Commissioner of Income-tax (TDS) v. Oil and Natural Gas Corporation Ltd
[Citation -2020-LL-0317-31]

Citation 2020-LL-0317-31
Appellant Name Commissioner of Income-tax (TDS)
Respondent Name Oil and Natural Gas Corporation Ltd.
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act Income-tax
Date of Order 17/03/2020
Assessment Year 2010-11
Judgment View Judgment
Keyword Tags deduction of tax at source • expenditure incurred • claim of exemption • fringe benefit tax • standard deduction • uniform allowance • exempt from tax • perquisite • reimbursement of expenditure • charging of interest
Bot Summary: 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 Page 3 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT not possible per employee even after use all the time and day and night. Mr. M.R. Bhatt, Senior Advocate, learned counsel for the appellant submitted that during the fringe benefit tax regime, the assessee treated uniform allowance as a perquisite; therefore, such uniform allowance cannot cease to be a perquisite. According to the learned counsel, the entire facts are inbuilt even with regard to uniform not being prescribed and that the Tribunal has gone on the aspect of self-certification without going into the issue of non- prescription of uniform. The Assessing Officer had noted that during the survey operation, the employees were not wearing any uniform and in his statement, the Senior Finance and Accounts Officer of ONGC, had stated that though previously uniform was prescribed by ONGC, with effect from 16.11.1995, such prescription was done away with and that despite discontinuance of uniform at work place, ONGC continued to pay uniform allowance, which was later adjusted toward employees contribution to the pension fund. In the present case, while passing the order under section 201(1) read with section 201(1A) of the Act, it is not the case of the Assessing Officer that no uniform has been prescribed by the assessee for its employees and the amount paid towards uniform allowance is not exempt section 10(14)(i) of the Act. No ground has been raised to the effect that as no uniform had been prescribed, no claim towards uniform allowance could have been allowed. On behalf of the revenue, it has been contended that the second ground raised before the Tribunal would take within its fold the requirement of prescription of a uniform, and that the expenditure had to be incurred towards such prescribed purpose; whereas in the facts of the present case, the Tribunal, without deciding the basic issue as to whether uniform had in fact been prescribed, dismissed the appeal by following its earlier decisions which related assessment years when the fringe benefit tax regime was in force.


C/TAXAP/1218/2018 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 1218 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE DR.JUSTICE A. P. THAKER 1 Whether Reporters of Local Papers may be allowed to No see judgment ? 2 To be referred to Reporter or not ? No 3 Whether their Lordships wish to see fair copy of No judgment ? 4 Whether this case involves substantial question of law No as to interpretation of Constitution of India or any order made thereunder ? COMMISSIONER OF INCOME TAX (TDS) Versus OIL AND NATURAL GAS CORPORATION LTD Appearance: MR MR BHATT, SENIOR ADVOCATE with MRS MAUNA M BHATT(174) for Appellant(s) No. 1 MR SN SOPARKAR, SENIOR ADVOCATE with MR AKSHAT KHARE(5912) for Opponent(s) No. 1 MRS SUMAN KHARE(2226) for Opponent(s) No. 1 CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE DR.JUSTICE A. P. THAKER Date : 17/03/2020 Page 1 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT ORAL JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. By this appeal under section 260A of Income Tax Act, 1961 (hereinafter referred to as Act ), appellant - Commissioner of Income Tax (TDS) has called in question order dated 16.3.2018 passed by Income Tax Appellate Tribunal, Surat Bench, Surat (hereinafter referred to as Tribunal ) in ITA No.2436/Ahd/2014/SRT for assessment year 2010-11. 2. By order dated 9.10.2018, this court had issued notice for final disposal to consider following substantial question of law: Whether Income Tax Appellate Tribunal was right in law in confirming order of Income Tax Appellate Tribunal (sic. Commissioner of Income Tax (Appeals)) deleting additions made by Assessing Officer under section 201(1) of Income Tax Act, 1961, and consequential interest charged by Assessing Officer in relation to assessee s payments to its employees under head of uniform allowance? 