ORDER
N.S. Chopra, A.M.
1. This is a batch of 14 appeals filed both by the assessee and the Revenue against common order, dt. 28th August, 1996, of the learned CIT(A) disposing of assessee’s appeals against order of the AO under s. 201(1) of the IT Act. The second batch of 7 appeals is also against order, dt. 28th August, 1996 of the learned CIT(A) disposing of assessee’s appeals against AO’s order under s. 201(1A) of the Act. While the assessee has filed appeals against individual financial years, the Revenue has filed one appeal against order under s. 201(1) combining all the assessment years and similarly one appeal has been filed combining all the assessment years against order under s. 201(1A). The appeals having been heard together are disposed of by this common order. First we will dispose of appeals against order relating to s. 201(1). The grounds of appeal taken by the assessee for all the financial years are common and relate only to the order of the learned CIT(A) holding that the amount reimbursed to the employees on account of transport was subject to deduction of tax at source.
2. The relevant facts are that the assessee, a Dutch Airlines, is operating from India International Airports like, Delhi, Calcutta, Mumbai and Chennai. It is employing various categories of employees who are being paid salaries in respect of which the assessee is obliged to deduct tax at source as provided under s. 192 of the IT Act. The assessee is also obliged to file Form No. 24, which is annual return of tax deducted at source before the prescribed authority, which in this case is Asstt. CIT, TDS Circle, New Delhi, giving thereunder the required details including deduction and payment of tax at source from the salaries paid to the employees. The assessee filed Form No. 24 for all the six years more or less within the prescribed time, barring as relating to financial year 1991-92 and 1992-93. For the sake of facility the relevant dates on which Form No. 24 was filed for the respective financial years are given below :
Financial year Tax Deducted at source Date of filing the form.
Rs.
1987-88 8,15,460 25-4-1988
1988-89 3,34,415 19-4-1989
1989-90 12,80,088 30-4-1990
1990-91 17,88,910 30-4-1991
1991-92 21,56,201 4-5-1992
1992-93 19,12,990 26-5-1993
2.1 The AO processed all the six returns simultaneously and passed his order under s. 201(1) for asst. yr. 1992-93 which he followed for the other financial years. The AO in the course of verification of the annual returns filed in Form No. 24 under s. 206 called upon the assessee to furnish various details, including concessional rate tickets, concessional rate of interest, delayed flight bonus, miss-a-meal, transfer allowance and transportation reimbursement. The same were duly furnished by the assessee vide its letter, copy at pp. 53 to 56 of the paper-book. The AO further directed the assessee to furnish details of various other allowances/reimbursement/payments allowed by them to its various employees which are claimed exempt under s. 10(14) of the Act, including as relating to conveyance reimbursement. Regarding conveyance reimbursement the assessee claimed that this amount represented reimbursement of transportation expenses as actually incurred by the employees subject to a ceiling fixed in respect of each category of employees and subject to certificate being furnished by the employee having actually spent the amount. The AO judged the taxability of each and every allowance/concession given by the assessee to its employees and reached the conclusion that the assessee had made short deductions on account of TDS in respect of concessional rate tickets, concessional rate of interest, miss-a-meal, transfer allowance and transportation reimbursement.
2.2 The assessee went in appeal before the learned CIT(A) who did not approve of action of the AO on many counts, including concessional air tickets, against which the Revenue is in appeal. However, the learned CIT(A) upheld the action of the AO with regard to transportation reimbursement as coming within the ambit of s. 192. The assessee is aggrieved.
3. Since the AO has determined liability of the assessee under s. 201, he also passed order under s. 201(1A) levying interest payable by the assessee on short deduction of tax at source, against which the assessee went in appeal and the learned CIT(A), following his order on assessee’s appeal under s. 201 directed recomputation of interest. Both the assessee and the Revenue are in appeals.
