TaxTMI 
TaxTMI 
2019 (1) TMI 293
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..../Bang/2018 [in ITA 2244/Bang/2017 MP 197/Bang/2018 [in ITA 2245/Bang/2017 MP 198/Bang/2018 [in ITA 2246/Bang/2017 MP 199/Bang/2018 [in ITA 2247/Bang/2017 MP 200/Bang/2018 [in ITA 2248/Bang/2017 MP 201/Bang/2018 [in ITA 2249/Bang/2017 MP 202/Bang/2018 [in ITA 2250/Bang/2017 MP 203/Bang/2018 [in ITA 2251/Bang/2017 MP 204/Bang/2018 [in ITA 2252/Bang/2017 MP 205/Bang/2018 [in ITA 2253/Bang/2017 MP 206/Bang/2018 [in ITA 2254/Bang/2017 MP 207/Bang/2018 [in ITA 2255/Bang/2017 MP 208/Bang/2018 [in ITA 2256/Bang/2017 MP 209/Bang/2018 [in ITA 2257/Bang/2017 MP 210/Bang/2018 [in ITA 2258/Bang/2017 MP 211/Bang/2018 [in ITA 2259/Bang/2017 MP 212/Bang/2018 [in ITA 2260/Bang/2017 MP 214/Bang/2018 [in ITA 2262/Bang/2017 MP 215/Bang/2018 [in ITA 2263/Bang/2017 MP 232/Bang/2018 [in ITA 2280/Bang/2017 MP 232/Bang/2018 [in ITA 2280/Bang/2017 MP 234/Bang/2018 [in ITA 2282/Bang/2017 MP 247/Bang/2018 [in ITA 2295/Bang/2017 MP 248/Bang/2018 [in ITA 2296/Bang/2017. MP 249/Bang/2018 [in ITA 2297/Bang/2017 MP 250/Bang/2018 [in ITA 2298/Bang/2017 MP 251/Bang/2018 [in ITA 2299/Bang/2017 MP 252/Bang/2018 And [in ITA 2300/Bang/2017 For The Applicant : Shri K.V. Aravind, Standing Counsel For The Respondent : S....
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....the assessee under this head for that financial year. KPTCL as an employer was bound to deduct tax at source on the salaries paid to its employees by including the payment received by an employee in respect 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., "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 clauses shall not be included- ............................ (10AA) (i) any payment received by an employee of the Central Government or a State Government, as the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise; (ii) any payment of the nature referred to in sub-clause (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 a....
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....t to its employees towards unutilized leave period on retirement was exempt u/s.10(10AA)(i) of the Act. The revenue held that KPTCL was a statutory Corporation and therefore its employees were not employees of State Government and therefore KPTCL ought to have deducted tax at source on payment to employees towards unutilized leave period on retirement 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 applicable for determining liability to deduct tax at source was Sec.10(10AA)(ii) and not Section 10(10AA)(i) of the Act. 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 challenging the orders of CIT(A) confirming the action of the AO in holding KPTCL to be an Assessee in default u/s.201(1) of the Act. They were:- (i) Assumption of jurisdiction by the respondent in all 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 t....
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....bunal took the view that the estimate of income under the head salary made by the Assessee on the belief that its employees were to be equated with State Government employees was a bonafide estimate and therefore the Assessee has discharged its obligation u/s.192 of the Act and hence proceedings u/s.201(1) & 201(1A) of the Act were to be quashed. 14. The Tribunal took note of the historical background under which KPTCL came into existence. The Tribunal noticed that prior to enactment of Electricity Act, 2003 (Central Act) supply of Electricity 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 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 came to be established on 1.10.1957 which was subsequently named as Karnataka State Electricity Board (KEB). Employees of State Government ....
