These appeals are preferred by assessee against respective orders of CIT(A) on common grounds. As such same were heard together and are being disposed of by this consolidated order. Though assessee has raised various grounds of appeal but all grounds relate to charging of additional tax under s. 201 of IT Act and interest under s. 201(1A) of IT Act. Brief facts borne from record are that assessee was engaged in business of television network to provide news, current affairs etc. and has deducted tax at source on various payments but has not deducted TDS on certain payments of allowances made to its employees. Since TDS was not paid within stipulated period, assessee company did not file its TDS return in time and survey under s. 133A was conducted on assessee s premises on 2nd Sept., 1998. At time of survey it was noticed by Department that company was paying various allowances such as news gathering allowances, reading allowances and telephone allowances to its employees and treated them to be tax-free allowances. show-cause notice under s. 131 was issued to assessee to show-cause as to why above allowances should not be included in total income of employees for calculating liability of TDS under s. 192 of IT Act. It was stated before AO that allowances given to employees to meet exigencies of business carried on by employer which are exempt under s. 10(14) of Act cannot be established that special allowances granted to employees were not to meet expenses wholly, necessarily, exclusively required for purpose of which they were allocated. Being not convinced with explanation of assessee, AO held that under law assessee was fully liable for deduction of tax at source on payments relating to above allowances. He further observed that above payments were part and parcel of salary but same has been paid in different names to avoid provisions of TDS and also to exclude it from purview of taxation. AO, accordingly, computed additional tax at 40 per cent on amount so deducted and interest under s. 201(1A) in both in assessment years. assessee preferred appeal before CIT(A) with submissions that t h e assessee company had not failed to deduct and pay tax as special allowances were not covered under s. 10(14) of Act, r/w r. 2BB of IT Rules. It was further stated that while levying additional tax and penal interest it was presumed by AO that assessee should have deducted tax at source under s. 192 on special allowances paid to staff members which were not in nature of perquisites in their hands so as to qualify for such deduction. CIT(A) was also not convinced with arguments of assessee and he confirmed additional tax and interest charged by AO. Now assessee has preferred appeal before Tribunal. Besides reiterating its contentions it was submitted that nature of business of assessee requires production of news programme and those on current affairs and programmes of general interest to viewers continuously and on daily basis. It had about 550 trained personnel working full time. Unfortunately, business suffered huge loss. In asst. yr. 1997-98 loss was at Rs. 27.49 crores and in asst. yr. 1998-99 it was at Rs. 27.42 crores. Because of heavy losses business stands practically closed with no employee is now available even to assist in handling income-tax matters. learned counsel for assessee further explained nature of allowances with submission that in fact these are reimbursement of certain expenses, which were erroneously called allowances. news allowances were in fact expenditure incurred in news gatherings. staff spent substantial time outside office for establishing contacts, meeting with people for purpose of news gathering. This involves incurring of expenses for assessee s business in nature of travelling/conveyance having tea, coffee with potential contacts and such like expenditure which is essential and imperative in this kind of business. reading allowance was also in fact expenditure incurred on purchase of newspaper and magazines etc. staff was also required to keep itself abreast of latest development in terms of news, stories etc. in print media. Therefore, expenditure incurred on purchase of newspapers, magazines etc. have to be reimbursed to staff for discharge of official duties. Likewise telephone allowances were also reimbursement of expenditure incurred o n telephones. Telephone is lifeline and critical input for this type of business. It is abiding link between staff, their supervisory officers, company, potential contacts and with customers etc. Providing telephone connection at residence of each member of staff of 550 trained personnel would have been very expensive and impractical proposition and therefore, assessee thought it fit to reimburse amount on account of telephone expenses incurred. learned counsel for assessee further contended that assessee has been duly deducting tax at source on salary paid to employees but no tax was deducted at source on reimbursement of these three types of expenditures incurred through employees for purpose of business of assessee. learned counsel for assessee further contended that limit of reimbursement of expenditure was fixed with upper cap according to status of employee keeping in view difficulties