Appeal details
Counselvise Citation
[2019] 118 COUNSELVISE.COM (IT) 8296 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Miscellaneous Application
Pronouncement Date
04-01-2019
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
C
Assessment Year
2013-2014
Appeal Filed On
22-06-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER M.P. NOS. [IN ITA NOS.] APPLICANT VS. RESPONDENT MP 175/BANG/2018 [IN ITA 2223/BANG/2017] THE INCOME TAX OFFICER (OSD)(TDS), LARGE TAX PAYER UNIT (LTU), BANGALORE. M/S. KARNATAKA POWER TRANSMISSION CORPORATION LTD. (KPTCL), DAVANGERE MP 176/BANG/2018 [IN ITA 2224/BANG/2017] KPTCL, DAVANGERE. MP 177/BANG/2018 [IN ITA 2225/BANG/2017] KPTCL, BIJAPUR. MP 178/BANG/2018 [IN ITA 2226/BANG/2017] KPTCL, BIJAPUR. MP 179/BANG/2018 [IN ITA 2227/BANG/2017] KPTCL, HAVERI. MP 180/BANG/2018 [IN ITA 2228/BANG/2017] KPTCL, HAVERI. MP 181/BANG/2018 [IN ITA 2229/BANG/2017] KPTCL, HAVERI. MP 182/BANG/2018 [IN ITA 2230/BANG/2017] KPTCL, HAVERI. MP 183/BANG/2018 [IN ITA 2231/BANG/2017] KPTCL, SHIMOGA. MP 184/BANG/2018 [IN ITA 2232/BANG/2017 KPTCL, SHIMOGA. MP 185/BANG/2018 [IN ITA 2233/BANG/2017 KPTCL, MYSORE. MP 186/BANG/2018 [IN ITA 2234/B ANG/2017 KPTCL, MYSORE. MP 187/BANG/2018 [IN ITA 2235/BANG/2017 KPTCL, TUMKUR. MP 188/BANG/2018 [IN ITA 2236/BANG/2017 KPTCL, TUMKUR. MP 189/BANG/2018 [IN ITA 2237/BANG/2017 KPTCL, BANGALORE. MP NOS. 175 TO 252/BANG/2018 PAGE 2 OF 23 MP 190/BANG/2018 [IN ITA 2238/BANG/2017 THE INCOME TAX OFFICER (OSD)(TDS), LARGE TAX PAYER UNIT (LTU), BANGALORE. VS. KPTCL, BANGALORE. MP 191/BANG/2018 [IN ITA 2239/BANG/2017 KPTCL, BANGALORE. MP 192/BANG/2018 [IN ITA 2240/BANG/2017 KPTCL, BANGALORE. MP 193/BANG/2018 [IN ITA 2241/BANG/2017 KPTCL, HASSAN. MP 194/BANG/2018 [IN ITA 2242/BANG/2017 KPTCL, HASSAN. MP 195/BANG/2018 [IN ITA 2243/BANG/2017 KPTCL, MUNIRABAD. MP 196/BANG/2018 [IN ITA 2244/BANG/2017 KPTCL, MUNIRABAD. MP 197/BANG/2018 [IN ITA 2245/BANG/2017 KPTCL, DAVANGERE. MP 198/BANG/2018 [IN ITA 2246/BANG/2017 KPTCL, DAVANGERE. MP 199/BANG/2018 [IN ITA 2247/BANG/2017 KPTCL, KALBURGI. MP 200/BANG/2018 [IN ITA 2248/BANG/2017 KPTCL, KALBURGI. MP 201/BANG/2018 [IN ITA 2249/BANG/2017 KPTCL, HASSAN. MP 202/BANG/2018 [IN ITA 2250/BANG/2017 KPTCL, HASSAN. MP 203/BANG/2018 [IN ITA 2251/BANG/2017 KPTCL, BANGALORE. MP 204/BANG/2018 [IN ITA 2252/BANG/2017 KPTCL, BANGALORE. MP 205/BANG/2018 [IN ITA 2253/BANG/2017 KPTCL, BANGALORE. MP 206/BANG/2018 [IN ITA 2254/ BANG/2017 KPTCL, BANGALORE. MP 207/BANG/2018 [IN ITA 2255/BANG/2017 KPTCL, BANGALORE. MP 208/BANG/2018 [IN ITA 2256/BANG/2017 KPTCL, BANGALORE. MP 209/BANG/2018 [IN ITA 2257/BANG/2017 KPTCL, BAGALKOT. MP 210/BANG/2018 [IN ITA 2258/BANG/2017 KPTCL, BAGALKOT. MP NOS. 175 TO 252/BANG/2018 PAGE 3 OF 23 MP 211/BANG/2018 [IN ITA 2259/BANG/2017 THE INCOME TAX OFFICER (OSD)(TDS), LARGE TAX PAYER UNIT (LTU), BANGALORE. VS. KPTCL, KALBURGI. MP 212/BANG/2018 [IN ITA 2260/BANG/2017 KPTCL, KALBURGI. MP 213/BANG/2018 [IN ITA 2261/BANG /2017 KPTCL, HUBLI. MP 214/BANG/2018 [IN ITA 2262/BANG/2017 KPTCL, HUBLI. MP 215/BANG/2018 [IN ITA 2263/BANG/2017 KPTCL, DODDABALLAPURA. MP 216/BANG/2018 [IN ITA 2264/BANG/2017 KPTCL, DODABALLAPURA. MP 217/BANG/2018 [IN ITA 2265/BANG/2017 KPTCL, HASSAN. MP 218/BANG/2018 [IN ITA 2266/BANG/2017 KPTCL, HASSAN. MP 219/BANG/2018 [IN ITA 2267/BANG/2017 KPTCL, MANGALORE. MP 220/BANG/2018 [IN ITA 2268/BANG/2017 KPTCL, MANGALORE. MP 221/BANG/2018 [IN ITA 2269/BANG/2017 KPTCL, HUBLI. MP 222/BANG/2018 [IN ITA 2270/BANG/2017 KPTCL, HUBLI. MP 223/BANG/2018 [IN ITA 2271/BANG/2017 KPTCL, BELGAUM. MP 224/BANG/2018 [IN ITA 2272/BANG/2017 KPTCL, BELGAUM. MP 225/BANG/2018 [IN ITA 2273/BANG/2017 KPTCL, BANGALORE. MP 226/BANG/2018 [IN ITA 2 274/BANG/2017 KPTCL, BANGALORE. MP 227/BANG/2018 [IN ITA 2275/BANG/2017 KPTCL, TALAGUPPA. MP 228/BANG/2018 [IN ITA 2276/BANG/2017 KPTCL, TALAGUPPA. MP 229/BANG/2018 [IN ITA 2277/BANG/2017 KPTCL, HOLENARSIPURA. MP 230/BANG/2018 [IN ITA 2278/BANG/2017 KPTCL, HOLENARSIPURA. MP 231/BANG/2018 [IN ITA 2279/BANG/2017 KPTCL, BANGALORE. MP NOS. 175 TO 252/BANG/2018 PAGE 4 OF 23 MP 232/BANG/2018 [IN ITA 2280/BANG/2017 THE INCOME TAX OFFICER (OSD)(TDS), LARGE TAX PAYER UNIT (LTU), BANGALORE. VS. KPTCL, BANGALORE. MP 233/BANG/2018 [IN ITA 2281/BANG/2017 KPTCL, LINGASUGUR. MP 234/BANG/2018 [IN ITA 2282/BANG/2017 KPTCL, LINGASUGUR. MP 235/BANG/2018 [IN ITA 2283/BANG/2017 KPTCL, BAGALKOT. MP 236/BANG/2018 [IN ITA 2284/BANG/2017 KPTCL, BAGALKOT. MP 237/BANG/2018 [IN ITA 228 5/BANG/2017 KPTCL, MYSORE. MP 238/BANG/2018 [IN ITA 2286/BANG/2017 KPTCL, MYSORE. MP 239/BANG/2018 [IN ITA 2287/BANG/2017 KPTCL, BAGALKOT. MP 240/BANG/2018 [IN ITA 2288/BANG/2017 