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2020 Supreme(Guj) 424
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Harsha Devani, A.P. Thaker, JJ.
Commissioner of Income Tax (Tds) - Appellant
Versus
Oil And Natural Gas Corporation Ltd. - Opponent
R/Tax Appeal No. 1218 of 2018
Decided On : 17-03-2020
For the Appellant :Mr. Bhatt, Senior Advocate With Mrs. Mauna M. Bhatt
For the Opponent :Mr. S.N. Soparkar, Senior Advocate With Mr. Akshat Khare, Mrs. Suman Khare
Point of Law:
In the absence of the definition of the phrase "used for the purpose of employment" in the Income Tax Act, 1961, a doubt has been expressed as to the meaning of this phrase and the checks which can be applied for the proper verification of the claim, by the disbursing officers.
Headnote:
Income Tax Act, 1961 - section 260A - Appellant Commissioner of Income Tax has called in question order was right in law confirming order of Income Tax Appellate and consequential interest charged by Assessing Officer in relation to assessor's payments to its employees head of uniform allowance - Assessing Officer noted as to how all employees would uniformly incur expenditure irrespective of their post and necessity and as to how an employee would be in need of uniforms costing every year and odd figures and that no direct proof had been taken by employer and instead a simple format has been devised and all employees were indiscriminately putting their claims of huge cost of uniforms and their maintenance which was not possible per employee even after use all time - Held, Court in Oil and Natural Gas Corporation - Assistant Commissioner of Income tax taxman com has upheld order passed by Tribunal upholding order of Commissioner that as no uniform had been prescribed by ONGC which had merely prescribed a dress code payment of allowances heading of uniform allowances would not fall within exemption clause contained in Act - Court is of view that impugned order passed by Tribunal does not suffer from any legal infirmity warranting interference - Substantial question framed by this court while issuing notice is answered in affirmative that is in favor of assesses and against revenue - Income Tax Act and consequential interest charged by Assessing Officer in relation to assessor's payments to its employees head of uniform allowance - Appeal dismissed (Para 24)
Facts of the Case:
Section 192 of the Act casts a responsibility on the employer to deduct proper TDS from the salary of the employee. Salary includes allowances/ reimbursements which are conditionally exempt. It is the responsibility of the employer to ascertain the correctness of the claim of exemption of any allowance before allowing it as exempt. If the employer finds the claim of the employee to be correct, he can consider such claim while computing the taxable income and tax thereon; whereas in this case, the employer has allowed the blanket exemption to its employees without any verification. None of the employees on his own has added the allowances received to his own income in his individual income tax return and has claimed exemption under section 10(14)(i) of the Act, which shows that the government has lost revenue to that extent due to non-deduction of TDS by the employer.
Finding of the Court:
Court in Oil and Natural Gas Corporation - Assistant Commissioner of Income tax taxman com has upheld order passed by Tribunal upholding order of Commissioner that as no uniform had been prescribed by ONGC which had merely prescribed a dress code payment of allowances heading of uniform allowances would not fall within exemption clause contained in Act - Court is of view that impugned order passed by Tribunal does not suffer from any legal infirmity warranting interference - Substantial question framed by this court while issuing notice is answered in affirmative that is in favor of assesses and against revenue - Income Tax Act and consequential interest charged by Assessing Officer in relation to assessor's payments to its employees head of uniform allowance
Result: Appeal dismissed
JUDGMENT :
Harsha Devani, J.
1. By this appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), the appellant - Commissioner of Income Tax (TDS) has called in question the order dated 16.3.2018 passed by the Income Tax Appellate Tribunal, Surat Bench, Surat (hereinafter referred to as “the Tribunal”) in ITA No.2436/Ahd/2014/SRT for assessment year 2010-11.
2. By an order dated 9.10.2018, this court had issued notice for final disposal to consider the following substantial question of law:
“Whether the Income Tax Appellate Tribunal was right in law in confirming the order of the Income Tax Appellate Tribunal (sic. Commissioner of Income Tax (Appeals)) deleting the additions made by the Assessing Officer under section 201(1) of the Income Tax Act, 1961, and consequential interest charged by the Assessing Officer in relation to the assessee’s payments to its employees under the head of uniform allowance?”
3. On 22.11.2010, a survey was conducted at the office premises of the assessee - Oil and Natural Gas Corporation Limited. During the course of the survey, it was noticed that the assessee had made payments under the head “uniform allowance”; however, the deductor had neither included this allowance to the total salary payments nor had he deducted tax at source (TDS) on such income. On these issues, additions were made in the immediately preceding financial year 2009- 10 under section 201(1) read with section 201(1A) of the Act. The Assessing Officer noted that there was no provision for granting exemption on the basis of self certification. He further noticed that reimbursement of uniform allowance was not being treated as taxable for the assessment year and the assessee had disclosed in writing that out of around 790 to 800 employees at Hazira, 752 employees had taken this reimbursement on the basis of self-certification and thus, it has not been included in the gross salary chargeable to TDS under section 192 of the Act for the financial year in question presuming that since the employees had given self certification, they might have incurred or would be incurring such expenditure. Therefore, no further check had been observed by the deductor as to whether they had actually incurred such expenditure or not and original/genuine and real bills and vouchers to this effect were not taken at the relevant point of time during the relevant financial year or thereafter. According to the Assessing Officer, there is no direct provision under which such exemption can be provided on the basis of self certification. He also found that all the 752 employees were given a sum of Rs.52,364/- uniformly in the year and this system of self certification was prevalent from years together unhindered. The Assessing Officer noted as to how all the employees would uniformly incur such expenditure irrespective of their post and necessity and as to how an employee would be in need of uniforms costing Rs.52,364/- every year and odd figures and that no direct proof had been taken by the employer and instead a simple format has been devised and all the employees were indiscriminately putting their claims of such huge cost of uniforms and their maintenance which was not possible per employee even after use all the time and day and night. According to the Assessing Officer, such huge expenditure was not feasible and was highly disproportionate and that there was no justification on the part of the employer in incurring such huge expenditure. That even after paying such huge amounts, the Drawing Disbursing Officer (DDO) was treating this segment of income for the employees as exempt and holding these reimbursements as exempt. He further observed that the DDO had not called for bills and vouchers to examine the veracity of the claim of uniform allowance and had accepted the self certification given by the employees.
3.1 The Assessing Officer noticed that section 10(14)(i) of the Act provides that any such special allowance or b