of verification of expenditure incurred by most of 550 employees. It was wholly and exclusively for purposes of company s business and no benefit or advantage was derived either by employees or assessee. assessee company had deducted tax at source on salary paid to employees and deposited same in time with IT Department. Under s. 192(1), assessee company was liable to deduct tax at source "on estimated income of assessee", under head "Salaries" for respective financial years. estimate made was bona fide and as such, assessee company could not be held to be in default under s. 201(1) and be charged to tax at ad hoc rate of 40 per cent of aggregate of reimbursement of three types of expenditure incurred by company s employees for purpose of its business. In support of this contention, he relied upon following judgments: (i) Sol Pharmaceuticals Ltd. vs. ITO (2003) 79 TTJ (Hyd) 319; (ii) Su-Raj Diamonds (India) Ltd. vs. ITO (2002) 75 TTJ (Mumbai) 766: (2002) 81 ITD 212 (Mumbai); (iii) K.L.M. Royal Dutch Airlines vs. Asstt. CIT (1998) 62 TTJ (Del) 268; (iv) Gwalior Rayon Silk Co. Ltd. vs. CIT (1983) 37 CTR (MP) 351: (1983) 140 ITR 832 (MP). learned counsel for assessee Mr. S.R. Wadhwa further contended that s. 191 of Act requires direct payment by assessee concerned where income-tax has not been deducted in accordance with provisions of Chapter XVII relating to collection/recovery of tax. years involved being asst. yrs. 1997-98 and 1998-99, assessments of employees must have been completed long back and tax raised must have been collected. same cannot b e collected twice for second time from employer, i.e., assessee company. In support of this contention that AO has no jurisdiction under s. 201(1) to demand further tax from employer in respect of tax short deducted relating to such employee, where regular assessment of employee has been completed and amount of tax fully paid by him, he has relied upon following judgments: (i) CIT vs. Divisional Manager, New India Assurance Co. Ltd. (1983) 33 CTR (MP) 248: (1983) 140 ITR 818 (MP) (ii) CIT vs. Shri Synthetics Ltd. (1984) 39 CTR (MP) 72: (1985) 151 ITR 634 (MP); (iii) CIT vs. Kannan Devan Hill Produce Co. Ltd. (1987) 63 CTR (Ker) 28: (1986) 161 ITR 477 (Ker); (iv) CIT vs. M.P. Agro Morarji Fertilizers Ltd. (1988) 73 CTR (MP) 180: (1989) 176 ITR 282 (MP); (v) Dy. CIT vs. Excel Industries Ltd. (2006) 5 SOT 235 (Mumbai); (vi) Gwalior Rayon Silk Co. Ltd. vs. CIT (supra); (vii) Associated Cement Co. Ltd. vs. ITO (2000) 68 TTJ (Mumbai) 220: (2000) 74 ITD 369 (Mumbai). It was further contended that assessee cannot be termed to be assessee-in-default under provisions of s. 201 of IT Act as assessee had deducted tax on salaries paid to employees in light of facts that assessment years involved are 1997-98 and 1998-99 and amendment was brought in this section by Finance Act, 2002 though with retrospective effect 1st April, 1962. In support of this proposition assessee has placed heavy reliance upon order of Tribunal in case of Dy. CIT vs. Excel Industries Ltd. (supra) in which it has been held that default under s. 201 is for non-deduction and not for short deduction. Since s. 201 is penal section, it has to be strictly construed and it cannot be assumed that due to difference of opinion as to taxability of item, employer has to be declared to be assessee-in-default. learned counsel for assessee further contended that assessee had bona fide belief for non-deducting tax on payment of these so-called allowances that there are only reimbursement of expenses incurred by employees. assessee thus cannot be called to be-in-default and penalty under s. 201 cannot be fastened. In support of this contention, he has relied upon order of Tribunal in case of Su-Raj Diamonds (India) Ltd. vs. ITO (supra). learned counsel for assessee further contended that there is no machinery vide s. 201(1A) to charge interest where no tax is deducted. manner of computing tax is not provided but AO had charged it at rate of 40 per cent on reimbursement of all these expenditures. For purpose of computing tax, provision of rate is material provision and so also date of payment of tax. s. 201(1A) provides that interest shall be charged from date from which tax was deductible to date on which such tax is actually paid. There is no case of actual payment where employer has bona fide belief that tax is not deductible and expression actually paid cannot possibly refer to tax paid by employees so large in number as to make exercise to ascertain dates of payment tax virtually impractical and futile. If no fault is found with employer for non- deducting tax on some controversial addition or deducted and paid on fair and honest estimation, he cannot be declared to be assessee deemed to be in default and question of levy of interest under s. 201(1A) does not arise. In support of this contention, he placed reliance upon following judgments: (a) Gwalior Rayon Silk Co. Ltd. vs. CIT (supra). (b) Orient Paper & Industries Ltd. vs. CIT (1982) 12 TAXMAN 348 (MP). (c) Dy. CIT vs. Excel Industries Ltd. (supra). learned Departmental Representative, on other hand, submitted that assessee itself has given nomenclature of these payments to be allowances. While making