KPTCL, BAGALKOT. MP 241/BANG/2018 [IN ITA 2289/BANG/2017 KPTCL, DAVANGERE. MP 242/BANG/2018 [IN ITA 2290/BANG/2017 KPTCL, DAVANGERE. MP 243/BANG/2018 [IN ITA 2291/BANG/2017 KPTCL, BANGALORE. MP 244/BANG/2018 [IN ITA 2292/BANG/2017 KPTCL, BANGALORE. MP 245/BANG/2018 [IN ITA 2293/BANG/2017 KPTCL, MYSORE. MP 246/BANG/2018 [IN ITA 2294/BANG/2017 KPTCL, MYSORE. MP 247/BANG/2018 [IN ITA 2295/BANG/2017 KPTCL, SHIVAMOGGA. MP 248/BANG/2018 [IN ITA 2296/BANG/2017 KPTCL, SHIVAMOGGA. MP 249/BANG/2018 [IN ITA 2297/BANG/2017 KPTCL, KALBUGRI. MP 250/BANG/2018 [IN ITA 2298/BANG/2017 KPTCL, KALBURGI. MP 251/BANG/2018 [IN ITA 2299/BANG/2017 KPTCL, MYSORE. MP 252/BANG/2018 [IN ITA 2300/BANG/2017 KPTCL, MYSORE. ASSESSMENT YEAR: 2013-14 MP NOS. 175 TO 252/BANG/2018 PAGE 5 OF 23 APP L IC ANT BY : SHRI K.V. ARAVIND, STANDING COUNSEL RE SPONDENT BY : S/ SHRI TATA KRISHNA & R AVISHANKAR, ADVOCATES. DATE OF HEARING : 28.12.2018 DATE OF PRONOUNCEMENT : 04 . 01 . 201 9 O R D E R PER N V VASUDEVAN, VICE PRESIDENT THESE ARE MISCELLANEOUS PETITIONS (MPS) FILED BY T HE 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 TH E AFORESAID APPEALS SUFFERS FROM MISTAKES APPARENT FROM RECORD. THE RE VENUE 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 TH AT CIRCUMSTANCES EXPLAINED BY THE LD. COUNSEL FOR KPTC L 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 RECONSI DERATION. III) THE CONCLUSION OF HON'BLE TRIBUNAL'S THAT THE ASSESSEE HAS DISCHARGED ITS OBLIGATION U/S 192 AND HENCE PROCEED INGS U/S 201(1) & 201(1A) OF THE ACT DESERVES TO BE QUASHED IS INCORRECT AND THE GROUND 10 SHOULD BE ADJUDICATED A FRESH. IV) THE APPELLATE ORDER OF THE TRIBUNAL SUFFERS FRO M VARIOUS MISTAKES WHICH ARE APPARENT ON RECORD, AND HENCE, T HE ORDER PASSED HAS TO BE RECALLED. V) THE REVENUE SHOULD BE HEARD ON ALL GROUNDS BEFOR E DISPOSING THEM ON MERITS. MP NOS. 175 TO 252/BANG/2018 PAGE 6 OF 23 2. THE ISSUE INVOLVED IN THE APPEALS WAS AS TO WHET HER M/S KARNATAKA POWER TRANSMISSION CORPORATION LTD. [HEREINAFTER RE FERRED TO AS KPTCL OR ASSESSEE], CAN BE CONSIDERED AS ASSESSEE IN DEFAU LT UNDER THE PROVISIONS OF SECTION 201(1) OF THE INCOME TAX ACT, 1961(ACT) FOR NOT DEDUCTING TAX AT SOURCE AND WHETHER KPTCL IS LIABLE TO PAY INTEREST ON TAX NOT DEDUCTED AT SOURCE U/S.201(1A) OF THE ACT? THE ISSUE ARISES FOR CONSIDERATION ON THE FOLLOWING FACTS AND CIRCUMSTAN CES. KPTCL PAID CASH EQUIVALENT TO ITS EMPLOYEES AT THE TIME OF THEIR RE TIREMENT. 3. UNDER SECTION 17(1)(VA) SALARY INCLUDES(VA) ANY PAYMENT RECEIVED BY AN EMPLOYEE IN RESPECT OF ANY PERIOD OF LEAVE NOT AVAILED OF BY HIM. UNDER SECTION 192 OF THE ACT, ANY PERSON RESPONSIB LE FOR PAYING ANY INCOME CHARGEABLE UNDER THE HEAD SALARI ES 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. KPTCL AS AN EMPLOYER WAS BOUND TO DEDUCT TAX AT SOURCE ON THE SALARIES P AID TO ITS EMPLOYEES BY INCLUDING THE PAYMENT RECEIVED BY AN EMPLOYEE IN RE SPECT OF ANY LEAVE PERIOD NOT AVAILED BY THE EMPLOYEE. 4. SECTION 10(10AA) OF THE ACT PROVIDES FOR CERTAIN EXEMPTION WHEN PAYMENTS ARE RECEIVED BY AN EMPLOYEE IN RESPECT OF LEAVE PERIOD NOT AVAILED BY THE EMPLOYEE. SECTION 10(10AA) OF THE ACT PROVIDES FOR THE FOLLOWING EXEMPTION VIZ., MP NOS. 175 TO 252/BANG/2018 PAGE 7 OF 23 SECTION 10: INCOMES NOT INCLUDED IN TOTAL INCOME. IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR OF ANY PERSON, ANY INCOME FALLING WITHIN ANY OF THE FOLLOWING CLAU SES SHALL NOT BE INCLUDED . (10AA) (I) ANY PAYMENT RECEIVED BY AN EMPLOYEE OF T HE CENTRAL GOVERNMENT OR A STATE GOVERNMENT, AS THE CASH EQUIV ALENT OF THE LEAVE SALARY IN RESPECT OF THE PERIOD OF EARNED LEA VE AT HIS CREDIT AT THE TIME OF HIS RETIREMENT WHETHER ON SUPERANNUA TION OR OTHERWISE; (II) ANY PAYMENT OF THE NATURE REFERRED TO IN SUB-C LAUSE (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 SALA RY DRAWN BY THE EMPLOYEE DURING THE PERIOD OF TEN MONTHS IMMEDI ATELY 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 TH IS BEHALF HAVING REGARD TO THE LIMIT APPLICABLE IN THIS BEHALF TO TH E 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.10 AA IS RS. 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. 6. AS CAN BE SEEN FROM THE ABOVE PROVISIONS, IF THE EMPLOYEE TO WHOM PAYMENT IS MADE FOR UNUTILIZED LEAVE PERIOD IS AN E MPLOYEE OR CENTRAL OR STATE GOVERNMENT THEN THE ENTIRE PAYMENT SO MADE IS EXEMPT AND THEREFORE AN EMPLOYEE IN SUCH CIRCUMSTANCES IS NOT OBLIGED TO DEDUCT TAX AT SOURCE ON SUCH PAYMENT. IF, ON THE OTHER HAND, THE PERSON TO WHOM SUCH MP NOS. 175 TO 252/BANG/2018 PAGE 8 OF 23 PAYMENT IS MADE IS NOT A CENTRAL OR STATE GOVERNMEN T EMPLOYEE, THEN ONLY RS.3 LACS IS EXEMPT AND THE REMAINING SUM IS TAXABL E AND THE EMPLOYER HAS TO DEDUCT TAX AT SOURCE ON PAYMENT IN EXCESS OF RS.3 LACS TOWARDS UNUTILIZED LEAVE PERIOD. 