3. On 22.11.2010, survey was conducted at office premises of assessee - Oil and Natural Gas Corporation Limited. During course of survey, it was noticed that assessee had made payments under head uniform allowance ; however, deductor had neither included this allowance to total salary payments nor had he deducted tax at source (TDS) on such income. On these issues, additions Page 2 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT were made in immediately preceding financial year 2009- 10 under section 201(1) read with section 201(1A) of Act. Assessing Officer noted that there was no provision for granting exemption on basis of self certification. He further noticed that reimbursement of uniform allowance was not being treated as taxable for assessment year and assessee had disclosed in writing that out of around 790 to 800 employees at Hazira, 752 employees had taken this reimbursement on basis of self-certification and thus, it has not been included in gross salary chargeable to TDS under section 192 of Act for financial year in question presuming that since employees had given self certification, they might have incurred or would be incurring such expenditure. Therefore, no further check had been observed by 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 relevant point of time during relevant financial year or thereafter. According to Assessing Officer, there is no direct provision under which such exemption can be provided on basis of self certification. He also found that all 752 employees were given sum of Rs.52,364/- uniformly in year and this system of self certification was prevalent from years together unhindered. Assessing Officer noted as to how all employees would uniformly incur such expenditure irrespective of their post and necessity and as to how 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 employer and instead simple format has been devised and all employees were indiscriminately putting their claims of such huge cost of uniforms and their maintenance which was Page 3 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT not possible per employee even after use all time and day and night. According to Assessing Officer, such huge expenditure was not feasible and was highly disproportionate and that there was no justification on part of employer in incurring such huge expenditure. That even after paying such huge amounts, Drawing Disbursing Officer (DDO) was treating this segment of income for employees as exempt and holding these reimbursements as exempt. He further observed that DDO had not called for bills and vouchers to examine veracity of claim of uniform allowance and had accepted self certification given by employees. 3.1 Assessing Officer noticed that section 10(14)(i) of Act provides that any such special allowance or benefit, not being in nature of perquisite within meaning of clause (2) of section 17, specially granted to meet expenses wholly, necessarily and exclusively incurred in performance of duties of office or employment of profit, as may be prescribed to extent to which such expenses are actually incurred for that purpose. According to Assessing Officer, such allowances firstly become part of salary and exempt to extent of spending, but assessee had not included these allowances as part of salary and had not examined aspect of actual expenditure and instead had taken self certification at beginning of financial year from all employees without verification of claim to ascertain whether such expenditure had actually been incurred for purpose. He further noted that section 192 of Act casts responsibility on employer to deduct proper TDS from salary of employee. Salary includes allowances/ reimbursements which are conditionally exempt. It is Page 4 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT responsibility of employer to ascertain correctness of claim of exemption of any allowance before allowing it as exempt. If employer finds claim of employee to be correct, he can consider such claim while computing taxable income and tax thereon; whereas in this case, employer has allowed blanket exemption to its employees without any verification. None of employees on his own has added allowances received to his own income in his individual income tax return and has claimed exemption under section 10(14)(i) of Act, which shows that government has lost revenue to that extent due to non-deduction of TDS by employer. 3.2 On behalf of assessee, it was contended that such reimbursement is exempt under rule 2BB (1)(f) of Income Tax Rules, 1962 (hereinafter referred to as rules ) read with section 10(14)(i) of Act. However, Assessing Officer was of view that such reimbursement was completely out of provisions of rule 2BB of rules read with section 10(14)(i) of Act. He, accordingly, treated reimbursement of Rs.3,92,67,843/- for 752 employees as taxable whereon TDS was not deducted by DDO in financial year 2010 and held that same is required to be taxed now. 4. assessee carried matter in appeal before Commissioner (Appeals). Before Commissioner (Appeals) assessee placed reliance upon CBDT Circular No.15 dated 8.5.1969 and submitted that similar issue, that is, reimbursement of uniform allowance on basis of declaration by employees had been decided in favour of Page 5 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT assessee in its own case for its Baroda Division by Income Tax Appellate Tribunal D Bench, Ahmedabad in ITA No.184-185 and 1066 and 609 -611/Ahd/2010 for assessment year 2009-10. It was submitted that similar issue was decided in favour of assessee in its own case by decision dated 11.1.2013 in Tax Appeal No.152 to 154, 156 to 158, 283 to 286 and 329 to 331 of 2012 following decision in case of ONGC, Baroda. 