVERSE INFERENCE. RELEVANT FINDINGS OF THE CO - ORDINATE BENCH READ AS UNDER: - I.T.A NO S . 09,321,461 & 462 /AHD/20 12 A.Y. 2008 - 09 & 2009 - 10 PAGE NO GUJARAT ALKALIES & CHEMICALS LTD VS. ACIT 10 3. THE ONLY GRIEVANCE RAISED IN ALL THE THREE APPEALS IS TH AT THE CIT (A) ERRED IN UPHOLDING DEMAND RAISED ON THE ASSESSEE UNDER SECTION 201 READ WITH SECTION 192 IN RESPECT OF CONVEYANCE ALLOWANCE PAID TO THE E MPLOYEES. 4. THE UNDISPUTED MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE EMPLOYER HAS PAID CONVEYANCE ALLOWANCE TO A NUMBER OF EMPLOYEES TO MEET THE COST OF TRAVELLING FROM RESIDENCE TO PLACE OF WORK, AND VICE VERSA THE ASSESSING OFFICER (TDS), WHILE SCRUTIN IZING THE TDS RETURN FILED BY THE ASSESSEE, NOTICED THESE PAYMENTS BUT HE WAS OF THE VIEW THAT THESE PAYMENTS ARE TAXABLE IN THE HANDS OF THE ASSESSEE, AND, ACCORDINGLY, THE ASSESSEE EMPLOYER SHOULD HAVE DEDUCTED TAX AT SOURCE IN RESPECT OF THE SAME. IT WA S IN THIS BACKDROP THAT THE ASSESSING OFFICER (TDS) RAISED A DEMAND UNDER SECTION 201 READ WITH SECTION 192 IN RESPECT OF THE SAID CONVEYANCE ALLOWANCE. AGGRIEVED BY THE ACTION OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A) BUT WITHOUT ANY SUCCESS. STILL AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AT CONSIDERABLE LEN GTH, WE HAVE ALSO PERUSED THE MATERIAL BEFORE US, AND WE HAVE CAREFULLY CONSIDERED JUDICIAL PRECEDENTS ON THE ISSUE AS ALSO FACTUAL MATRIX OF THE CASE. 6. WE ARE OF THE CONSIDERED VIEW THAT TAXABILITY OF AN ALLOWANCE IN THE HANDS OF THE RECIPIENT OF THE SA ID ALLOWANCE PER SE CANNOT LEAD TO THE CONCLUSION THAT THE ASSESSEE EMPLOYER, WHO HAS GIVEN THE SAID ALLOWANCE, WAS ALSO LIABLE TO DEDUCT TAX AT SOURCE IN RESPECT THEREOF CONSTRUING THE TAXABILITY OF AN ALLOWANCE, ONE HAS TO STRICTLY SEE THE LEGAL POSITION . HOWEVER, AS FAR AS TDS OBLIGATIONS IN RESPECT OF THE SAID ALLOWANCE ARE CONCERNED, EMPLOYER'S DUTY IS TO MAKE A FAIR AND HONEST ESTIMATE OF EMPLOYEE'S INCOME AND DEDUCT THE TAX ON THE BASIS OF SAID ESTIMATE. THE ASSESSING OFFICER'S RELIANCE ON THE JUDGME NT IN THE CASE OF LIC OFFICERS ASSOCIATION IS, THEREFORE, NOT REALLY RELEVANT INASMUCH AS IT DEALS WITH THE QUESTION OF TAXABILITY WHICH, STRICTLY SPEAKING, IS NOT EVEN OUR CONCERN HERE. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ASSESSED TO TAX FOR THE LAS T MANY YEARS. DEDUCTION OUT OF THE SALARY PAID HAS TO BE MADE AS PER THE PROVISIONS CONTAINED IN SECTION 192 OF THE INCOME TAX ACT. THE SAID SECTION REQUIRES AND EMPLOYER TO MAKE DEDUCTION FROM THE SALARY OF AN EMPLOYEE ON THE BASIS OF THE ESTIMATED INCOME. IF AN EMPLOYER I.T.A NO S . 