7. SEC.10(10AA) DOES NOT DEFINE AS TO WHO IS TO BE REGARDED AS EMPLOYEE OF CENTRAL OR A STATE GOVERNMENT. THE REV ENUES CASE IS KPTCL IS NOT STATE GOVERNMENT BUT A STATUTORY CORPORATION AND THEREFORE ITS EMPLOYEES CANNOT BE REGARDED AS EMPLOYEES OF STATE GOVERNMENT. 8. KPTCL IN THE PRESENT GROUP OF CASES DID NOT DEDU CT TAX AT SOURCE ON PAYMENTS MADE TO ITS RETIREMENT EMPLOYEES TOWARDS U NUTILIZED LEAVE PERIOD WHERE SUCH PAYMENT WAS MADE IN EXCESS OF RS.3 LACS. IT IS IN THIS SCENARIO THAT THE INCOME TAX AUTHORITIES INITIATED PROCEEDIN GS AGAINST THE ASSESSEE U/S.201(1) & 201(1A) OF THE ACT FOR TREATING KPTCL AS AN ASSESSEE IN DEFAULT AND ALSO FOR LEVYING INTEREST ON TAX NOT PA ID TO THE CREDIT OF THE CENTRAL GOVERNMENT FOR THE PERIOD ON WHICH THE TAX DEDUCTED OUGHT TO HAVE BEEN REMITTED TILL SUCH TIME THEY WERE ACTUALLY REM ITTED. 9. THE PLEA OF KPTCL WAS THAT ITS EMPLOYEES WERE EM PLOYEES OF THE STATE GOVERNMENT AND THEREFORE THE ENTIRE PAYMENT T O ITS EMPLOYEES TOWARDS UNUTILIZED LEAVE PERIOD ON RETIREMENT WAS E XEMPT U/S.10(10AA)(I) OF THE ACT. THE REVENUE HELD THAT KPTCL WAS A STAT UTORY CORPORATION AND THEREFORE ITS EMPLOYEES WERE NOT EMPLOYEES OF STATE GOVERNMENT AND THEREFORE KPTCL OUGHT TO HAVE DEDUCTED TAX AT SOURC E ON PAYMENT TO EMPLOYEES TOWARDS UNUTILIZED LEAVE PERIOD ON RETIRE MENT IN EXCESS OF RS.3 LACS WHICH ALONE WAS EXEMPT U/S.10(10AA)(II) OF THE ACT. IN OTHER WORDS, THE STAND OF THE REVENUE WAS THAT THE CLAUSE APPLIC ABLE FOR DETERMINING LIABILITY TO DEDUCT TAX AT SOURCE WAS SEC.10(10AA)( II) AND NOT SECTION 10(10AA)(I) OF THE ACT. MP NOS. 175 TO 252/BANG/2018 PAGE 9 OF 23 10. BOTH THE AO AND THE CIT(A) REJECTED THE PLEA OF KPTCL AND THAT IS HOW KPTCL FILED APPEALS BEFORE THE TRIBUNAL. 11. BEFORE THE TRIBUNAL, THE FIVE PROPOSITIONS WERE CANVASSED ON BEHALF OF KPTCL BY THE LEARNED COUNSELS FOR KPTCL CHALLENG ING THE ORDERS OF CIT(A) CONFIRMING THE ACTION OF THE AO IN HOLDING K PTCL TO BE AN ASSESSEE IN DEFAULT U/S.201(1) OF THE ACT. THEY WE RE:- (I) ASSUMPTION OF JURISDICTION BY THE RESPONDENT IN A LL 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 A RE BEYOND THE PERIOD OF LIMITATION AND HENCE BARRED BY TIME. (III) THE PAYMENTS IN QUESTION FOR WHICH KPTCL WAS TREATE D AS ASSESSEE IN DEFAULT FOR NOT DEDUCTING TAX AT SOUR CE WERE NOT IN THE NATURE OF INCOME WITHIN THE MEANING OF SEC.1 7(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 AP PLICABLE IN THE CASE OF THE ASSESSEE AS THE EMPLOYEES OF KPT CL ARE TO BE REGARDED AS EMPLOYEES OF STATE GOVERNMENT; (V) THE PROVISIONS OF SEC.201(1) & 201(1A) OF THE ACT A RE NOT ATTRACTED IN THE PRESENT CASE BECAUSE THE NON DEDUC TION OF TAX AT SOURCE BY KPTCL WAS UNDER THE BONAFIDE BELIEF TH AT IT WAS NOT OBLIGED TO DEDUCT TAX AT SOURCE ON PAYMENTS IN EXCESS OF RS.3 LACS TOWARDS UNUTILIZED LEAVE PERIOD AS IT BEL IEVED THAT ITS EMPLOYEES WERE EMPLOYEES OF STATE GOVERNMENT AN D THEREFORE THE APPLICABLE PROVISIONS WILL BE ONLY SEC.10(10AA)(I) OF THE ACT. 12. THE TRIBUNAL HEARD THE PARTIES ON PROPOSITION ( IV) AND (V) ALONE AS THERE ARE DECISIONS OF ITAT BANGALORE BENCH ON IDEN TICAL FACTS AND IDENTICAL ISSUES. AS FAR AS PROPOSITION NO. (IV) I S CONCERNED, THE TRIBUNAL NOTICED THAT THE ITAT BANGALORE BENCH, IN THE CASE OF CENTRAL FOOD MP NOS. 175 TO 252/BANG/2018 PAGE 10 OF 23 TECHNOLOGICAL RESEARCH INSTITUTE VS. THE ITO (TDS), MYSORE, ITA NO.1607 TO 1611/BANG/2013 ORDER DATED 4.7.2014 HAS ALREADY TAKEN A VIEW ON IDENTICAL FACTS AND CIRCUMSTANCES OF THE CASE OF TH E ASSESSEE THAT EMPLOYEES OF STATUTORY CORPORATIONS CANNOT BE REGAR DED AS EMPLOYEES OF THE STATE OR CENTRAL GOVERNMENT. IN VIEW OF THE AF ORESAID DECISION OF THE TRIBUNAL, IT WAS HELD THAT THERE WAS NO MERIT IN PR OPOSITION NO.(IV) CANVASSED BY THE PARTIES BEFORE US. 13. THE SUBMISSION ON BEHALF OF THE ASSESSEE ON PRO POSITION NO.(V) WAS THAT U/S.192(1) OF THE ACT THE OBLIGATION OF THE EM PLOYER IS ONLY TO DEDUCT TAX ON THE ESTIMATED INCOME OF THE ASSESSEE UNDER T HE HEAD SALARIES FOR THAT FINANCIAL YEAR. IF THE ESTIMATE IS MADE BONAFIDE AND TAX DEDUCTED ON SUCH BONAFIDE ESTIMATE, THEN THERE CAN BE NO PROCEEDINGS TREATIN G THE PERSON RESPONSIBLE FOR DEDUCTING TAX AT THE TIME OF PAYMENT, AS ASSESSEE IN DEFAULT. THE ASSESSEE PLACED RELIANCE ON A DEC ISION OF THE ITAT BANGALORE BENCH IN THE CASE OF INDIAN INSTITUTE OF SCIENCE VS. DCIT ITA NO.1589/BANG/2014 FOR AY 2010-11 ORDER DATED 27.2.2 015 ON IDENTICAL FACTS. IN THE AFORESAID DECISION, THE TRIBUNAL TO OK THE VIEW THAT THE ESTIMATE OF INCOME UNDER THE HEAD SALARY MADE BY TH E ASSESSEE ON THE BELIEF THAT ITS EMPLOYEES WERE TO BE EQUATED WITH S TATE GOVERNMENT EMPLOYEES WAS A BONAFIDE ESTIMATE AND THEREFORE THE ASSESSEE HAS DISCHARGED ITS OBLIGATION U/S.192 OF THE ACT AND HE NCE PROCEEDINGS U/S.201(1) & 201(1A) OF THE ACT WERE TO BE QUASHED. 