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....ured them that all that the employees will get as employees of KEB will continue to be available even after formation of KPTCL. The tribunal also took note of extent of control and protection that the employees of the restructured corporate entities of the erstwhile KEB 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 accrued. Sec.192(3) of the Act permits the employer to increase or reduce the amount of TDS for any excess or deficiency. We have already noticed that the fact that bills/evidence to substantiate incurring of expenditure on medical treatment up to Rs. 15,000/- and the availing of the LTC by the employees and the fulfilment of the conditions contemplated by Sec.10(5) of the Act for availing exemption by the employees so availing LTC, have not been dispute....
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....lowed before extending the 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 the ratio of the following decisions. CIT vs. Nicholas Piramal India Ltd (2008) 299 ITR 0356 (BOMBAY); CIT v. Semiconductor Complex Ltd [2007] 292 ITR 636 (P&H) CIT vs. HCL Info System Ltd. [2006] 282 ITR 263 (Del) CIT v Oil and Natural Gas Corporation Ltd [2002] 254 ITR 121 (Guj) ITO v Gujarat Narmada Valley Fertilizers Co. Ltd [2001] 247 ITR 305 (Guj) CIT v Nestle India Ltd (2000) 243 ITR 0435 (DEL) Gwalior Rayon Silk Co. Ltd. v. CIT [1983] 140 ITR 832 (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 follows:- "19. We have considered the rival submissions. In our view, the plea of the Assessee that it made a bona fide estimate of employee's sala....
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.... submitted that on retirement the employer employee relationship between KPTCL and the retiring employee ceases and any payment made thereafter cannot be strictly termed as "Salary". Our attention Page 16 of 23 was drawn to Finance Act, 2018 which inserted Sec.56(2)(xi) w.e.f. 1.4.2018 to avoid a possible plea that may be taken in such cases by holding that any payment post retirement will 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 was heard on the arguments advanced by the learned counsel for the Assessee. 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 revenue. In any event, the conclusions of the Tribunal are not based on the arguments of the learned counsel for the Assessee as we have explained in the earlier paragraphs 3 to 19 of this order. We therefore hold that there is no merit in the allegations contained in paragraph-17 of the MPs. 21....
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.... Taxman 505(SC) wherein the Hon'ble Supreme Court cancelled penalty u/s.271C of the Act for non-deduction of tax 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 Hon'ble Supreme Court has held that bonafide belief for non-deduction of tax at source cannot be a defence to an action u/s.201(1) & 201(1A) of the Act. We are of the view that the said decision was rendered in the context of Sec.271C penalty for failure to deduct tax at source. The defence to such an action was bonafide belief of the Assessee that it was not liable to deduct tax at source on home salary paid to expatriate employees outside India. The Hon'ble Supreme Court observed on the scope of Sec.201(1) & 201(1A) of the 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 cannot be inferred that the Hon'ble Supreme Court has held that in....
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....e Hon'ble Karnataka High Court in the case of Karnataka Electricity Board ILR 2006 KAR 3384 = 2007(1) Kar LJ 147, wherein the question was whether the benefit of free 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 Legislature. The contention was that there was discrimination between employees who continued in service in the erstwhile KEB and those who would become employees of KPTCL in future. The Hon'ble 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 there was no violation of Article 14 of the Constitution. It is the contention 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 the Assessee must be having sufficient knowledge that its employees cannot be equated with employees of State Government and therefore the plea of bonafide belief while estimating income of employee ought not to have been accepted by the Tribunal. 23. We are unable t....
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.... validity of initiation of reassessment proceeding on change of opinion, it has to be verified whether in the assessment made earlier there was expression opinion either expressly or by implication. According to him, in the present case 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 the context of recording of satisfaction before issue of warrant of authorization u/s.132 of the Act for search and seizure proceedings. The Hon'ble Court observed that there must be application of mind to the material and thereafter bonafide and honest opinion has to be formed. According to him in the present case, the Assessee did not have any material based on which he formed bonafide belief that its employees are employees 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 power to take particular action invading the right of privacy or for initiating proceedings for levy of tax. It may not be appropriate to read the observations....