09,321,461 & 462 /AHD/20 12 A.Y. 2008 - 09 & 2009 - 10 PAGE NO GUJARAT ALKALIES & CHEMICALS LTD VS. ACIT 11 HAS MADE A FAIR AND HONEST - ESTIMATE OF THE TAXABLE SALARY AND DEDUCTED AND PAID TAX THEREON, HE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT UNDER SECTION 201(1) OF THE ACT EVEN IF THE ASSESSING OFFICER ULTIMATELY ASSESSED THE SALARY AT A HIGHER FIGURE. FOR THIS PROPOSITION, WE DERIVE STRENGTH FROM THE FOLLOWING OBSERVATIONS OF THE MADHYA PRADESH HIGH COURT IN THE CASE GWALIOR RAYON SILK CO. LTD. V. CIT (1983) 140 ITR 832 : - '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 UNDO UBTEDLY 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. UNL ESS 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.' THEREFORE, ALL THAT WE ARE REQUIRED TO ADJUDICATE IS WHETHER THE ASSES SEE'S ACTION OF NOT INCLUDING THE CONVEYANCE ALLOWANCE IN EMPLOYEE'S ESTIMATED INCOME IS BONA FIDE OR NOT. 7. VARIOUS BENCHES OF THIS TRIBUNAL HAVE TAKEN THE VIEW THAT THE ASSESSEE EMPLOYER IS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM CONVEYANCE ALLOWANCE UN LESS THE QUANTUM OF ALLOWANCE IS SUCH THAT IT APPEARS TO BE PAYMENT OF SALARY IN THE GARB OF ALLOWANCE. ONE OF THE MUMBAI BENCHES, IN THE CASE OF ICICI LTD. V. FOURTH ITO (1993) 47 TTJ (BOM.) 401 HAS OBSERVED. '6. WE HAVE HEARD THE PARTIES TO THE DISPUTE A ND, IN OUR VIEW, THE CONVEYANCE ALLOWANCE PAID BY THE ASSESSEE TO ITS EMPLOYEES CANNOT BE REGARDED AS PART OF, THE SALARY PAID TO THEM. THERE IS CONSIDERABLE FORCE IN THE SUBMISSION OF THE ASSESSEE THAT THIS PAYMENT HAS BEEN MADE TO MEET MOSTLY THE EXPENDI TURE INCURRED BY THE EMPLOYEES FOR CO MMUTING BETWEEN BETWEEN THE RESIDENCE AND OFFICE OR A REGULAR PLACE OF WORK AND BACK.... I.T.A NO S . 09,321,461 & 462 /AHD/20 12 A.Y. 2008 - 09 & 2009 - 10 PAGE NO GUJARAT ALKALIES & CHEMICALS LTD VS. ACIT 12 THE ITO OR FOR THAT MATTER THE CIT (A) WHO HEARD THE FIRST APPEAL HAVE NOWHERE ESTABLISHED THAT THE SCALE AT WHICH CONVEYANCE ALLO WANCE IS PAID TO THE EMPLOYEES IS EXCESSIVE OR UNREASONABLE. THIS IS H AVING REGARD TO THE ESCALATING COST OF TRAVEL BY ANY MODE OF TRANSPORT. THE INCOME TAX OFFICER WOULD HAVE BEEN JUSTIFIED IN TREATING PART OF THE CONVEYANCE ALLOWANCE AS PART OF THE SALAR Y OF AN EMPLOYEE ONLY WHERE THE SAME WAS FOUND TO BE EXCESSIVE OR WHERE THE SALARY HAS BEEN PAID IN THE GARB OF CONVEYANCE EXPENSE. SINCE THIS IS NOT THE CASE HERE, WE ARE OF THE VIEW THAT THE ASSESSEE WAS UNDER NO OBLIGATION TO DEDUCT THE TAX AT SOURCE ON CONVEYANCE ALLOWANCE.' WHEN SUCH ARE THE VIEWS OF THE TRIBUNAL, THE ASSESSEE EMPLOYER CANNOT BE FAULTED IS HOLDING THE VIEW THAT THE CONVEYANCE ALLOWANCE IS NOT TAXABLE IN THE HANDS OF THE