14. THE TRIBUNAL TOOK NOTE OF THE HISTORICAL BACKGR OUND UNDER WHICH KPTCL CAME INTO EXISTENCE. THE TRIBUNAL NOTICED TH AT PRIOR TO ENACTMENT OF ELECTRICITY ACT, 2003 (CENTRAL ACT) SUPPLY OF EL ECTRICITY WAS GOVERNED BY THE ELECTRICITY (SUPPLY) ACT, 1948 (AGAIN A CENTRAL ACT). AS PER SECTION 5(1) OF THE ELECTRICITY (SUPPLY) ACT, 1948, EVERY STATE HAD TO CONSTITUTE A STATE ELECTRICITY BOARD (SEB) BY NOTIFICATION IN OFFICIAL GAZETTE. SEC.12 OF THE MP NOS. 175 TO 252/BANG/2018 PAGE 11 OF 23 SAID 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 C AME TO BE ESTABLISHED ON 1.10.1957 WHICH WAS SUBSEQUENTLY NAMED AS KARNAT AKA STATE ELECTRICITY BOARD (KEB). EMPLOYEES OF STATE GOVERN MENT BECAME EMPLOYEES OF KEB. 15. IN VIEW OF LOSSES INCURRED BY KEB, GOVERNMENT O F KARNATAKA CAME OUT WITH GENERAL POLICY PROPOSING FUNDAMENTAL AND R ADICAL REFORMS IN THE POWER SECTOR. ACCORDINGLY, KARNATAKA ELECTRICITY R EFORMS ACT, 1999 (KERA) WAS ENACTED BY THE KARNATAKA STATE LEGISLATU RE WHICH ADVOCATED DIVISION OF THE FUNCTIONS OF GENERATION, TRANSMISSI ON & DISTRIBUTION OF ELECTRICITY AND EACH FUNCTION TO BE PERFORMED WAS E NTRUSTED TO VARIOUS STATUTORY CORPORATIONS. THE FUNCTION OF GENERATION OF ELECTRICITY WAS TRANSFERRED TO VISWESHWARAIAH VIDYUTH NIGAMA LIMITE D WAY BACK IN 1970. BY SECTION 14(3) OF KERA, KPTCL WAS INCORPORATED AN D THE FUNCTION OF TRANSMISSION AND DISTRIBUTION OF ELECTRICITY WAS TR ANSFERRED TO KPTCL. SUBSEQUENTLY THE DISTRIBUTION FUNCTION WAS GIVEN TO FOUR INDEPENDENT DISTRIBUTION COMPANIES IN 2002 VIZ., BESCOM, MESCOM , HESCOM, GESCOM. EMPLOYEES OF KEB BECAME EMPLOYEES OF KPTCL. 16. THE TRIBUNAL TOOK NOTE OF THE FACT THAT THE ASS ESSEE AFTER ITS INCEPTION TILL AY 2012-13 HAS BEEN DEDUCTING TDS BY CONSIDERING ITS EMPLOYEES AS EMPLOYEES OF STATE GOVERNMENT IN VIEW OF THE HISTORICAL BACKGROUND UNDER WHICH KPTCL CAME INTO EXISTENCE. THE REVENUE HAS ACCEPTED IN THE PAST THE MANNER IN WHICH TAX WAS DE DUCTED AT SOURCE BY KPTCL BY CONSIDERING THE EMPLOYEES OF KPTCL AS EMPL OYEES OF STATE GOVERNMENT. IT WAS POINTED OUT THAT IT IS ONLY IN AY 2012-13, THAT THE REVENUE TOOK THE STAND THAT EMPLOYEES OF KPTCL WERE NOT TO BE REGARDED MP NOS. 175 TO 252/BANG/2018 PAGE 12 OF 23 AS EMPLOYEES OF STATE GOVERNMENT BECAUSE EMPLOYMENT UNDER KPTCL CANNOT BE EQUATED WITH AN OFFICE OR POST IN CONNECT ION WITH THE AFFAIRS OF SUCH STATE. IT WAS FOR THE FIRST TIME THAT THE REV ENUE TOOK THE STAND THAT STATUTORY CORPORATIONS SUCH AS KPTCL WERE NOT TO BE REGARDED AS STATE GOVERNMENT. IT HAS ALSO BEEN CONTENDED THAT THE AS SESSEE HAS BEEN FILING RETURN OF TDS FOR AY 2013-14 IN THE STATUS OF STATU TORY BODY (STATE GOVT.) IN FORM NO.27A. 17. THE TRIBUNAL ALSO TOOK NOTE OF THE TRIPARTITE A GREEMENT DATED 31.7.1999 UNDER THE PROVISIONS OF SUB-SECTION 2 OF SECTION 15 OF THE KARNATAKA ELECTRICITY REFORM ORDINANCE, 1999 BETWEE N THE GOVERNMENT OF KARNATAKA AND KEB AND KEB EMPLOYEES UNION, WHEREIN ON CORPORATIZATION OF THE TRANSMISSION AND DISTRIBUTION BUSINESS BY FO RMING KPTCL EMPLOYEES OF ERSTWHILE KEB EXPRESSED APPREHENSION THAT THEIR SERVICES WILL BE PRIVATIZED. KEB UNDER THE TRIPARTITE AGREEMENT ALL AYED THEIR FEARS AND ASSURED THEM THAT ALL THAT THE EMPLOYEES WILL GET A S EMPLOYEES OF KEB WILL CONTINUE TO BE AVAILABLE EVEN AFTER FORMATION OF KP TCL. THE TRIBUNAL ALSO TOOK NOTE OF EXTENT OF CONTROL AND PROTECTION THAT THE EMPLOYEES OF THE RESTRUCTURED CORPORATE ENTITIES OF THE ERSTWHILE KE B WERE SUBJECT TO OR GIVEN BY THE STATE GOVERNMENT. 18. THE TRIBUNAL THEREAFTER NOTICED THAT THE ISSUE OF BONAFIDE BELIEF IN THE MATTER OF ESTIMATING OF INCOME UNDER THE HEAD SALARIES FOR THE PURPOSE OF SECC.192 OF THE ACT, WAS EXPLAINED IN A DECISION OF ITAT BANGALORE IN THE CASE OF ACIT VS. INFOSYS BPO LTD. 150 ITD 132 (BANG) IN THE FOLLOWING MANNER:- 26. IT IS NO DOUBT TRUE THAT TDS IS TO BE MADE AT THE TIME OF PAYMENT OF SALARY AND NOT ON THE BASIS OF SALARY AC CRUED. SEC.192(3) OF THE ACT PERMITS THE EMPLOYER TO INCRE ASE OR REDUCE THE AMOUNT OF TDS FOR ANY EXCESS OR DEFICIENCY. WE HAVE ALREADY NOTICED THAT THE FACT THAT BILLS/EVIDENCE T O SUBSTANTIATE MP NOS. 175 TO 252/BANG/2018 PAGE 13 OF 23 INCURRING OF EXPENDITURE ON MEDICAL TREATMENT UP TO RS.15,000/- AND THE AVAILING OF THE LTC BY THE EMPLOYEES AND TH E 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 H AVE DEDUCTED TAX AT