4.1 Commissioner (Appeals) held that there exists circular of Board enabling non-deduction of tax from reimbursement of allowances on strength of certificate of utilisation from employees. He further observed that in any case matter was decided in favour of assessee in its own case for earlier years. Following said decisions, Commissioner (Appeals) has held that there was no liability for deduction of tax from payments made to employees as uniform allowance on strength of certificate given by employees for utilisation of same. He, accordingly, held that assessee cannot be said to be as assessee in default within meaning of section 201(1) read with section 201 (1A) of Act and deleted payment of Rs.1,60,21,247/- raised under section 201(1) and 201(1A) of Act. 5. revenue preferred appeal before Tribunal. Before Tribunal, it was contended on behalf of revenue that specified allowances under section 10(14)(i) of Act are exempt to extent these are actually incurred for that purpose; that uniform allowance had been allowed ignoring fact that such claim had been allowed without fulfilling conditions as laid down under section 10(14)(i) of Act. Page 6 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT 5.1 Tribunal, after considering submissions advanced on behalf of respective parties, observed that uniform given to employee for using same during his duty hours is presumed to be used for purpose of employment only. When there was circular of CBDT enabling assessee for non-deduction of tax from reimbursement of allowances on basis of utilisation certificate of employee, there was no liability on part of assessee for deduction of tax from payments made to employees as uniform allowance. Tribunal was of opinion that conclusion drawn by Commissioner (Appeals) is correct and accordingly dismissed appeal. 6. Mr. M.R. Bhatt, Senior Advocate, learned counsel for appellant submitted that during fringe benefit tax regime, assessee treated uniform allowance as perquisite; therefore, such uniform allowance cannot cease to be perquisite. It was submitted that fringe benefit tax provisions have been omitted from assessment year commencing from 1st day of April, 2010, that is, from assessment year 2010-11 vide Finance (No.2) Act, 2009 with effect from 1.4.2009, accordingly, reimbursement of uniform allowance made by assessee for assessment year 2010-11 was not governed by provisions of section 115WB(E) of Act and hence, decision of Tribunal in ITA No.184-185 and 1066 and 609-611/Ahd/2010 in assessee s own case for assessment year 2009-10 is not applicable in case of assessee for assessment year 2010-11 and hence, Tribunal was not justified in placing Page 7 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT reliance upon said decision. It was submitted that Commissioner (Appeals) has placed reliance upon decisions of Tribunal which were carried to High Court in Commissioner of Income tax v. Oil and Natural Gas Corporation Limited, (2015) 61 taxmann.com 105 (Guj.), and issue was decided in favour of assessee. It was submitted that said decision had been rendered in context of fringe benefit tax (uniform allowance) in context of provisions of section 17(2)(vi) and section 115 WB(2)E of Act; whereas in facts of present court, court is concerned with exemption clause contained in section 10(14)(i) of Act read with rule 2BB of rules. It was submitted that, therefore, said decision would have no applicability to facts of present case. 6.1 It was submitted that in case of Ankleshwar Division of assessee itself, there is decision of this court on question of absence of uniform whereby court has held that no uniform was prescribed for employees of assessee. It was contended that therefore incongruous situation has arisen whereby in respect of very same issue, namely, whether claim of uniform allowance is exempt section 10(14)(i) of Act, this court has held that claim is not admissible in absence of uniform having been prescribed, whereas in respect of same issue, Tribunal has allowed such claim. According to learned counsel, entire facts are inbuilt even with regard to uniform not being prescribed and that Tribunal has gone on aspect of self-certification without going into issue of non- prescription of uniform. Page 8 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT 6.2 Reference was made to above decision of this court in case of Oil and Natural Gas Corporation Ltd. v. Assistant Commissioner of Income tax (TDS), 73 taxmann.com 273, wherein court, in context of section 10(14)(i) of Act read with clause (f) of rule 2BB(1) of