4. With regard to transportation reimbursement, the assessee’s main contention in these appeals is that there was no justification for holding that the assessee defaulted in deducting tax in respect of payments made by it to its employees by way of reimbursement of transportation expenses, which have been made by it to all of its employees on the basis of ceiling imposed by it as a check measure varying between Rs. 350 to Rs. 750 p.m. depending upon grade of the employees. It is the claim of the assessee that transportation reimbursement is neither salary not an allowance constituting a part of salary, thus, coming within the ambit of s. 192 of the Act. Aggarwal submitted that the amounts are reimbursed to employees who actually incur some expenditure for commuting between residence and office. He submitted that the assessee has been operating in India since 1934 and has been regularly filing its annual return under s. 206 in the prescribed Form No. 24 and the AO had never objected to the amount reimbursed and claimed not forming part of the salary under s. 192 of the Act being by way of reimbursement of transportation expenses. He submitted that the amount reimbursed does not represent conveyance allowance but represent reimbursement of actual expenses incurred by the employees for commuting between residence and office and vice versa and such trips are to be regarded as being for the purpose of employment. In this connection he has referred to Board’s Circular No. 23 (LVIII-8), dt. 9th July, 1956, and Board’s F. No. 208/35/79/IT (A1), dt. 4th July, 1987, to FICCI. Aggarwal submitted that throughout in the past never there has been any objection raised by the Revenue for the inclusion of the aforesaid amount to be taken as a part of salary. He submitted that the relevant returns were filed within the due date, while verification thereof was started simultaneously on 4th August, 1993, leading to the impugned orders being passed on 21st February, 1995, i.e., after a period of 8 years, which is highly unreasonable and this itself vitiates the order. He submitted that for argument sake even if it is held that the amount represented salary to the employees coming within the ambit of s. 192, there was a bona fide and valid reason and justification for the assessee not to have deducted tax at source in respect of the aforesaid sums the Revenue having never informed the assessee before on this count. He submitted that the assessee is only bound to reasonably estimate the income of its employees on which it is required to deduct tax at source. According to Aggarwal, the estimate of such amount is to be bona fide. He further pointed out that there is no specific column in Form No. 24 requiring the assessee to treat the amount as part of salary of the employee, as is also no such column in Form No. 16 which is made available to the employees. He submitted that the estimate of the amount of the income by way of salaries, as understood and believed by the assessee, has been extremely bona fide and cannot be said to be unreasonable being not bona fide. Aggarwal submitted that the case of the assessee is squarely covered by order of Delhi Bench of the Tribunal in the case of Nestle India Ltd. vs. Asstt. CIT (1997) 61 ITD 444 (Del). He has also referred to Mumbai Bench orders of the Tribunal in the case of Indian Airlines Ltd. vs. Asstt. CIT (1996) 56 TTJ (Mumbai) 573 : (1996) 59 ITD 353 (Mumbai), Mahendra & Mahendra Ltd. vs. ITO (1996) 55 TTJ (Bom) 174 and ICICI vs. ITO (1993) 47 TTJ (Bom) 401. He has also placed on record a copy of Mumbai Bench of the Tribunal order in the case of Glaxo India. It was, therefore, urged that the learned CIT(A) wrongly held the assessee liable to deduct tax at source on account of reimbursement of transportation expenses. He submitted that s. 201(1) is applicable only if the person responsible does not deduct or after deducting fails to pay tax. He submitted that for TDS under s. 192, the assessee was required to make a fair and bona fide estimate of salary of its employees. He refers to Madhya Pradesh High Court judgment in the case of Gwalior Rayon Silk Co. Ltd. vs. CIT (1983) 140 ITR 832 (MP). He submitted that on facts and in the background of the assessee, the estimate made by the assessee for the purpose of s. 192 was reasonable and bona fide and it is not even alleged that it was not so much less proved by the Revenue.
5. On the other hand, the learned Departmental Representative submitted that the amount paid represented transportation allowance, thus, partaking the character of salary since it is paid at flat rate to all the employees depending upon its grade and the assessee also did not show the amount in Form No. 24, as also in Form No. 16, thus preventing the Revenue from scrutinising its returns and it is only when such returns have been scrutinised when the real picture emerged. The learned Departmental Representative submitted that even in Form No. 16 such allowance is not shown. The learned Departmental Representative supported her case by relying on Hyderabad Bench of the Tribunal in the case of Dr. Reddy Laboratories vs. ITO (1996) 58 ITD 104 (Hyd). According to her, this order of Hyderabad Bench of the Tribunal has not been distinguished by Delhi Bench in its order in the case of Nestle India (supra).
5.1 In reply Aggarwal submitted that there is no column in Form No. 24 requiring the assessee to furnish details of each and every expenditure incurred on its employees and since the amount involved, according to bona fide belief of the assessee, did not represent salary of its employees, it was not required to depict the same in Form No. 16 also.
6. We have heard the learned representative of the parties, perused the relevant record and have also gone through the paper-book filed by the assessee. The assessee since long has been reimbursing its employees with expenditure incurred by them on commuting between residence and office on the basis of certificate of expenditure actually incurred. This is, however, subject to a ceiling for the purpose of administrative control. It has been also submitting its returns as prescribed under s. 206 (Form 24) in the past. At no point of time the Revenue brought it to the notice of the assessee that the amounts reimbursed come within the ambit of s. 192. It is also not denied that assessee has been incurring such expenditure since very long. Therefore, it was under a bona fide belief that the amount reimbursed did not require tax deduction at source, when the Revenue has never informed the assessee before and as a matter of fact all these six returns, though filed within the prescribed time, were taken up for verification much later. Further admittedly there is no specific column in the prescribed Form No. 24 requiring the assessee to indicate reimbursement of such expenditure.