SOURCE, IS SUSTAINABLE; THE ASSESSEE ON A RE VIEW 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 TAXE S 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 EXPEND ITURE IS INCURRED OR AFTER THE EXPENDITURE IS INCURRED BY WA Y OF REIMBURSEMENT AND NOT AT AN EARLIER POINT OF TIME. IF IT IS SO PAID, THEN, EVEN THOUGH THE PAYMENT WOULD NOT FORM PART O F TAXABLE SALARY OF AN EMPLOYEE, THE EMPLOYER HAS TO DEDUCT T AX AT SOURCE TREATING IT AS PART OF SALARY, IS CONTRARY TO THE P ROVISIONS OF SEC.192(3) OF THE ACT AND CANNOT BE SUSTAINED. TH E RELIANCE PLACED BY THE AO ON THE EXPRESSION ACTUALLY INCURR ED FOUND IN SEC.10(5) OF THE ACT AND PROVISO (IV) TO SEC.17(2) OF THE ACT, IN OUR VIEW CANNOT BE SUSTAINED. IN ANY EVENT, THE IN TERPRETATION OF THE WORD ACTUALLY PAID IS NOT RELEVANT WHILE ASCE RTAINING THE QUANTUM OF TAX THAT HAS TO BE DEDUCTED AT SOURCE U/ S.192 OF THE ACT. AS FAR AS THE ASSESSEE IS CONCERNED, HIS OBLI GATION IS ONLY TO MAKE AN ESTIMATE OF THE INCOME UNDER THE HEAD SA LARIES AND SUCH ESTIMATE HAS TO BE A BONAFIDE ESTIMATE. 27. THE PRIMARY LIABILITY OF THE PAYEE TO PAY TAX REMAINS. SECTION 191 CONFIRMS THIS. IN A SITUATION OF HONEST DIFFERE NCE OF OPINION, IT IS NOT THE DEDUCTOR THAT IS TO BE PROCEEDED AGAINST BUT THE PAYEES OF THE SUMS. TO REITERATE, THE PAYMENT TOWARDS MEDI CAL EXPENDITURE AND LEAVE TRAVEL IS MADE KEEPING IN VIE W THE EMPLOYEE WELFARE. THE EXCLUSION IN RESPECT OF PAYME NT TOWARDS MEDICAL EXPENDITURE AND LEAVE TRAVEL IS CONSIDERED AFTER VERIFYING THE DETAILS AND EVIDENCE FURNISHED BY THE EMPLOYEES . NO EXEMPTION IS GRANTED IN THE ABSENCE OF DETAILS AND/ OR EVIDENCE. THE EXEMPTION IN RESPECT OF MEDICAL EXPENDITURE IS RESTRICTED TO EXPENDITURE ACTUALLY INCURRED BY THE EMPLOYEES, OR RS. 15,000/- WHICHEVER IS LOWER. THE EXEMPTION IS GRANTED EVEN I F THE MP NOS. 175 TO 252/BANG/2018 PAGE 14 OF 23 PAYMENT PRECEDES THE INCURRENCE OF EXPENDITURE. THE REQUIREMENTS/CONDITIONS OF SECTION 10(5) AND PROVIS O TO SECTION 17(2) ARE METICULOUSLY FOLLOWED BEFORE EXTENDING TH E DEDUCTION/EXEMPTION TO AN EMPLOYEE. NO TAX CAN BE RECOVERED FROM THE EMPLOYER ON ACCOUNT OF SHORT DEDUCTION OF TAX AT SOURCE UNDER SECTION 192 IF A BONA FIDE ESTIMATE OF SALARY TAXABLE IN THE HANDS OF THE EMPLOYEE IS MADE BY THE EMPLOYER, IS T HE RATIO OF THE FOLLOWING DECISIONS. CIT VS. NICHOLAS PIRAMAL INDIA LTD (2008) 299 ITR 0 356 (BOMBAY); CIT V. SEMICONDUCTOR COMPLEX LTD [2007] 292 ITR 636 (P&H) CIT VS. HCL INFO SYSTEM LTD. [2006] 282 ITR 263 (DE L) CIT V OIL AND NATURAL GAS CORPORATION LTD [2002] 25 4 ITR 121 (GUJ) ITO V GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD [2 001] 247 ITR 305 (GUJ) CIT V NESTLE INDIA LTD (2000) 243 ITR 0435 (DEL) GWALIOR RAYON SILK CO. LTD. V. CIT [1983] 140 ITR 8 32 (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 FO LLOWS:- 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. I N OUR VIEW, THE PLEA OF THE ASSESSEE THAT IT MADE A BONA FIDE E STIMATE OF EMPLOYEES 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 CE NTRAL GOVT. WAS BROUGHT TO ITS NOTICE BY THE DEPARTMENT ONLY IN THE PROCEEDINGS INITIATED IN 2013. EVEN THEREAFTER, THE ASSESSEE H AS BEEN TAKING A STAND THAT ITS EMPLOYEES OR EMPLOYEES OF CENTRAL GO VT. AS HELD IN SEVERAL DECISION REFERRED TO BY THE LD.COUNSEL F OR THE ASSESSEE, THE OBLIGATION OF THE ASSESSEE IS ONLY TO MAKE A BO NAFIDE ESTIMATE MP NOS. 175 TO 252/BANG/2018 PAGE 15 OF 23 OF THE SALARY. IN OUR VIEW, IN THE FACTS AND CIRCU MSTANCE OF THE PRESENT CASE, ASSESSEE HAS MADE SUCH AN ESTIMATE. THE ASSESSEES OBLIGATION U/S.192 IS THEREFORE PROPERLY DISCHARGED AND HENCE PROCEEDINGS U/S.201(1) & 201(1A) OF THE A CT HAVE TO BE QUASHED AND ARE HEREBY QUASHED. 20. THE TRIBUNAL, FOLLOWING THE AFORESAID DECISION, HELD THAT THE CIRCUMSTANCES EXPLAINED BY THE LEARNED COUNSEL FOR KPTCL REGARDING THE MANNER OF FORMATION OF KPTCL AND THE ACTION OF THE REVENUE IN NOT QUESTIONING KPTCLS ACTION IN THE PAST SEVERAL YEAR S AFTER ITS FORMATION AND THE MANNER OF EXERCISE OF CONTROL AND AFFORDING PRO TECTING TO EMPLOYEES OF KPTCL BY THE STATE GOVERNMENT WERE DEFINITELY FACTO RS WHICH WEIGHED WITH KPTCL WHEN IT MADE ESTIMATE OF ITS EMPLOYEES I NCOME UNDER THE HEAD SALARIES AND CONCLUDED THAT THERE WAS EVERY REASON FOR THE ASSESSEE TO THINK THAT ITS ESTIMATE OF EMPLOYEES I NCOME UNDER THE HEAD SALARIES WAS CORRECT AS THE BELIEF IT ENTERTAINED WAS THAT ITS EMPLOYEES WERE TO BE REGARDED AS EMPLOYEES OF STATE GOVERNMEN T AND THAT ITS EMPLOYEES ARE ENTITLED TO EXEMPTION OF THE ENTIRE S UM OF UNUTILIZED LEAVE ENCASHMENT U/S.10(10AA)(I) OF THE ACT. THE TRIBUNA L ACCORDINGLY QUASHED THE ORDERS U/S.201(1) & 201(1A) OF