Interim restraint on tax deduction bars default liability during its operation; perquisite disputes must be pursued by employees individually.

An employer cannot be treated as an assessee in default, or made liable to interest, for the period during which a subsisting High Court interim order restrained deduction and remittance of tax on perquisites. Once that restraint was vacated, liability operated prospectively, and interest under Section 201(1A) arose only from the date the employer failed to comply after vacation of the interim protection. The objection that employee accommodation was not a taxable concession was treated as a factual issue for the concerned employees to raise in their own assessment proceedings before the Assessing Officer, and it was not entertained on behalf of the employer or the association in these proceedings.

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Issues: (i) Whether the employer could be treated as an assessee in default, and made liable to interest, for the period during which a subsisting interim order of the High Court restrained deduction of tax at source on the valuation of perquisites. (ii) Whether the objection that accommodation provided to employees was not a concession, and therefore not a taxable perquisite, could be pursued by the employer or employees in these proceedings.

Issue (i): Whether the employer could be treated as an assessee in default, and made liable to interest, for the period during which a subsisting interim order of the High Court restrained deduction of tax at source on the valuation of perquisites.

Analysis: The interim order prevented deduction and payment of tax on the relevant portion of salary. During the currency of that order, the employer could not be treated as being in default under the Act. Once the writ petition was dismissed and the interim protection stood vacated, the position had to be restored to what it would have been but for the interim order. As the employer did not comply with the subsequent direction within the time granted, it became liable only from the date after vacation of the interim order, and interest under Section 201(1A) applied from that date.

Conclusion: The employer was not in default for the period when the interim order operated, but it became liable as an assessee deemed to be in default from 16 March 2010, with consequential liability to interest from that date.

Issue (ii): Whether the objection that accommodation provided to employees was not a concession, and therefore not a taxable perquisite, could be pursued by the employer or employees in these proceedings.

Analysis: The claim whether accommodation amounts to a concession is a factual issue to be raised by the employee in his own assessment proceedings before the Assessing Officer. The employer or the association could not prosecute that claim in these proceedings, since the statutory scheme contemplates deduction by the employer, issuance of a tax deduction certificate, and any challenge or claim for refund by the employee before the Assessing Officer.

Conclusion: The contention was left open to the concerned employees before the Assessing Officer and was not entertained for the employer or the association in these proceedings.

Final Conclusion: The challenge succeeded only to the limited extent that no default or interest could be fastened for the period covered by the interim order, while the employer remained liable from the date the interim protection ceased and the employees were left to pursue any personal assessment claims separately.

Ratio Decidendi: A party prevented by a subsisting judicial restraint from deducting and remitting tax cannot be treated as an assessee in default for that restrained period, but once the restraint is vacated, liability and interest arise prospectively from the date of default; factual objections to the character of a perquisite must be pursued by the individual assessee in assessment proceedings.

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