CROMPTON GREAVES LTD. v. ASSISTANT COMMISSIONER OF INCOME TAX
[Citation -2006-LL-0724-5]

Citation 2006-LL-0724-5
Appellant Name CROMPTON GREAVES LTD.
Respondent Name ASSISTANT COMMISSIONER OF INCOME TAX
Court ITAT
Relevant Act Income-tax
Date of Order 24/07/2006
Assessment Year 1997-98
Judgment View Judgment
Keyword Tags short-deduction of tax at source • reimbursement of expenditure • deduct tax at source • revenue authorities • actual expenditure • levy of interest • annual return • place of work • co-operative
Bot Summary: In ground No. A, the assessee is aggrieved by the decision of the learned CIT(A) in confirming the order of the AO treating the assessee-in-default under s. 201(1) and levying Rs. 3,82,993 being the amount of short-deduction of tax at source on reimbursement of conveyance allowance to the employees. The AO rejected the claim of the assessee, because it was a fixed sum given to the employees it could not be treated as reimbursement and accordingly held that there was a short- deduction of tax at source on conveyance allowance of Rs. 9,57,483 and levied a sum of Rs. 3,82,903 on the assessee under s. 201(1) of the Act. The learned CIT(A) dismissed the ground of the assessee relating to the validity of the order passed under s. 201(1) of the Act. The learned counsel appearing on behalf of the assessee contended that it w a s a case of reimbursement of expenditure incurred by the employees for commuting between residence to office and back though the same was given in the form of fixed allowance based upon the declaration given by the employees. The AO has treated the assessee-in-default under s. 201 r/w s. 192 of the Act by holding that conveyance allowance given by the assessee is not exempt under s. 10(14) of the Act because the same cannot be said to have been given to meet the expenses wholly, necessarily and exclusively incurred in the performance of duties. Further, Explanation to s. 17(2) of the Act also supports the case of the assessee. In view of our decision, we do not find any necessity to deal with the other contentions of the assessee, thus ground No. A of the assessee stands allowed.


This is appeal filed by assessee and directed against CIT(A) s order dt. 27th June, 2002 for asst. yr. 1997-98 in matter of assessment completed under s. 143(3) of IT Act, 1961. Parties are heard, material before us perused and factual matrix of case considered. In ground No. A, assessee is aggrieved by decision of learned CIT(A) in confirming order of AO treating assessee-in-default under s. 201(1) and levying Rs. 3,82,993 being amount of short-deduction of tax at source on reimbursement of conveyance allowance to employees. Briefly stated facts in this regard are that AO, during course of scrutinizing annual return relating to TDS under s. 192, observed that assessee had granted exemption to its employees under s. 10(14) of Act in respect of conveyance allowance given to them which ranged from Rs. 250 per month and Rs. 2,000 per month depending upon status and designation of t h e particular employee in company. AO rejected claim of assessee, because it was fixed sum given to employees, therefore, it could not be treated as reimbursement and accordingly held that there was short- deduction of tax at source on conveyance allowance of Rs. 9,57,483 and levied sum of Rs. 3,82,903 on assessee under s. 201(1) of Act. AO also levied interest of Rs. 1,41,246 under s. 201(1) of Act on this amount. Aggrieved by this, assessee preferred appeal before learned CIT(A). learned CIT(A) dismissed ground of assessee relating to validity of order passed under s. 201(1) of Act. learned CIT(A) held that reimbursement of conveyance expenses to its employees in respect of travelling from residence to office and back was made subject to fixed ceiling limit depending on status of employees but was not supported by any vouchers showing thereby actual incurrence of such expenses. learned CIT(A) also noticed provisions of law and held that expenses incurred or reimbursed for travelling prior to reaching and after leaving office were not qualified for exemption under s. 10(14) of Act and same would form part of salary within meaning of s. 17(2) of Act. Aggrieved by decision of learned CIT(A), assessee is in appeal before us. learned counsel appearing on behalf of assessee contended that it w s case of reimbursement of expenditure incurred by employees for commuting between residence to office and back though same was given in form of fixed allowance based upon declaration given by employees. ceilings of such allowance was also fixed based upon status and designation of employees and having regard to actual expenditure to be incurred by them according to mode of conveyance likely to be used by them. amount of allowance could not held as excessive or unreasonable so as to construe same as salary given in garb of reimbursement of expenses. learned counsel further contended that both Revenue authorities held that conveyance allowance given by employer for compensation of expenditure incurred on commuting from residence to office or vice versa could not be said as allowance given for purpose of duties which was not correct in view of Circular No. 23(L) iii-8 of 1956, dt. 9th July, 1956 wherein expenditure incurred on maintenance and use of car for purposes of employment included trips between residence and office or regular place of work, to and fro. learned counsel also pleaded that this circular was still relevant for purposes of interpretation of expenditure incurred for purposes of employment. learned counsel also placed reliance on decision of Division Bench of Tribunal in case of Industrial Credit & Investment Corpn. of India Ltd. vs. ITO (1993) 47 TTJ (Bom) 401 wherein it was held that if conveyance allowance paid to employees was not found to be of excessive or unreasonable having regard to escalating cost of travel by any mode of transport for commuting between residence and office, same would not be eligible