THE ACT. 21. IN THESE MPS., THE GRIEVANCE OF THE REVENUE IS THAT THE ORDER OF THE TRIBUNAL SUFFERS FROM FOLLOWING MISTAKES APPARENT F ROM RECORD:- 21.1 IN PARAGRAPH-17 OF THE MPS IT HAS BEEN ALLEG ED THAT THE DR WAS NOT GIVEN OPPORTUNITY TO REBUT THE FOLLOWING AR GUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE, IN PARAGRAPH-16 OF THE OR DER OF THE TRIBUNAL. IT WAS ARGUED THAT UNDER CLAUSE (VA) TO SEC.17(1) OF THE ACT IT IS ONLY ANY PAYMENT RECEIVED BY AN EMPLOYEE IN RESPECT OF A NY PERIOD OF LEAVE NOT AVAILED OF BY HIM. IT WAS SUBMITTED THAT ON RETIREMENT THE EMPLOYER EMPLOYEE RELATIONSHIP BETWE EN KPTCL AND THE RETIRING EMPLOYEE CEASES AND ANY PAYMENT MA DE THEREAFTER CANNOT BE STRICTLY TERMED AS SALARY. OUR ATTENTION MP NOS. 175 TO 252/BANG/2018 PAGE 16 OF 23 WAS DRAWN TO FINANCE ACT, 2018 WHICH INSERTED SEC.5 6(2)(XI) W.E.F. 1.4.2018 TO AVOID A POSSIBLE PLEA THAT MAY B E TAKEN IN SUCH CASES BY HOLDING THAT ANY PAYMENT POST RETIREMENT W ILL ALSO BE CHARGEABLE TO TAX UNDER INCOME FROM OTHER SOURCES, IF IT IS NOT CHARGEABLE UNDER THE HEAD INCOME FROM SALARIES. WE HAVE CONSIDERED THE AFORESAID ALLEGATION IN THE MPS AND ARE OF THE VIEW THAT THE SAME IS INCORRECT. THE LEARNED DR WA S HEARD ON THE ARGUMENTS ADVANCED BY THE LEARNED COUNSEL FOR THE A SSESSEE. 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 REVENU E. IN ANY EVENT, THE CONCLUSIONS OF THE TRIBUNAL ARE NOT BASED ON THE AR GUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE AS WE HAVE EXPLAINED IN TH E EARLIER PARAGRAPHS 3 TO 19 OF THIS ORDER. WE THEREFORE HOLD THAT THERE I S NO MERIT IN THE ALLEGATIONS CONTAINED IN PARAGRAPH-17 OF THE MPS. 21.2 IN PARAGRAPH-18 OF THE MPS, IT HAS BEEN ALLE GED THAT THE LEARNED DR WAS NOT ALLOWED TO ARGUE ON CONTENTION O F 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 HONBLE 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 T HESE MPS COULD NOT POINT OUT THE RELEVANCE OF THE AFORESAID DECISION T O THE ISSUE THAT WAS DECIDED BY THE TRIBUNAL, VIZ., WHETHER THE ESTIMATE MADE BY THE ASSESSEE OF THE INCOME UNDER THE HEAD SALARIES OF ITS EMPLOY EES WAS BONAFIDE OR NOT. WE MAY ALSO MENTION THAT THE REVENUES CONTEN TION THAT THE ASSESSEE IS NOT A STATE HAS BEEN ACCEPTED BY THE TRIBUNAL AN D THE DECISION TRIBUNAL PROCEEDED ONLY ON THE BASIS THAT IT WAS NOT A STATE AND THEREFORE THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE ON PA YMENT OF LEAVE SALARY MP NOS. 175 TO 252/BANG/2018 PAGE 17 OF 23 AT THE TIME OF RETIREMENT WAS EXEMPT ONLY UPTO RS.3 LACS AND FOR PAYMENTS ABOVE RS.3 LACS, THE ASSESSEE WAS OBLIGED TO DEDUCT TAX AT SOURCE. 21.3 IN PARAGRAPH-19 OF THE MPS IT HAS BEEN ALLE GED THAT THE CONTENTIONS OF THE REVENUE REGARDING ABSENCE OF BONAFIDE BELIEF BY THE ASSESSEE AT THE TIME OF ESTIMATION OF SALARY INCOME WAS NOT TAKE NOTE OF BY THE TRIBUNAL IN ITS ORDER. THE CONTENTIONS ALLEGED TO HAVE BEEN MADE IN THIS REGARD ARE SET OUT IN PARAGRAPH-19 OF THE MPS. THE SE CONTENTIONS WERE MADE ONLY IN THE CONTEXT OF THE STAND OF THE REVENU E THAT EMPLOYEES OF THE ASSESSEE CANNOT BE REGARDED AS EMPLOYEES OF STATE G OVERNMENT AND THEREFORE THE LEAVE SALARY ON RETIREMENT WAS NOT FU LLY EXEMPT BUT WAS EXEMPT ONLY UPTO RS.3 LACS. THIS ARGUMENT, AS WE H AVE ALREADY MENTIONED HAS BEEN ACCEPTED BY THE TRIBUNAL THAT THE ASSESSEE IS NOT A STATE. THEREFORE THERE IS NO MERIT IN THE CONTENTION IN PA RAGRAPH-19 OF THE MPS. THE CONTENTIONS IN REBUTTAL TO THE CONTENTIONS OF BONAFIDE BELIEF AS CONTAINED IN THE WRITTEN SYNOPSIS FILED ON BEHALF O F THE REVENUE HAS BEEN EXTRACTED BY THE TRIBUNAL IN PARAGRAPH- 18 OF ITS O RDER AND THE SAME HAVE BEEN DEALT WITH IN PARAGRAPH-23 OF ITS ORDER. 21.4 IN PARAGRAPH-20 OF THE MPS, IT HAS BEEN AL LEGED BY THE REVENUE THAT THE REVENUE HAD RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ELI LILLY & CO.(INDIA) PVT.LTD. (2009) 178 TAXMAN 505(SC) WHEREIN THE HONBLE SUPREME COURT CANCELLED PENALTY U/S.271C OF THE ACT FOR NON-DEDUCTION OF TA X AT SOURCE ON THE GROUND THAT THE ESTIMATE OF SALARY FOR THE PURPOSE OF DEDUCTION OF TAX AT SOURCE BY THE ASSESSEE IN THAT CASE WAS BONAFIDE AND THEREFORE NO PENALTY SHOULD BE LEVIED BUT NEVERTHELESS OBSERVED THAT THE ASSESSEE WAS LIABLE TO PROCEEDED AGAINST U/S.201(1) & 201(1A) OF THE ACT. IT IS THE PLEA OF THE ASSESSEE THAT BY IMPLICATION, THE HONBLE SUPREME C OURT HAS HELD THAT BONAFIDE BELIEF FOR NON-DEDUCTION OF TAX AT SOURCE CANNOT B E A DEFENCE TO MP NOS. 175 TO 252/BANG/2018 PAGE 18 OF 23 AN ACTION U/S.201(1) & 201(1A) OF THE ACT. WE ARE O F THE VIEW THAT THE SAID DECISION WAS RENDERED IN THE CONTEXT OF SEC.271C PE NALTY FOR FAILURE TO DEDUCT TAX AT SOURCE. THE DEFENCE