TaxTMI 
TaxTMI 
TaxTMI 
2011 (10) TMI 17
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....le for interest under Section 201(1A) of the Income Tax Act, 1961." 2. Some of the Appeals are filed by the Income Tax Department and some other Appeals by the Assessee which are in the nature of counter objections. Since the issue involved in the Appeals of the Revenue is common, these Appeals taken up first for decision. 3. An on-the-spot interactive education programme was conducted on 10th March, 2005 wherein it was revealed that the Assessee School was providing free educational facilities to the wards of teachers/staff members. The Assessing Officer(AO), based on his understanding of Rule 3(5) of the Income Tax Rules, 1962, held that the Assessee had committed a default by lower deduction of TDS from the total salary a....
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....ged from other students. Keeping the requirements of the Rule in view, the CIT(A) held that the perquisites are not chargeable to tax if the cost of such education or the value of such benefit per child does not exceed Rs. 1,000/- per month. Applying purposive construction in preference to the literal construction, the CIT(A) held that in view of the factual and legal position in the present matter, the purposive and contextual interpretation in relation to the provisions of Rule 3(5) requires to be preferred over the literal interpretation, and came to the conclusion that there was no case for treating the Assessee as an Assessee in default. 6. Before the Income Tax Appellate Tribunal (ITAT) the Assessee School had argued that it had esti....
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.... 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 the Madhya Pradesh High Court in the case of Gwalior Rayon Silk Co. Ltd. v. Commissioner of Income Tax, (1983) 140 ITR 832 and in the case of Commissioner of Income Tax v. Nestle India Ltd., (2000) 243 ITR 435. On the basis of these judgments it was observed that what the Assessee was required to do was to make an honest and bona fide estimate of income of the employees chargeable to tax under the head "salaries", deduct tax thereon and deposit the same to the credit of the Government and since this process had been undertaken by the Ass....
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....hat he has not deducted tax on the estimated income of the employee." 9. In Commissioner of Income Tax v. ITC Ltd., 199 Taxman 412 (Del), in Paragraph 29 of the Report the Court held as follows:- "29. We have given out thoughtful consideration to the submissions of the learned counsels for the assessee based on bona fide belief and non-deducting tax at source from the payments made to the employees on account of tips. Learned counsel appearing for the Revenue did not controvert that this practice has been accepted by the Revenue by accepting the assessments in the form of annual returns of the assessees in the past. Since the taxes were to be deducted from the amounts, which were the dues of the employees, no dishonest inten....
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....ally, the CIT(A) held that on the basis of the accounts maintained by the Assessee, the cost of education was less than Rs. 1,000/- per month per child and, therefore, the Assessee was also entitled to the benefit of the proviso to Rule3(5) of the Rules, 1962. 11. In view of the above, we are of the opinion that the ITAT was correct in coming to the finding that these were not fit cases for passing orders under Section 201(1) and consequently levying interest under Section 201(1A) of the Act. Resultantly, the substantial question of law proposed above is answered in favour of the Assessee and against the Revenue and the Appeals filed on behalf of the Income Tax Department are dismissed herewith. Further, we are also of the opinion, ....