payment of these allowances, he did not make any verification of bills or vouchers of expenditure incurred by assessee. Certain allowances are fixed according to their posts and salary of employees. Since assessee has made payment of allowances, it formed part of salaries and is exigible to tax and in these circumstances, assessee was required to deduct TDS on these payments and if he fails to do so, he would be deemed to be assessee-in-default for purpose of s. 201 of IT Act. learned Departmental Representative further contended that in fact these payments are in nature of perquisites which are to be taxed in hands of employees as part of salary and assessee was required to deduct TDS. Having considered rival submissions and from careful perusal of record and nature of business of assessee, we find that undisputedly assessee company had been running news and current affairs television network and in this type of business assessee company requires production of news programmes and also on current affairs of general interest of viewers continuously. All these information were collected through employees who had to incur certain expenditure in this line of business. contention of assessee that staff of assessee spent substantial time outside office for establishing contacts for purpose of news gathering and to keep itself abreast of latest developments in terms of news, stories etc. certain expenditure are bound to be incurred, cannot be outrightly rejected. In this type of business certain expenditure is bound to be incurred by employees on telephones, newspapers, magazines etc. without which it may be difficult for them to keep themselves upbreast with latest information/developments. In this scenario, contention of assessee that expenditures were reimbursed to employees with certain cap cannot be discarded. In any case claim with regard to expenses whether it was mere reimbursement of expenditure claimed by employees for business purposes or it was allowance in nature of perquisites forming part of salary is in fact debatable issue. We have also carefully examined order of Tribunal in case of Smith (Inspector of Tax) vs. Abbot (1994) 210 ITR 323 (CA), in which special allowance for purchasing newspapers and periodicals in order to equip themselves for performance of duties of their office paid to journalists was considered to be reimbursement of expenditure incurred and was held to be exempt from tax. Likewise in case of Sol Pharmaceuticals Ltd. vs. ITO (supra) it was held that if assessee did not deduct tax at source as required under s. 192 in respect of various allowances paid to its employees under honest belief that these allowances were exempt from tax, as they were paid by way of reimbursement of expenses within ceiling fixed by it, assessee cannot be held to be in default in terms of s. 201. In case of K.LM. Royal Dutch Airlines vs. Asstt. CIT (1998) 62 TTJ (Del) 268 assessee has been reimbursing its employees conveyance expenditure since long and at no point of time revenue pointed out that amounts reimbursed could come within ambit of s. 192. Therefore, it was bona fide belief that this amount did not require tax deduction at source. As such, there was no material to indicate that conduct of assessee is not bona fide. Hence assessee cannot be deemed to be assessee-in-default. If claim of assessee that these allowances are nothing but reimbursement of expenditure incurred by its employees is viewed in light of various orders of Tribunal, we would find that there is debate on nature of expenses whether they are reimbursement of expenditure incurred by employees or they are perquisites and form part of salary. In these circumstances, benefit should go to assessee as he is under bona fide belief that these are mere reimbursements of expenditure incurred by assessee and are not chargeable to tax, under this bona fide belief, he did not deduct TDS. So far as applicability of s. 201 is concerned, we have examined this section very carefully and we find that before amendment by Finance Act, 2002 this section can only be invoked if assessee does not deduct tax or after deduction, failed to pay tax as required under this Act. If he does so, he would be deemed to be assessee-in-default in respect of taxes. After amendment by Finance Act, 2002 though with retrospective effect 1st April, 1962 assessee would be deemed to be in default even if does not deduct 1962 assessee would be deemed to be in default even if does not deduct whole or any part of tax also. Since amendment was brought by Finance Act, 2002, implications of amendment was not known to assessee while deducting taxes in financial year prior to 2001. instant cases pertains to financial years 1996-97 and 1997-98 and at relevant point of time this amendment was not there and as per pre-amended sections, assessee can only be termed to be assessee-in-default when he fails to deduct entire tax at all and not on account of short deduction of tax. This aspect was examined by Tribunal in case of Excel Industries Ltd. (supra) in which it has been held that penalty under s. 201 is for not deduction of tax and not for short deduction. It was also held that since s. 201 is penal section, it has to be