rules, had held that in context of statutory provisions, it was necessary to ascertain whether employer had granted allowances to meet expenditure incurred by employer on purchase or maintenance of uniform for wearing during performance of duties of office or employment of profit. court, in facts of said case, found that though previously uniform was prescribed by ONGC, with effect from 16.11.1995, such prescription was done away with. On behalf of assessee, reliance was placed upon Circular dated 29.3.2010 which prescribed certain dress code to be followed by employees. court held that if for sake of arguments it is accepted that dress code as referred to in Circular dated 29.3.2010 or similar was prescribed during period under consideration, it did not find that same would qualify as prescription of uniform. court, accordingly, did not find any merit in appeal and dismissed same. It, however, clarified that observations in order are confined to material on record. If ONGC produces any other evidence in this respect in assessment proceedings which may be pending at different stages, authorities would take view on basis of evidence that may be brought on record. 6.3 It was submitted that this court, in assessee s own case, having come to conclusion that ONGC had not prescribed any uniform for its employees, as necessary Page 9 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT corollary it follows that in absence of any uniform having been prescribed, payment made in respect of uniform allowance is not exempt under section 10(14)(i) of Act. Tribunal was therefore not justified in confirming order of Commissioner (Appeals) deleting additions made by Assessing Officer under section 201(1) of Act and consequential interest charged by Assessing Officer in relation to assessee s payments to its employees under head of uniform allowance. 6.4 It was further submitted Commissioner (Appeals) as well as Tribunal were not justified in placing reliance on Circular No.15 dated 8.5.1969 inasmuch as clarification contained in circular is only qua conveyance and cannot be enlarged to make it applicable to uniforms as that would amount to adding words to clarificatory circular. 7. Mr. S.N. Soparkar, Senior Advocate, learned counsel for respondent assessee, submitted that reliance placed by appellant upon decision of this court in Oil and Natural Gas Corporation Ltd. v. Assistant Commissioner of Income Tax (TDS) 73 taxmann.com 273, is misconceived, inasmuch as, prescription of uniform has never been questioned in facts of this case. It was submitted that whether or not uniform has been prescribed is essentially question of fact, and hence, court cannot be called upon to invoke such facts which were never before Tribunal. 7.1 It was submitted that whether uniform is prescribed or not was not in issue in present case. What was in issue was validity of self certification. Therefore, whole Page 10 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT contention canvassed before this court regarding uniform not having been prescribed does not arise out of impugned order. It was emphatically argued that therefore, issue that is raised before this court is not coming out of order of Tribunal as it was not even case of department that there was no uniform. 7.2 Reliance was placed upon decision of this court in Assistant Commissioner of Income Tax v. Ashima Syntax Ltd., (2001) 251 ITR 133 (Gujarat), wherein court noted that in that case revenue had contended that assessee having capitalised expenditure in books of account of company, company cannot claim depreciation. However, this was not issue raised before Tribunal and there was no finding recorded by Tribunal in this behalf. court held that as issue was not arising out of order rendered by Tribunal, it would not be open for revenue to contend said submission. 7.3 Reliance was also placed upon decision of Punjab and Haryana High Court in Echo Shella v. Commissioner of Income Tax-I Chandigarh, [2007] 293 ITR 234 (P&H) wherein court held thus: 5. only submission made by counsel for appellant is that while confirming impugned addition, expenses on electricity labour, etc., have not been considered by authorities below. perusal of orders of all authorities below show that no such claim was made at any stage. Accordingly, same cannot be permitted to be raised at this stage before this court. It is quite evident that rates at which valuation was made, were supplied by partner of assessee-firm itself. So to state that there was error in Page 11 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT calculation is neither here nor there. Once assessment of valuation has been made as per material supplied by assessee himself, there is no question of challenging same either on ground that same is incorrect or that assessee was not given proper opportunity to explain same . 