Judicial Analysis Court Copy Headnote Facts Arguments Court observation

GUJARAT HIGH COURT
K.S. Jhaveri, K.J. Thaker, JJ
COMMISSIONER OF INCOME TAX (TDS) – Appellant
Versus
OIL & NATURAL GAS CORPORATION (INDIA) LTD – Respondent
TAX APPEAL NO. 549 of 2013 | TAX APPEAL NO. 550 of 2013 | TAX APPEAL NO. 1095 of 2014 | TAX APPEAL NO. 1096 of 2014 | TAX APPEAL NO. 1097 of 2014 | TAX APPEAL NO. 1098 of 2014 | TAX APPEAL NO. 1099 of 2014 | TAX APPEAL NO. 1100 of 2014 | TAX APPEAL NO. 1101 of 2014 | TAX APPEAL NO. 1102 of 2014 | TAX APPEAL NO. 1103 of 2014 | TAX APPEAL NO. 1104 of 2014 | TAX APPEAL NO. 1105 of 2014 | TAX APPEAL NO. 1106 of 2014 | TAX APPEAL NO. 1094 of 2014

Advocates:
For the Appellant(s)/Petitioners: MRS MAUNA M BHATT
For the Respondents: MR B S SOPARKAR

Payment of uniform allowance is classified as fringe benefit, exempt from TDS as it does not constitute salary under the Income Tax Act.

Headnote:(A) Income Tax Act, 1961 - Sections 10(14), 17(1), 17(2)(vi), 115WB - Fringe Benefit Tax (FBT) - The Revenue challenged the Tribunal's decision on the inclusion of uniform allowance as taxable salary. Court held that uniform allowance is not salary under section 17(1) and subject to FBT, thus no TDS required. Court aligned with statutory interpretation distinguishing between taxable salary and exemptions. (Paras 1-21)

(B) Tax Deductions - TDS obligation - The court held that only those allowances exempt under specified provisions are not subject to TDS, and the employer's obligation to pay tax under FBT does not necessitate TDS deduction. Court reinforced legislative intent against double taxation on fringe benefits. (Paras 10, 18)

Facts of the case:
The appellant contended that various allowances paid to employees by respondent corporation, identified as uniform allowances, should attract TDS. However, the Tribunal found these allowances are subject to FBT and not salary, which led to the present appeals.

Findings of Court:
The court emphasized that uniform allowances provided do not constitute salary and are governed under fringe benefit provisions, thus exempt from TDS.

Issues: Whether the payments made under uniform allowance should be considered as salary for TDS purposes, and the implications of FBT on such allowances.

Ratio Decidendi: The court reaffirmed that allowances classified as fringe benefits and rendered under statutory provisions do not meet the criteria for salary under section 17(1), confirming no TDS obligation exists on these payments.

Result: Appeals dismissed.

Table of Content
1. appellant challenges the tribunal's ruling regarding the nature of uniform allowance. (Para 1 , 2)
2. survey details revealing allowance classifications and employer's responses. (Para 4 , 5)
3. discussions on statutory obligations and tax implications for allowances. (Para 10 , 18)
4. final ruling confirms allowances are exempt from tds. (Para 21)

JUDGEMENT

(PER : HONOURABLE MR.JUSTICE KS JHAVERI)

1. By way of these appeals, the appellant- Revenue has challenged (1) the judgment and order dated 16.11.2012 passed in ITA No. 184/Ahd/2010 for AY 2009-10, (2) ITA No. 609, 611/Ahd/2010 for AY 2009-10, (3) ITA No. 1343/Ahd/2010 for AY 2009-10, (4) ITA No. 185/Ahd/2010 for AY 2009-10, and (5) the judgment and order dated 11.1.2013 passed in ITA Nos. 153/2012 for AY 2007-08, (6) ITA No. 154/2012 for AY 2008-09, (7) ITA No. 156/2012 for AY 2006-07, (8) ITA No. 157/2012 for AY 2007-08, (9) ITA No. 158/2012 for AY 2008- 09, (10) ITA No. 283/2012 for AY 2006-07, (11) ITA No. 284/2012 for AY 2007-08, (12) ITA No. 285/2012 for AY 2008-09, (13) ITA No. 286/2012 for AY 2009-10, (14) ITA No. 329/2012 for AY 2006-07, (15) ITA No. 330/2012 for AY 2007-08, (16) ITA No. 331/2012 for AY 2008-09, (17) for ITA No. 152/2012 for AY 2006-07.

2. While admitting these appeals, this Court has framed the following substantial question of law:

“Whether on facts and in law the ITAT was right in holding that payment of uniform allowance etc. to the employees by the assessee is liable for FBT and by holding so it did not consider the fact that the payment of uniform allowance was nothing but additional salary paid in the form of an allowance within the meaning of section 17(1) (iv) attracting the TDS provisions of section 192 of the IT Act ?”

3. The facts of the present case are that for verification of compliances of TDS provisions survey were conducted in the offices Oil and Natural Gas Corporation Limited at its following offices:

1.ONGC workshop at Baroda 2.ONGC Basin office at Baroda, and 3.ONGC Ankleshwar Asset, falling under the jurisdiction of this office.

4. At the time of survey, besides details of contract payments and other miscellaneous payments, the salary payments to the employees was asked for, and verification was focused on salary and contract expenses incurred by the respective offices of the ONGC. That during the survey/verification of the salary details, it was informed that salary are prepared on computer and therefore, the concerned officers were requested to produce the details of payment of salaries to the employees and to produce form no. 16 for the preceding year for understanding and to provide the salary slips for the month of January, 2009.

4.1 The salary slips shown for employees for January, 2009 reflected that besides salary there was substantial amount of money has paid to each employee against the item CMRE under the column of “Earnings”. The cumulative receipts of above CMRE amount were reflected under the column “YTD Earning” and this amount was exceeding Rs. 50 thousands in each case. Below the above CMRE amount, there were other allowances under the earnings named as “OTHER (T)” and OTHER (NT). The amount of earnings reflected under the above allowances was substantial (in the range of Rs. 1 lakh).

5. On enquiring it was told that the amount of allowances shown as OTHER(NT) was presenting the amount of uniform allowance. On verification from Form 16 produced for test check for FY 2007-08, it was observed that the amount of (NT) allowances was not reflected in Form 16 for the relevant FY i.e. 2007-08.

5.1 The above facts were enquired for the FY 2008-09 as well (as Form 16 was not yet due for this year). But no evidence was produced to justify the non inclusion of these allowances in salary and no reasonable explanation was offered in support of not including

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