TaxTMI 
TaxTMI 
2008 (2) TMI 462
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....survey operation was conducted in the premises of the school and the books of account maintained by it were examined. It was found that the assessee had been providing free education to the wards of teachers and other staff members of the school. While calculating the value of perquisite taxable in the hands of the teachers or the staff members, a deduction of Rs. 1,000 per month per child was made from the amount of the educational facility provided free of cost. It was explained that the aforesaid deduction was made after consulting various books on the subject. The ITO, Ward 49(3), New Delhi (hereinafter called 'the Assessing Officer') considered the provision contained in rule 3(5) of the Income-tax Rules, 1962. He came to the conclusion that in a situation where the value of the benefit of free education exceeded Rs. 1,000 per month, the whole of the amount was to be treated as perquisite under the aforesaid rule. Therefore, reliance on Taxmann 5 Direct Taxes Ready Reckoner by Vinod K. Singhania, on which reliance was placed by the assessee, was not the authentic view in the matter. Therefore, he proceeded to calculate the amount of short deduction of tax on this groun....
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....foresaid two issues into consideration. The revenue is in appeal against this order. 4. Before us, the learned DR referred to the order of the Assessing Officer and pointed out that his finding was that where the amount exceeded Rs. 1,000 per month, the entire amount had to be taken into account for valuing the perquisite of free education to the children of teachers and staff members. The assessee had worked out perquisite on the basis of the fees charged from other students. Therefore, it was argued that in terms of the provision contained in rule 3(5), the Assessing Officer was right in working out the amount of short deduction of tax for various years, and consequently interest on the amounts for which the assessee was held to be an assessee-in-default for those years. On the other hand, the learned CIT(A), contrary to the rule, came to the conclusion that deduction of Rs. 1,000 per month should be allowed from the cost for working out the perquisite. Coming to the issue of cost versus fee, it was pointed out that the assessee is a charitable institution, being run on no-profit-no-loss basis. In such circumstances, the cost would be nothing but the fees charged from the othe....
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....ection of tax. What is required to be done under the provision is to estimate the income of the assessee under the head "Salaries", compute tax on the estimated income and deduct such tax and deposit the same to the credit of the Government. The aforesaid exercise involves valuation of various perquisites including the perquisite arising on account of free education facilities provided to the children of the employees. The tax to be deducted is merely an interim measure of an estimated amount subject to final determination of the tax in the hands of the employees on regular assessment. The interim measure of deduction of tax is without prejudice to the rights of the employees as well as the revenue to determine the exact amount of tax payable by them at the time of regular assessment. By its very nature, the estimated amount could not have been contemplated to be an exact amount and what is required is to deduct tax on the basis of a bona fide estimate. In this connection, reliance was placed on the decision of Hon'ble Madhya Pradesh High Court in the case of Gwalior Rayon Silk Co. Ltd. v. CIT [1983] 140 ITR 832. In that case, the Hon'ble Court pointed out that the provisio....
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....was not to be included in the salary. Being a question of fact, no question of law arose and rightly so because the conveyance allowance will be exempt under section 10(14). Therefore, the matter was decided in favour of the assessee and against the revenue. He also relied on the decision of Hon'ble Gujarat High Court in the case of CIT v. Oil & Natural Gas Corpn. Ltd. [2002] 254 ITR 121. In that case, Special Allowance was being granted by the employer to the employees to meet expenses incurred in the course of performance of duties. The entire allowance was not taken into account for the purpose of tax deduction at source. The question before the Hon'ble Court was whether the allowance was exempt under section 10(14) of the Act. The Hon'ble Court pointed out that the fact that reimbursement is up to a maximum limit and not more does not detract from the fact that the expenses were being paid, as far as employer is concerned, towards reimbursing actual expenditure incurred by the employee in undertaking official journey up to the extent of amount actually reimbursed. It is another matter that the employee was not entitled to deduction of the full amount in his own asse....
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....e bona fide conduct of the assessee, the learned DR pointed out in the rejoinder that if there is a short deduction of tax, the assessee will be treated to be an assessee-in-default under section 201(1). The question of bona fide arises only in penalty and prosecution proceedings. However, section 201(1) dealt merely with collection of tax by resorting to tax deduction at source and, therefore, such consideration will not come into play while interpreting the provisions contained in section 201(1). It was also pointed out that the learned CIT(A) has not furnished his findings in the matter. Therefore, it was agitated that if the department's case was not to be accepted, the same may be restored to the file of the learned CIT(A). 5. We have considered the facts of the case and submissions in this regard. Section 192 of the Act provides that the employer, at the time of payment of salary, estimate the income of the employee and deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rate in force for the financial year in which the payment is made. Thus, this section casts an obligation on the employer to estimate the income under....
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.... had some basis on which the decision was taken not to deduct tax on the impugned amount of Rs. 1,000 per month per child. Therefore, unless it is shown that there was something more than mere reliance on the ready reckoner, the assessee cannot be held to be an assessee-in-default in terms of the decision in the case of Nestle India Ltd. The decision in the case of Gwalior Rayon Silk Co. Ltd. is quite different as the Assessing Officer had made controversial addition to the income of the employees. In this case, the Assessing Officer has merely followed rule 3(5) of the Income-tax Rules, 1962. Therefore, the ratio of that decision is not applicable to the facts of our case. In the case of Oil & Natural Gas Corpn. Ltd. also, the question was regarding deductibility of tax on conveyance allowance and, therefore, the facts are similar to the facts in the case of Nestle India Ltd. In the case of Gujarat Narmada Valley Fertilizers Co. Ltd., a number of allowances were given to the employees, which were valued by the employer albeit incorrectly. The facts of the case of Kannan Devan Hill Produce Co. Ltd. stand on a totally different footing, namely, that the employees' assessments ha....
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....t the assessee is a charitable institution, run on no-profit-no-loss basis and, therefore, cost and the fee will be more or less the same. We find that the learned CIT(A) has given cost in various years ranging between Rs. 950 per month and Rs. 1,210 per month in various financial years. These costs were worked out by the assessee by taking into account only the direct cost. In the case of Director, Delhi Public School the Tribunal came to the conclusion that all direct and indirect costs, except the depreciation allowance, shall be taken into account for this purpose. Respectfully following this order, the Assessing Officer is directed to work out the cost in terms of that order. 5.2 The third argument of the learned counsel was that the employer cannot be deemed to be in default if the employees have filed the returns of income and paid taxes accordingly. He was questioned whether any evidence was filed before the lower authorities about filing of the returns by the employees and payment of tax by them on the correct value of perquisites. He was not able to answer this question, but we find that no such evidence was filed before the lower authorities. However, his case was tha....