7.4 Reliance was placed upon decision of Delhi High Court in Commissioner of Income Tax v. Indocount Finance Ltd. [2004] 271 ITR 215 (Delhi) wherein court held thus: 3. We are unable to agree with learned counsel. We find that before first appellate authority it was specifically pleaded on behalf of assessee that there was no difference in use of trucks by assessee as owner on hire or in giving trucks to some other party for using them in their business on hire . first appellate authority has not commented adversely on said plea. Even before Tribunal it was never pleaded that leased out trucks were not used in business of hire. It is now too late in day for Revenue to raise such issue for first time in this appeal, which, having regard to limited jurisdiction of this Court under section 260A of Act, cannot be permitted. It was then contended by learned counsel for Revenue that Supreme Court has now issued notice in some of special leave petitions filed by Revenue on similar issue. 7.5 Reference was also made to decision of Madhya Pradesh High Court in Commissioner of Income Tax v. Smt Kiran Devi Kailashchand, [2006] 286 ITR 612 (MP), wherein court held that it is settled principle of law that question of law framed at instance of appellant in appeal filed under section 260A of Act must arise out of order impugned in appeal. It is only then that High Court exercising powers under section 260A as appellate Page 12 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT court gets jurisdiction to decide question so framed. In other words, there has to be first finding recorded by Tribunal on question framed against appellant in impugned order. It is only then that appellant becomes entitled to assail finding in appeal under section 260A by getting question framed on such adverse findings recorded by Tribunal. In absence of any such finding being recorded by Tribunal, appellant has no right to raise such plea. 7.6 It was submitted that in light of settled legal position as enunciated in above decisions, question as to whether or not uniform had been prescribed by assessee being essentially question of fact, which had not been raised before Tribunal, does not arise out of impugned order, and hence, it is not permissible for revenue to raise such plea. 7.7 As regards applicability of Circular No.15 dated 8.5.1969, it was submitted that circular is clear, namely that self certification is permissible. It was submitted that in case of individual employee, Assessing Officer of concerned employee can examine validity of claim of exemption under section 10(14)(i) of Act qua uniform allowance if self certification is found to be doubtful. It was submitted that insofar as employer is concerned, he is only concerned with deduction of tax at source, provided income is taxable. If employee concerned, certifies that he has incurred expenditure towards uniform allowance, which is exempt under section 10(14)(i) of Act read with clause (f) of rule 2BB(1) of rules, such self certification is good Page 13 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT enough for employer not to deduct tax at source, though it does not grant immunity to employee if claim is incorrect. In support of such submission, learned counsel placed reliance upon decision of this court in Commissioner of Income-tax v. Oil & Natural Gas Corporation Ltd., [2002] 254 ITR 121 (Guj.), reference to which shall be made subsequently. 8. In rejoinder, Mr. M.R. Bhatt, learned counsel for appellant submitted that even as per paragraph 21 of decision of this court in Oil and Natural Gas Corporation Ltd. v. Assistant Commissioner of Income tax (TDS), 73 taxmann.com 273, liberty was granted to assessee to produce evidence in respect of assessment proceedings pending at different stages. Therefore, assessee could have produced evidence in this case; however, no such facts have come on record. It was, accordingly, urged that matter requires consideration on questions as proposed or as may be formulated by this court. 9. As can be seen from contentions raised by learned counsel for appellant, strong reliance has been on decision of this court in Oil and Natural Gas Corporation Ltd. v. Assistant Commissioner of Income tax (TDS), 73 taxmann.com 273, therefore, at outset, it may be necessary to refer to same to understand nature of controversy before court in that case so as to ascertain as to whether or not same is applicable to facts of present case. 10. In Oil and Natural Gas Corporation Ltd. v. Assistant Page 14 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT Commissioner of Income tax (TDS), 73 taxmann.com 273, issue involved pertained to requirement of deducting tax at source by assessee as employer on payments made to employees under heading of uniform allowance. assessment year was 2010-11, which is assessment year in question in present case also. It was case of Assessing Officer that no uniform was prescribed by employer and that, therefore, payment of allowance under head of uniform allowance would not fall within exemption clause of section 10(14)(i) of Act read with rule 2BB of rules. Assessing Officer had noted that during survey operation, employees were not wearing any uniform and in his statement, Senior Finance and Accounts Officer of ONGC, had stated that though previously uniform was prescribed by ONGC, with effect from 16.11.1995, such prescription was done away with and that despite discontinuance of uniform at work place, ONGC continued to pay uniform allowance, which was later adjusted toward employees contribution to pension fund. It was in aforesaid factual backdrop that this court upheld order of Tribunal which had held that as no uniform was prescribed by ONGC, payment made towards uniform allowance was not exempt under section 10(14)(i) of Act . 