TaxTMI 
TaxTMI 
2002 (11) TMI 264
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....re us are these: The assessee is a joint venture company incorporated inIndiabetween Tej Group ofIndiaand Quebecor World ofCanada. The assessee company employed Mr. Lester Garnett as Works Manager w.e.f.1-1-1995as per the letter of appointments copy of which is placed at page 14 of the paper bock against remuneration of 95,000 Canadian dollars per annum. In addition to the above salary, he was also allowed certain perks i.e., rent free accommodation, car with driver and servant. However, due to heavy losses, the assessee could not pay any salary to Mr. Garnett right from the first year. Such salary was shown as outstanding liability in the books of account maintained by the assessee. Since no salary was paid to Mr. Garnett, his name was not....
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....itted that these factual aspects constitute reasonable cause for not deducting the tax at source. Hence, no penalty could be levied. Not satisfied with the above explanations the Joint Commissioner of Income-tax (JCIT) levied penalty for all these years under section 271C aggregating Rs. 52,04,778, details of which has been given in the penalty order dated 28-9-2001. 5. On appeal, similar contention was reiterated by the assessee. The CIT(A) noticed that Mr. Garnet had mentioned in his assessment proceedings that tax was deductible by the employer and, therefore, provisions of advance-tax were not applicable and as a result thereof, interest under section 234B could not be levied. However, no tax was deducted by the employer company and,....
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.... was, therefore, being credited and shown as outstanding liability in the books of assessee. He drew cur attention to the note No. 13 in Schedule XIII appended to the audited statement of accounts for the financial year 1998-99 appearing at page 29 of the paper book wherein it has been stated that sundry creditors included the sum of Rs. 1,19,32,950 on account of salary payable to expatriate employees, who had returned to his home country after the year end and the company will be making necessary application to RBI for remittance of his salary in the foreign currency. According to him, this clearly establishes that no salary was paid till the end of financial year 1998-99. Proceeding furthers it was submitted that there was no material on ....
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....essee outsideIndiais merely based on suspicion and surmises. Lastly, it was argued by him that assessee was under bona fide belief that it was not required to deduct the tax at source as no payment was made and such belief was formed on the basis of language of section 192 and consequently, it constituted a reasonable cause within the ambit of section 273B. In support of his contention, he also relied on certain decisions. He referred to the decision of Andhra Pradesh High Court in the case of A.V.S. Raghavan v. Chairman and MD, Syndicate Bank [2002] 253 ITR 1 for the proposition that accrual as well as payment of salary should co-exist in order to attract the provisions of section 192. He also relied on the decision of the Tribunal in the ....
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.... payment, therefore, it appears that different incidences have been provided deliberately by the legislature for deduction of tax at source considering the nature of payment. Accordingly, we are in agreement with the learned counsel for the assessee that assessee was not required to deduct the tax at source if the salary was not actually paid to the employee. The view, which have been taken by us, is also fully supported by the two decisions of the Tribunal in the eases of Pentagon Engg. (P.) Ltd. and Datson Raviraj & Co. (P.) Ltd relied upon by the learned counsel for the assessee. 9. In the present case, it has always been the contention of the assessee that no salary was paid to Mr. Garnett. This is also fortified by the Note No. 13 i....