strictly construed and it cannot be assumed that due to difference of opinion as to taxability of item, employer has to be declared to be assessee-in-default. relevant observation of Tribunal is extracted hereunder for sake of reference: "A bare reading of this section shows that interest under s. 201(1A) r/w s. 201(1) can be levied only when: person is declared as assessee-in-default. When person is declared as assessee-in-default, then it has to be seen whether interest as per s. 201(1A) can be computed. For computation of interest, there are three elements. One is quantum on which interest has to be levied. Second is rate at which interest has to be charged and third is period for which interest has to be charged. rate is provided in Act under s. 201(1A) itself. It is not in dispute. Then comes quantum on which interest has to be paid. sub-s. (1A) specifies on amount of such tax which is mentioned in sub-s. (1), wherein, it is amount of tax in respect of which assessee has been declared in default. Further, there is no provision of penalty under s. 201(1). After declaring assessee as deemed to be in default, AO has to resort to s. 221 for levy of penalty. Sec. 201(1) provides that without prejudice to any other consequences, which assessee may incur he will be deemed to be assessee-in-default in respect of that sum (for which he has been declared deemed to be in default). Thus, levy of penalty as per proviso is in addition to any other consequences to assessee as provided in Act under any other Act, [no Act is mentioned in sub-s. (1)]. Therefore, it is quite clear that penalty under s. 221 as per proviso can be levied only after assessee is declared as deemed to be in default or sum of tax not deducted at source or after deduction not paid to credit of Central Government in time as provided under Act. interest under s. 201(1A) can also be levied only after assessee is declared as deemed to be in default. Thus, in case where assessee is not declared as deemed to be in default or has wrongly been declared, then neither penalty under s. 221 can be levied nor interest under s. 201(1A) can be charged. Proviso to s. 201(1) provides one exception to main sub-section. It provides that no penalty shall be charged under s. 221 from such person, unless AO is satisfied that such person has without good or sufficient reasons failed to deduct and pay tax. main sub-section does not provide levy of penalty. main section only provides as to under what circumstances person can be declared as deemed to be in default. Thus, proviso attached to this sub-section carves out only exception to what is provided in main section. proviso enacted to sub-s. (1) cannot carve out exception to another section, in this case s. 221. Thus, one is not required to go to s. 221 in respect of person, who is saved by virtue of proviso. One will go to s. 221 only when person does not fall in, i.e., not saved by proviso to s. 201(1). section for levying penalty for default in payment of tax is s. 221. In that section word used is "levied". In proviso to s. 201(1), word used is charged . difference between charge and levy used in second proviso to s. 221(1) is obvious. That is, only those persons will be liable to penalty under s. 221 who are declared as deemed to be-in-default after holding that they did not have good and sufficient reasons for not deducting tax or not paying in time to Central Government. Thus, person who has not committed any default in TDS, he is not at all liable to penalty. One is not required to take recourse to s. 221 in their cases. And further, person, who is not in default is also not covered by s. 201(1A), thus. before invoking s. 221 AO has to clear hurdle provided by s. 201(1) i.e., he has to first declare assessee in-default. Interest under that section can also not be charged on assessee not declared-in-default, which is clear from wordings used in s. 201(1A). Liability to pay interest under s. 201(1A) arises only in those cases who are declared assessee as deemed to be in default as that sub-section refers for such liability of interest to persons mentioned in sub-s. (1). From this it is that if assessee is not in default he is not liable to pay interest under s. 201(1A) also. M.K. Kirtikar vs. CIT (1955) 25 ITR 908 (Bom), Gwalior Rayon Silk Co. Ltd. vs. CIT (supra), Orient Paper and Industries Ltd. vs. CIT (supra) and CIT vs. M.P. Agro Morarji Fertilizers Ltd. (1988) 73 CTR (MP) 180: (1989) 176 ITR 282 (MP) relied on. Levy of interest under s. 201(1A) is posterior action to declaring assessee (employer) as deemed to be in default. If no fault can be found with employer for not deducting tax on some controversial addition or deducting tax on some controversial addition or deducting and paying tax on honest and fair estimation, then he cannot be declared as assessee deemed to be-in-default. Under such circumstances, question of levy of interest under s. 201(1A) would not arise. Sec. 201 has two levels. One is that employer has not deducted tax and second is that after deduction he has failed to pay to Government. There is nothing in s. 201 to treat employer in default for deduction. default in s. 201 is not non-deduction and not for short deduction. Since