10.1 Thus, in facts of that case, it was specific case of revenue that as no uniform was prescribed by ONGC, uniform allowance granted by it was not exempt under section 10(14)(i) of Act. 11. Section 10 of Act provides that total income of previous year of any person falling in any of clauses set out Page 15 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT thereunder shall not be included. Sub-clause (i) of clause (14) thereof, as it stood at relevant time, reads thus: (14) (i) any such special allowance or benefit, not being in nature of perquisite within meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in performance of duties of office or employment of profit, as may be prescribed, to extent to which such expenses are actually incurred for that purpose. 12. Rule 2BB of rules prescribes allowances for purpose of clause (14) of section 10. allowances enumerated under sub-rule (1) thereof are prescribed for purposes of clause (14) of section 10. allowance prescribed by clause (f) of rule 2BB(1) of rules is any allowance granted to meet expenditure incurred on purchase or maintenance of uniform for wear during performance of duties of office or employment of profit. 13. Thus, if any allowance has been granted to meet expenditure incurred on purchase or maintenance of uniform for wear during performance of duties during course of employment, it is covered by exemption clause contained in section 10(14)(i) of Act. 14. In present case, while passing order under section 201(1) read with section 201(1A) of Act, it is not case of Assessing Officer that no uniform has been prescribed by assessee for its employees and, therefore, amount paid towards uniform allowance is not exempt section 10(14)(i) of Act. According to him, requirements of section Page 16 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT 10(14)(i) of Act have not been satisfied as assessee has not proved that expenses claimed by it are actually incurred for that purpose as assessee has placed reliance upon self certification on part of employees without actual proof of such expenditure having been produced by them. 15. On behalf of appellant, learned counsel has contended that entire facts are inbuilt, even with regard to uniform not being prescribed, and that Tribunal had erred in going into aspect of self certification without going into issue of non-prescription of uniform. 16. facts have been extensively referred to hereinabove. perusal thereof makes it evident that sole issue raised by Assessing Officer was that assessee had claimed expenditure incurred towards uniform allowance as exempt section 10(14)(i) of Act on basis of self-certification by concerned employees without calling for any proof in nature of bills, vouchers etc. regarding such expenditure having been actually incurred and without due verification. No ground has been raised to effect that as no uniform had been prescribed, no claim towards uniform allowance could have been allowed. 17. In case of respondent assessee itself, this court in Oil and Natural Gas Corporation Ltd. v. Assistant Commissioner of Income tax (TDS), 73 taxmann.com 273, has upheld order passed by Tribunal upholding order of Commissioner (Appeals) that as no uniform had been prescribed by ONGC, which had merely prescribed Page 17 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT dress code, payment of allowances under heading of uniform allowances would not fall within exemption clause contained in section 10(14)(i) of Act. However, while in facts of present case, assessee is same and assessment year is also same, as noted hereinabove, question of prescription of uniform or otherwise was not subject matter before Tribunal. It is not case of Assessing Officer in order under section 201(1) read with section 201(1A) of Act nor was it case of revenue before Commissioner (Appeals) that as no uniform had been prescribed, assessee was not entitled to claim exemption section 10(14)(i) of Act towards uniform allowance. sole ground on which Assessing Officer sought to deny exemption of uniform allowance section 10(14) (i) of Act is that employees had given self-certification and assessee had not taken original, genuine real bills and vouchers to this effect at any point of time during relevant financial year and there was no provision which permitted assessee to exemption on basis of self certification. Assessing Officer was also of view that there was no justification for such huge expenditure towards uniform allowance on yearly basis. 