6.1 Sec. 192 requires the person responsible for paying any income chargeable under the head “Salaries”, shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax on the estimated income of the employee for the relevant financial year. The assessee was, therefore, required to make an estimate of employees income a bona fide estimate undoubtedly as coming within the ambit of s. 192. The only issue to be seen is as to whether the assessee failed in its duty in making a bona fide estimate of income under the head ‘salaries’ of its employees. To our mind, such failure cannot even be alleged much less established in the light of facts detailed above. We do not find any material on record by which it could be inferred that the appellant’s conduct in not deducting tax at source on transportation reimbursement expenses was not bona fide. As a matter of fact various orders of the Tribunal, as also of High Courts, including in the case of ICICI (supra), Indian Airlines Ltd. (supra) and Glaxo India (supra) support the case of the assessee that it was its bona fide belief that no tax was required to be deducted on the amount involved. The Delhi Bench order of the Tribunal in the case of Nestle India (supra) is on the same facts and under similar circumstances again in favour of the assessee. In this order the Hyderabad Bench order of the Tribunal in the case of Dr. Reddy Laboratories, (supra) as was relied upon by the learned Departmental Representative has also been referred to and taken note of, when it was held that the assessee was under a bona fide belief that amount paid by way of transportation reimbursement expenses did not require deduction of tax at source. Therefore, as far as assessee is concerned, we find ourselves in agreement with the view canvassed by Aggarwal that there was bona fide belief on the part of the assessee that no TDS was required to be made from the expenditure incurred. Deduction of tax at source under s. 192 entails making of a fair, reasonable and bona fide estimate of employee’s income coming within the meaning of s. 192. No material exists on record to show that the estimate made by the assessee for the purpose of TDS is not bona fide. It is not the case of the Revenue that the assessee did not deduct tax from various other allowances and perquisites wherever paid to the employees. In our view the appellant-employer acted honestly and fairly in the discharge of its duties cast under s. 192 of the IT Act. Therefore, we hold that the penalty levied under s. 201(1) is not justified. We allow the assessee’s appeals.
Appeal No. 6358(Del)/1996
7. This appeal is filed by the Revenue for all the six assessment years against order, dt. 28th August, 1996, of the learned CIT(A) and the only ground of appeal taken is as under :
“On the facts and in the circumstances of the case, the learned CIT(A) was not justified in holding that the appellant cannot be held to be an assessee in default in respect of perquisite on account of free concessional ticket provided to the employees for travel on carriers other than appellant’s own carriers.”
The AO noted that the assessee has not deducted tax at source on account of use of free/concessional flying tickets enjoyed by its employees by courtesy of other airlines. He rejected the assessee’s explanation that provisions of s. 17(2)(iii) were not applicable. He also rejected assessee’s contention that it was not offering any such facility to its employees and neither they were, by right, entitled to the same. The assessee made very elaborate submissions before the AO on this account mainly to the effect that assessee is a Member of IATA and as such has to abide by mandatory resolutions of the IATA, including Resolution No. 788 with regard to free and reduced fare or rate transportation expenditure by member airlines to the employees of other member airlines. It was submitted that in this very resolution it is provided that the employees did not acquire any vested right for this facility. The AO, however, took the view the benefit enjoyed by employees, courtesy another carrier, constitutes a perquisite as the benefit is derived directly from employment with the assessee and the facility is available only by virtue of his employment with the assessee. He also found the contention of the assessee that cost of these free tickets was nil, as irrelevant and immaterial. He, thus, worked out the value of perquisite on this account for different years on which the assessee was held liable to deduct tax at source. In appeal, the learned CIT(A) examined the matter at length and in depth when he took the view that benefit has not flown to the employees by way of concessional tickets from the assessee-employer but is from other airlines and, therefore, the assessee was not required to deduct tax at source. He also took the view that such a perquisite could be taxed only in the hands of employees as income from other sources, as held by Hon’ble Supreme Court in the case of Emil Weber vs. CIT (1993) 200 ITR 483 (SC). The Revenue is aggrieved.
8. Learned representative are heard and relevant record seen. We do not find any material on record, neither is such material placed before us which could persuade us to take a view contrary to the view taken by the learned CIT(A). We may also mention that on same facts and under similar circumstances this issue stands decided against the Revenue by order of Delhi Bench in the case of Indian Airlines (Northern Region), Airlines House, Gurudwara Rakabganj Road, vs. Asstt. CIT, vide order, dt. 20th August, 1996 in TDS Nos. 13 to 20(Del)/1995. Therefore, we find no merit in this ground of appeal taken by the Revenue and as such dismiss its appeal.
9. Now we take up appeals against levy of interest under s. 201(1A) filed by the assessee vide Appeal Nos. 6415, to 6420/1996 and Appeal No. 6357/(Del)/1996 filed by the Revenue. Because of short-deductions of tax at source, as worked out by the AO he levied interest under s. 201(1A) of the Act. In appeal the learned CIT(A) following his order directed that interest be recalculated, in view of relief allowed by him. Both the assessee and the Revenue are aggrieved.
9.1 Vide our order above on appeals of the assessee, we have allowed assessee’s appeals. On the other hand we have dismissed appeal of the Revenue against order under s. 201(1). Therefore, as a corollary while we allow appeals of the assessee, the appeal of the Revenue is dismissed.