EMPLOYEES, AND, THEREFORE, EXCLUDING THE SAME FROM ESTIMATED INCOM E UNDER SECTION 192 . IT IS NOT EVEN REVENUE'S CASE THAT THE AMOUNT SO PAID BY THE ASSESSEE TAX DEDUCTOR WAS SO EXCESSIVE OR UNREASONABLE THAT IT WAS DE FACTO A PAYMENT OF SALARY IN THE GARB OF ALLOWANCES. IN THIS VIEW OF THE MATTER, THE VERY BASIS OF DEMANDS RAISED UNDER SECTION 201 READ WITH SECTION 192 IS NOT SUSTAINABLE IN LAW. ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW THAT THE CIT (A) INDEED ERRED IN LAW IN SUSTAINING THE SAME. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO DELETE THE SAME. 8. IN THE RESULT, ALL THE THREE APPEALS ARE ALLOWED. 9. WE DRAW SUPPORT FROM THE ABOVE EXTRACTED OBSERVATION S AND CONCLUDE THAT THE ASSESSEE HAS ACTED FAIRLY AND HONESTLY IN COMPUTING ITS TDS LIABILITY QUA SALARY AND OTHER ALLOWANCES PAID TO ITS EMPLOYEES U/S. 192 OF THE ACT. NOR IT IS THE REVENUE S CASE THAT IT HAS NOT ACTED IN THE ABOVE STATED BONAFIDE MANNER O R THAT QUANTUM OF MEDICAL ALLOWANCE QUESTION APPEARS TO BE PAYMENT OF SALARY IN GARB THEREOF. THE CASE FILE DOES NOT REVEAL THAT THESE VERY SUMS STAND ASSESSED IN INDIVIDUAL EMPLOYEES HANDS. THE REVENUE FAILS IN I.T.A NO S . 09,321,461 & 462 /AHD/20 12 A.Y. 2008 - 09 & 2009 - 10 PAGE NO GUJARAT ALKALIES & CHEMICALS LTD VS. ACIT 13 CONTROVERTING ALL OF THE ABOVE STATED FINDINGS. WE ACCORDINGLY RE VERSE LOWER AUTHORITIES ACTION AND ACCEPT ASSESSEE S FIRST SUBSTANTIVE G ROUND CHALLENGING SECTION 201(1) AND (1A) DEMAND IN QUESTION. THIS FIRST SUBSTANTIVE GROUND RELATING TO MEDICAL REIMBURSEMENT ISSUE SUCCEEDS. ITA 461/AHD/2012 IS PARTLY ACCEPTED. ASSESSMENT YEAR 2009 - 10 ITA 462/AHD/2012 10. BOTH PARTIES INFORM US THA T THE SOLE SUBSTANTIVE GROUND RAISED IN THE INSTANT APPEAL PERTAINS TO MEDICAL REIMBURSEMENT ALLOWANCE AS ADJUDICATED HEREINABOVE IN ASSESSMENT YEAR 2008 - 09. WE FIND THIS FAIR STAND TO BE CORRECT. THE ASSESSEE S ARGUMENTS IN THE IMPUGNED ASSESSMENT YEAR SUCCEE D IN THE LIGHT OF OUR OBSERVATION AND FINDINGS IN ASSESSMENT YEAR 2008 - 09 ITA 461/AHD/2012. THIS ASSESSEE S APPEAL ITA 462/AHD/2012 IS ACCEPTED. 11. ASSESSEE S APPEALS ITA 09 & 461/AHD/2012 ARE PARTLY ALLOWED, ITA 462/AHD/2012 IS ALLOWED. REVENUE S APPEAL ITA 321/AHD/2012 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN C OURT ON 17 - 12 - 2015 SD/ - SD/ - ( ANIL CHATURVEDI ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMED ABAD : DATED 17 /12 /2015 AK I.T.A NO S . 09,321,461 & 462 /AHD/20 12 A.Y. 2008 - 09 & 2009 - 10 PAGE NO GUJARAT ALKALIES & CHEMICALS LTD VS. ACIT 14 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,
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