s. 201 is penal section, it has to be strictly construed and it cannot be assumed that there was duty to deduct tax strictly in accordance with computation under Act and for any shortfall as compared to such strict computation, employer can be declared as assessee-in-default, i.e., it cannot be assumed that due to difference of opinion as to taxability of item, employer has to be declared to be assessee-in-default. In present case, AO has passed order directing assessee to pay Rs. 4,60,832 under s. 201(1), as is evident from last para of order under s. 201(1) passed by AO on 23rd March, 2001 . There is no specific order declaring assessee as deemed to be in default . This order is necessary so that further consequences would follow and assessee can file appeal against this specific order by AO. On this account alone, order of AO under s. 201(1) is liable to be quashed. Even though, CIT(A) has mentioned in his order that AO has treated assessee-in-default for not including conveyance allowance in computation of salary for purposes of TDS, but such finding of CIT(A) are only presumptive or speculative as in order there is no such specific finding by AO declaring assessee as deemed to be in default, even though default, as prescribed by AO, has been mentioned. specific finding to declare assessee deemed to be in default is necessary for further consequences as provided in ss. 201(1A) and 221. Merely describing default is not enough for charging interest and levy of penalty under s. 221. It may be enough for recovery of tax relating to default by issuing demand notice under s. 156. But levy of penalty under s. 221, charging of interest under s. 201(1 A) and creating of charge over all these assets of person in default as per sub-s. (2) would follow only when there is specific order declaring employer as deemed to be in default P. vs. Rajagopal vs. Union of India (1999) 151 CTR (AP) 442: (1998) 233 ITR 678 (AP), Mahindra & Mahindra Ltd. vs. ITO (1996) 55 TTJ (Bom) 174 and Mettur Chemicals & Industrial Corporation Ltd. vs. IAC (1984) 150 ITR 341 (Mad) relied on." other arguments of assessee that if allowances were considered to be perquisites and part of salaries, they must have been taxed in hands of employees in their respective assessments has also some force but in this regard neither assessee has produced any evidence in support of its claim nor Revenue controverted this argument with some evidence. It is however, held by Hon ble High Court of Madhya Pradesh in case of Gwalior Rayon Silk Co. Ltd. vs. CIT (supra) that where regular assessment of employee has been completed and amount of tax fully paid by him, ITO (TDS) has no jurisdiction under s. 201 to demand further tax from employer in respect of tax deducted relating to such employee. In instant case, since assessment years involved are 1997-98 and 1998-99, assessment in hands of employees must have been completed and if allowances were considered to be perquisites, it must have been taxed in hands of employees or in case it was considered to be reimbursement of expenditure, no tax might have been charged on these payments. In that case assessee has better case in support of his bona fide belief. In any case, if it is charged to tax in hands of assessee, it certainly amounts to double taxation. Keeping in view totality of facts and circumstances of case, we find that first of all assessee has deducted TDS on salaries paid to employees and deducted tax was duly paid to Department. default was employees and deducted tax was duly paid to Department. default was only with regard to this payment of reimbursement of expenditures which were termed to be allowances paid to employees meaning thereby it was case of short deduction of tax and according to order of Mumbai Bench of Tribunal in case of Excel Industries Ltd. (supra) default in s. 201 is for non- deduction of taxes and not for short deduction of taxes. In light of this judgment of Tribunal, assessee cannot be held to be-in-default in respect of short deduction of tax. Once assessee cannot be held to be-in-default, impugned additional tax and interest under s. 201(1A) cannot be charged against assessee. If we go to next argument with regard to bona fide belief of assessee for non-charging of tax on these payments, we find that it h s been repeatedly held by Tribunal in aforesaid judgments that wherever debate is needed on particular claim, assessee may have bona fide belief in this regard. Accordingly, we have no hesitation in holding that assessee has bona fide belief with regard to these allowances which were claimed to be reimbursement of expenditure incurred by assessee and according to provisions of s. 201 once assessee made this short deduction of tax or did not deduct tax under bona fide belief, provision of s. 201 cannot be invoked and additional tax cannot be charged against assessee. From any angle if case is viewed, it is fit case in which additional tax and interest under s. 201(1A) cannot be charged. We therefore, set aside order of CIT(A) and delete additional tax and interest charged against assessee. In result, appeals of assessee are allowed. *** BUSINESS INDIA TELEVISION INTERNATIONAL LTD. v. ASSISTANT COMMISSIONER OF INCOME TAX