18. Before Tribunal, appellant had contended that specified allowances under section 10(14)(i) of Act are exempt to extent these are actually incurred for that purpose; and that Commissioner (Appeals) had erred by allowing uniform allowance without considering whether such claim fulfilled conditions as laid down in section 10(14)(i) of Act. Therefore, scope of present appeal is also Page 18 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT limited to these issues only. 19. On behalf of revenue, it has been contended that second ground raised before Tribunal would take within its fold requirement of prescription of uniform, and that expenditure had to be incurred towards such prescribed purpose; whereas in facts of present case, Tribunal, without deciding basic issue as to whether uniform had in fact been prescribed, dismissed appeal by following its earlier decisions which related assessment years when fringe benefit tax regime was in force. 20. As can be seen from impugned order, on behalf of revenue only two grounds as referred to hereinabove had been raised and learned Departmental Representative had submitted that Commissioner (Appeals) had erred in allowing uniform allowance ignoring fact as to whether such claim fulfilled conditions laid down in section 10(14)(i) of Act. In fact perusal of entire record of case including orders of Assessing Officer as well as Commissioner (Appeals) shows that nowhere has any issue been raised regarding uniform not having been prescribed by assessee. only question before authorities was that assessee had claimed exemption towards uniform allowance under section 10(14)(i) of Act on basis of self-certification given by employees without verifying whether such expenditure had actually been incurred. Under circumstances, decision of this court in case of Oil and Natural Gas Corporation Ltd. v. Assistant Commissioner of Income tax (TDS), 73 taxmann.com 273, Page 19 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT would not be applicable to facts of present case, same having been rendered in context of totally different facts. In absence of any factual foundation with regard to there being no prescription of uniform by assessee having been laid in present case, such question does not arise out of impugned order of Tribunal, and hence, it is not permissible for appellant to raise such plea at this stage. 21. order of Tribunal may, therefore, be tested on basis of facts as emerging from record. As is evident on perusal of order of Commissioner (Appeals), on behalf of assessee, reliance was placed upon Circular No.15 dated 8.5.1969 issued by CBDT enabling assessee for non-deduction of tax from reimbursement allowance on basis of utilisation certificate of employee. relevant extract of said circular has been produced in paragraph 4.2 of order of Commissioner (Appeals) and reads thus: 1. reference is invited to Press Note issued by Ministry of Finance (Central Board of Direct Taxes) on 25.5.1968, relating to allowance of standard deduction for maintenance expenditure and wear and tear in case of salaried taxpayers owning conveyances and using them for purpose of their employment. 2. In absence of definition of phrase used for purpose of employment in Income Tax Act, 1961, doubt has been expressed as to meaning of this phrase and checks which can be applied for proper verification of claim, by disbursing officers. Page 20 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT 3. For purpose it is hereby clarified that declaration from employee that conveyance is owned by him and is being used by him for purposes of employment may be considered adequate by disbursing officer for purpose of calculation of tax deductible at source under section 192. 22. At this juncture reference may be made to decision of this court in Commissioner of Income-tax v. Oil & Natural Gas Corporation Ltd., [2002] 254 ITR 121 (Guj.), wherein court held thus: 5. We are of opinion that in facts and circumstances found by tribunal no question of law referable to this court arises as answer is evident. tax at source in case of employee in receipt of salaries is deducted on basis of estimate of income under head "Salary" emanating from employer. That estimate also include fair estimate by employer whether any amount paid by him is not likely to be subjected to tax under any provisions of Income- tax Act. As we have noticed above, evidence regarding operation of scheme clearly attracted provisions of sec. 10(14) inasmuch as reimbursement is granted for use of one vehicle owned and possessed by employee for expenses incurred in undertaking official journeys and payment is made on employee issuing certificate that