to be included in salary of employee, hence employer would not be liable to deduct tax at source of such allowance. learned counsel also referred to provisions of Explanation to s. 17(2) of Act which clearly provides that use of any vehicle of company or employer for journey between office and residence and back would not be regarded as benefit granted to employee and would not be treated as perquisite, hence, on same logic, reimbursement of expenditure incurred by employees on use of transport from their residence to other places of work and back could not be regarded as perquisite. learned counsel also contended that employees were held as not liable to be taxed on amounts reimbursed to them in their individual assessments and where assessment of concerned employees had been completed, AO had no jurisdiction under s. 201 of Act to demand further tax from employer and in this regard, he placed reliance on following: (1) CIT vs. Manager, Madhya Pradesh State Co-operative Development Bank Ltd. (1982) 31 CTR (MP) 187: (1982) 137 ITR 230 (MP); (2) CIT vs. Divisional Manager, New India Assurance Co. Ltd. (1983) 33 CTR (MP) 248: (1983) 140 ITR 818 (MP); (3) CIT vs. Shri Synthetics Ltd. (1984) 39 CTR (MP) 72: (1985) 151 ITR 634 (MP); (4) Gwalior Rayon Silk Co. Ltd. vs. CIT (1983) 37 CTR (MP) 351: (1983) 140 ITR 832 (MP); (5) CIT vs. Hindustan Steel Ltd. 73 Taxation 153 (MP) (6) CIT vs. M.P. Agro Morarji Fertilizers Ltd. (1988) 73 CTR (MP) 180: (1989) 176 ITR 282 (MP); and (7) CIT vs. LIC of India (1986) 52 CTR (MP) 278: (1987) 166 ITR 191 (MP). Accordingly, learned counsel pleaded that order of Revenue authorities were liable to be quashed. learned Departmental Representative, on other hand, placed k reliance on order of learned CIT(A). We have considered submissions made by both parties and perused material placed before us and also applicable legal provisions. AO has treated assessee-in-default under s. 201 r/w s. 192 of Act by holding that conveyance allowance given by assessee is not exempt under s. 10(14) of Act because same cannot be said to have been given to meet expenses wholly, necessarily and exclusively incurred in performance of duties. AO has also held that it is not case of reimbursement of expenses incurred by assessee. Whereas, learned CIT(A) has held that expenses incurred or reimbursed for travelling prior to reaching and after leaving office are not qualified for exemption under s. 10(14)(1) of Act which means that even if it is case of reimbursement, same would not be eligible for exemption. learned CIT(A) has also placed reliance on decision of Hon ble jurisdictional High Court in case of LIC Class-I Officers (Bombay) Association vs. LIC of India & Anr. (1998) 229 ITR 510 (Bom) and decision of Divisional Bench of Tribunal in case of Dr. Reddy's Laboratories Ltd. vs. ITO (1996) 56 TTJ (Hyd) 38: (1996) 58 ITD 104 (Hyd) in support of his contentions. If we look at decision of Hon ble jurisdictional High Court in case of LIC of India (supra), it is noted that in that case Hon ble Court was seized with case where conveyance allowance was not reimbursement of expenditure incurred but it was given in terms of service rules irrespective of fact where employee was on duty or not and irrespective of distance from residence to office, and in this background Hon ble Court held that said allowance was not exempt under s. 10(14) of Act r/w r. 2BB(1)(c) of IT Rules, 1962. In present case, no material has been brought on record to show that it has been given in same manner and same circumstances, hence ratio of this decision cannot be applied in summarily manner. As far as decision of Division Bench of Tribunal in case of Dr. Reddy s Laboratories Ltd. (supra) is concerned, we find that Circular No. 23, dt. 9th July, 1956 was not brought to their notice and also earlier decision of Division Bench in case of Industrial Credit & Investment Corporation of India Ltd. (supra) was not brought to their notice. In any case, if two views are possible on particular issue, view favourable to assessee must be adopted as held by Hon ble Supreme Court in case of CIT vs. Vegetable Products Ltd. 1973 CTR (SC) 177: (1973) 88 ITR 192 (SC). Even legislature w.e.f. 1st Aug., 1997 recognised practice of fixed transport allowance given to employee on commuting from residence to office and back subject to maximum limit of Rs. 800 per month. Hence method adopted by assessee cannot be termed as to give salary in form of reimbursement of expenses. only question which arises is reasonableness of such conveyance allowance paid. However, no material has been placed to show limits fixed by assessee are unreasonable and excessive and in view of decision of Co-ordinate Bench of Tribunal in case of Industrial Credit & Investment Corporation of India Ltd. (supra) such reimbursement not being unreasonable or excessive, cannot be treated as perquisite. Further, Explanation to s. 17(2) of Act also supports case of assessee. We also find substance in contention of assessee that such reimbursement is for purposes of employment and it being reasonable cannot be considered as perquisite in view of Circular No. 23, dt. 9th July, 1956. In view of above facts and legal position, we are of considered opinion to reverse findings of learned CIT(A) and cancel levy of amount of Rs. 3,82,993 levied under s. 201 of Act. In view of our decision, we do not find any necessity to deal with other contentions of assessee, thus ground No. of assessee stands allowed. Ground No. B is regarding interest levied under s. 201(1A), which is consequential to ground No. and in view of our decision thereon, question of levy of interest is not genuine, hence assessee gets relief here also. Thus, this ground is also allowed. Ground No. C was not pressed, hence same is dismissed as not pressed. In result, appeal filed by assessee stands partly allowed. *** CROMPTON GREAVES LTD. v. ASSISTANT COMMISSIONER OF INCOME TAX
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