TO SUCH AN ACTIO N WAS BONAFIDE BELIEF OF THE ASSESSEE THAT IT WAS NOT LIABLE TO DEDUCT TAX A T SOURCE ON HOME SALARY PAID TO EXPATRIATE EMPLOYEES OUTSIDE INDIA. THE HO NBLE SUPREME COURT OBSERVED ON THE SCOPE OF SEC.201(1) & 201(1A) OF TH E 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 CA NNOT BE INFERRED THAT THE HONBLE SUPREME COURT HAS HELD THAT IN AN ACTION U/ S.201(1) OF THE ACT, THE PAYER CANNOT PLEAD BONAFIDE ESTIMATE OF INCOME UNDE R 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 H ELD 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 T HE VIEW THAT THERE IS NO MERIT IN ALLEGATIONS IN PARAGRAPH-24 OF THE MPS. B ESIDES THE ABOVE, THERE IS ALSO AN ALLEGATION THAT THE LEARNED DR WAS PREVE NTED FROM ASSISTING THE HONBLE BENCH BY DIFFERENTIATING THE CASES RELIED B Y THE ASSESSEE ON THE CONTENTION OF THE ASSESSEE THAT IT WAS A STATE. AS WE HAVE ALREADY SAID, THE TRIBUNAL HAS ALREADY ACCEPTED THE CONTENTION OF THE REVENUE THAT THE ASSESSEE IS NOT A STATE. THE ALLEGATIONS IN PARAGR APH-24 THAT THE LEARNED DR WAS PREVENTED FROM ARGUING IS, THEREFORE, NOT CO RRECT FOR THE REASON THE ARGUMENT WAS ACCEPTED BY THE TRIBUNAL. 21.5 IN PARAGRAPH-25 OF THE MPS IT HAS BEEN CONT ENDED THAT DECISIONS CITED BY THE LEARNED DR WERE REFERRED TO IN THE ORDER OF THE TRIBUNAL BUT WAS DEALT WITH BY WAY OF PASSING REMAR K. THE ALLEGATIONS ARE NOT TRUE. IN PARAGRAPH-23 & 24, THE TRIBUNAL HAS H ELD THAT THE DECISIONS CITED BY LEARNED DR WERE NOT RELEVANT. IT IS NOT O PEN FOR A PARTY TO CONTENT IN A MP U/S.254(2) OF THE ACT, THAT THE TRIBUNAL OU GHT TO HAVE DEALT WITH OR WRITTEN THE ORDER IN A PARTICULAR MANNER. THE FURT HER ALLEGATIONS IN MP NOS. 175 TO 252/BANG/2018 PAGE 19 OF 23 PARAGRAPH-26 OF THE MPS THAT FAILURE TO CONSIDER A DECISION CITED BY THE PARTIES GIVES RISE TO A MISTAKE APPARENT ON THE FAC E OF THE RECORD, THEREFORE DOES NOT REQUIRE ANY FURTHER ELABORATION. 22. NOW WE SHALL DEAL WITH THE SPECIFIC ARGUMENTS M ADE BY THE LEARNED COUNSEL FOR THE REVENUE BEFORE US IN THESE MISCELLA NEOUS PETITIONS. THE LEARNED STANDING COUNSEL FOR THE DEPARTMENT SUBMITT ED THAT THE TRIBUNAL ERRED IN CONCLUDING THAT THE ESTIMATE MADE BY THE A SSESSEE OF INCOME OF ITS EMPLOYEES UNDER THE HEAD SALARIES WAS BONAFIDE . ACCORDING TO HIM, THE EMPLOYEES OF THE ASSESSEE WERE NOT EMPLOYEES OF STA TE AND THEREFORE THE LEAVE ENCASHMENT SALARY WAS EXEMPT ONLY UPTO RS.3 L ACS. TO THE EXTENT OF PAYMENT OF LEAVE ENCASHMENT ABOVE RS.3 LACS BY THE ASSESSEE TO ITS EMPLOYEES THE SAME WAS NOT EXEMPT AND OUGHT TO HAVE BEEN CONSIDERED WHILE ESTIMATING INCOME OF THE ASSESSEE. IN THIS R EGARD, HE DREW OUR ATTENTION TO A DECISION OF THE HONBLE KARNATAKA HI GH COURT IN THE CASE OF KARNATAKA ELECTRICITY BOARD ILR 2006 KAR 3384 = 200 7(1) KAR LJ 147 , WHEREIN THE QUESTION WAS WHETHER THE BENEFIT OF FRE E POWER CAN BE DENIED TO THE FUTURE EMPLOYEES KPTCL WHEN SUCH BENEFIT WAS AVAILABLE TO ERSTWHILE EMPLOYEES OF KEB WHO BECAME EMPLOYEES OF STATUTORY CORPORATION KPTCL BY LAW PASSED BY STATE LEGISLATUR E. THE CONTENTION WAS THAT THERE WAS DISCRIMINATION BETWEEN EMPLOYEES WHO CONTINUED IN SERVICE IN THE ERSTWHILE KEB AND THOSE WHO WOULD BE COME EMPLOYEES OF KPTCL IN FUTURE. THE HONBLE COURT HELD THAT THERE WAS NO SUCH DISCRIMINATION AS THE TWO SET OF EMPLOYEES FORMED A DISTINCT CLASS AND THEREFORE COULD BE TREATED DIFFERENTLY AND THAT THE RE WAS NO VIOLATION OF ARTICLE 14 OF THE CONSTITUTION. IT IS THE CONTENTI ON 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 T HE ASSESSEE MUST BE HAVING SUFFICIENT KNOWLEDGE THAT ITS EMPLOYEES CANN OT BE EQUATED WITH EMPLOYEES OF STATE GOVERNMENT AND THEREFORE THE PLE A OF BONAFIDE BELIEF MP NOS. 175 TO 252/BANG/2018 PAGE 20 OF 23 WHILE ESTIMATING INCOME OF EMPLOYEE OUGHT NOT TO HA VE BEEN ACCEPTED BY THE TRIBUNAL. 23. WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE L EARNED DR FOR THE REASON THAT, FIRSTLY IN THE MP U/S.254(2) OF THE A CT, IT IS NOT OPEN TO THE PARTIES TO ADVANCE NEW ARGUMENTS THAT WERE NOT ADDR ESSED WHEN THE APPEAL WAS ORIGINALLY HEARD. THE POWER OF THE TRIB UNAL U/S. 254(2) OF THE ACT IS ONLY TO RECTIFY MISTAKES APPARENT ON THE FAC E OF THE RECORD. THE TRIBUNAL DOES NOT HAVE POWER TO REVIEW ITS OWN ORDE RS. SECONDLY, THE DECISION CITED BY THE LEARNED COUNSEL FOR THE ASSES SEE SHOWS THAT THE BENEFIT OF FREE SUPPLY OF POWER WAS GIVEN TO ERSTWH ILE EMPLOYEES OF KEB WHO BECAME EMPLOYEES OF KPTCL ON ITS CREATION. THE REFORE, THEY WERE ALSO CONSIDERED AS ELIGIBLE FOR ALL BENEFITS THAT E MPLOYEE OF THE STATE ENJOYED AND THAT SUCH CONCESSION WAS WITHDRAWN ONLY FOR FUTURE EMPLOYEES OF KPTCL. THEREFORE, THE BELIEF OF THE ASSESSEE