he has incurred more expenses than amount which is being reimbursed to him at end of month. fact that reimbursement upto maximum limit and not more does not detract from fact that expenses are being paid as far as employer is concerned towards reimbursing actual expenses incurred by employee in undertaking official journeys upto extent amount is actually reimbursed. Nor fact that employee, during course of his assessment, is not found entitled to full benefit u/s 10(14), does in any way reflect on estimate of income tax payable on income Page 21 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT of employee at time when such amount is paid. Whether employee actually incurs such amount for official purposes is relevant for assessment of employee because exemption operates in his terms and conditions of availing such exemption that is to be fulfilled by him whether employee is able to substantiate his claim to exemption has no bearing on estimate of income liable to tax to be made by employer. 6. These findings do not give rise to any question of law. fact that ultimately on assessment of employees they have been found in not utilising full amount received by them from employer does not reflect in any manner on estimate of employer at end of each month about income of employee receiving from his employer liable to tax as per mark it bears. 23. In terms of above Circular No.15 dated 8.5.1969, for purpose of calculation of tax deductible at source under section 192, self-certification on part of employee that conveyance was owned by him and being used by him for purposes of employment was adequate. present case relates to uniform allowance, which as noticed earlier is exempt from tax under section 10(14)(i) of Act read with rule 2BB(1)(f) of rules to extent to which such expenses are actually incurred for that purpose. Under Act, liability to employer is to deduct tax at source to extent of taxable income of employee. If any part of such income is exempt, there is no liability to deduct tax at source from such income. Since liability to pay tax under Act is of individual employee and liability on part of employer is only to deduct tax at source, Circular No.15 dated 8.5.1969 provides that self certification on part of employee is sufficient for disbursing officer for calculation of tax deductible at source. While said Page 22 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT circular relates to conveyances, underlying principle can well be applied even in case of uniform allowance. Therefore, if employee gives certificate certifying that he had incurred certain expenditure towards uniforms and maintenance thereof, insofar as disbursing officer is concerned, that would be adequate while calculating tax deductible at source. If Assessing Officer has any doubt about claim made by any individual employee, he can always take upon issue during course of assessment proceedings of such employee, inasmuch as, as rightly submitted by learned counsel for respondent, self certification is good enough for employer not to deduct tax at source, it does not grant any immunity to employee if claim is incorrect. As held by this court in Commissioner of Income-tax v. Oil & Natural Gas Corporation Ltd., [2002] 254 ITR 121 (Guj.), whether employee actually incurs such amount for official purposes is relevant for assessment of such employee because exemption operates in his terms and conditions of availing such exemption that is to be fulfilled by him. Whether employee is able to substantiate his claim to exemption has no bearing on estimate of income liable to tax to be made by employer. Under circumstances, there is no legal infirmity in impugned order passed by Tribunal in placing reliance upon above circular for holding that self certification on part of employees was adequate for assessee not to deduct tax from reimbursement allowance towards expenditure incurred for uniforms. 24. In light of above discussion, this court is of view that impugned order passed by Tribunal does not Page 23 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 C/TAXAP/1218/2018 JUDGMENT suffer from any legal infirmity warranting interference. substantial question framed by this court while issuing notice is answered in affirmative, that is, in favour of assessee and against revenue. Income Tax Appellate Tribunal was right in law in confirming order of Commissioner of Income-tax (Appeals) deleting additions made by Assessing Officer under section 201(1) of Income Tax Act, 1961, and consequential interest charged by Assessing Officer in relation to assessee s payments to its employees under head of uniform allowance. appeal, therefore, fails and is accordingly dismissed with no order as to costs. (HARSHA DEVANI, J) (A. P. THAKER, J) Z.G. SHAIKH Page 24 of 24 Downloaded on : Fri Mar 27 11:21:25 IST 2020 Commissioner of Income-tax (TDS) v. Oil and Natural Gas Corporation Ltd
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