TH AT ITS EMPLOYEES WERE TO BE REGARDED AS EMPLOYEES OF STATE CANNOT BE SAID TO BE NOT BONAFIDE , AT LEAST TO THE EXTENT OF ERSTWHILE EMPLOYEES OF KEB. THIRDLY, THE DECISION WAS RENDERED IN THE CONTEXT OF DISCRIMINATION UNDER ARTICLE 14 OF THE CONSTITUTION AND CANNOT BE APPLIED TO A CASE WHERE BONAFIDE BELIEF IS USED AS DEFENCE TO AN ACTION TO PROCEEDINGS U/S.201(1) & 201(1A) OF THE ACT. SUCH DEFENCE DESERVES TO BE LOOKED AT FROM DIFFEREN T PERSPECTIVE. THE LIABILITY OF THE EMPLOYEES FOR PAYMENT OF TAXES IS PRIMARY LIABILITY AND THE LIABILITY OF KPTCL IS ONLY VICARIOUS LIABILITY AND RECOVERY OF TAXES THROUGH TAX DEDUCTION AT SOURCE IS ONLY A MODE OF COLLECTIO N OF TAXES. THE REVENUE ALWAYS HAS THE OPTION AND THE RIGHT TO COLLECT TAXE S FROM EMPLOYEES CONCERNED. IN THAT VIEW OF THE MATTER, THE ARGUMEN T ADVANCED IN THIS REGARD IS HELD TO BE NOT ACCEPTABLE. MP NOS. 175 TO 252/BANG/2018 PAGE 21 OF 23 24. THE NEXT CONTENTION OF THE LEARNED STANDING COU NSEL FOR THE DEPARTMENT WAS THAT THERE WAS NO BASIS FOR FORMATIO N OF SUCH BONAFIDE BELIEF BY KPTCL, ESPECIALLY IN THE LIGHT OF THE DEC ISION OF THE HONBLE KARNATAKA HIGH COURT REFERRED TO IN PARAGRAPH-21 OF THIS ORDER. HE RELIED ON DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF ITO VS. TECHSPAN INDIA (P) LTD. (2018) 92 TAXMANN.COM 361 (SC) AND DGIT(INV.) VS. SPACEWOOD FURNISHERS (P) LTD. 374 ITR 595(SC) . 25. IN THE FIRST DECISION, THE QUESTION AROSE IN T HE CONTEXT OF VALIDITY OF INITIATION OF PROCEEDINGS U/S.147 OF THE ACT AND TH E COURT HAD TO EXAMINE AS TO WHETHER THE REASSESSMENT PROCEEDINGS U/S.147 OF THE ACT. THE HONBLE COURT HELD THAT FOR CHALLENGING THE VALIDITY OF INI TIATION OF REASSESSMENT PROCEEDING ON CHANGE OF OPINION, IT HAS TO BE VERIF IED WHETHER IN THE ASSESSMENT MADE EARLIER THERE WAS EXPRESSION OPINIO N EITHER EXPRESSLY OR BY IMPLICATION. ACCORDING TO HIM, IN THE PRESENT C ASE THE ASSESSEE HAS SET OUT THE BASIS ON WHICH THEY FORMED BELIEF THAT ITS EMPLOYEES WERE TO BE REGARDED AS EMPLOYEES OF STATE. 26. IN THE SECOND DECISION, THE QUESTION AROSE IN T HE CONTEXT OF RECORDING OF SATISFACTION BEFORE ISSUE OF WARRANT O F AUTHORIZATION U/S.132 OF THE ACT FOR SEARCH AND SEIZURE PROCEEDINGS. THE HO NBLE COURT OBSERVED THAT THERE MUST BE APPLICATION OF MIND TO THE MATER IAL AND THEREAFTER BONAFIDE AND HONEST OPINION HAS TO BE FORMED. ACCOR DING TO HIM IN THE PRESENT CASE, THE ASSESSEE DID NOT HAVE ANY MATERIA L BASED ON WHICH HE FORMED BONAFIDE BELIEF THAT ITS EMPLOYEES ARE EMPLO YEES 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 POWE R TO TAKE PARTICULAR ACTION INVADING THE RIGHT OF PRIVACY OR FOR INITIAT ING PROCEEDINGS FOR LEVY OF TAX. IT MAY NOT BE APPROPRIATE TO READ THE OBSERVA TIONS OF THE HONBLE MP NOS. 175 TO 252/BANG/2018 PAGE 22 OF 23 COURT IN THE CONTEXT OF THE PRESENT CASE. THE OBLIG ATION 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 TESTE D 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 ABOV E, 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. 28. THE POWER OF THE TRIBUNAL UNDER SECTION 254(2) IS CONFINED TO RECTIFYING ANY MISTAKE APPARENT FROM THE RECORD. TH E TRIBUNAL DOES NOT HAVE INHERENT POWER OF RECTIFICATION OR REVIEW OR R EVISION. UNLESS THERE IS MISTAKE APPARENT FROM THE RECORD IN THE SENSE OF PA TENT, OBVIOUS, CLEAR ERROR OR MISTAKE, THE TRIBUNAL CANNOT RECALL ITS PR EVIOUS ORDER. IF THE ERROR OR MISTAKE IS ONE WHICH COULD BE ESTABLISHED ONLY BY L ONG-DRAWN ARGUMENTS OR BY WAY OF PROCESS OF INVESTIGATION AND RESEARCH, IT IS NOT A MISTAKE APPARENT FROM THE RECORD. UNLESS THERE IS MANIFEST ERRORS WHICH ARE OBVIOUS, CLEAR AND SELF-EVIDENT, THE TRIBUNAL CANNO T RECALL ITS PREVIOUS ORDER IN AN ATTEMPT TO REWRITE THE SAME. FAILURE OF THE T RIBUNAL TO CONSIDER AN ARGUMENT ADVANCED BY EITHER PARTY FOR ARRIVING AT A CONCLUSION IS NOT AN ERROR APPARENT ON THE RECORD, ALTHOUGH IT MAY BE AN ERROR OF JUDGMENT. THE TRIBUNAL CANNOT IN EXERCISE OF ITS POWER OF RECTIFI CATION LOOK INTO SOME OTHER CIRCUMSTANCES WHICH WOULD SUPPORT OR NOT SUPPORT IT S CONCLUSION. THE TRIBUNAL CANNOT REDECIDE THE MATTER AND IT HAS NO P OWER TO REVIEW ITS ORDER. A DECISION ON DEBATABLE POINT OF LAW IS NOT A MISTA KE APPARENT FROM THE RECORD. MP NOS. 175 TO 252/BANG/2018 PAGE 23 OF 23 29. FOR THE REASONS GIVEN ABOVE, WE FIND NO MERIT I N THESE MPS AND ACCORDINGLY THE SAME ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 04 TH DAY OF JANUARY, 2019. SD/- SD/- ( JASON P. BOAZ ) ( N. V. VASUDEV AN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 04 TH JANUARY, 2019. / D ESAI S MURTHY / COPY TO: 1. THE APP LICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.
