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04-01-2019, Karnataka Power, Section 201(1), 17(1)(va), Tribunal Bangalore

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5 months 1 week ago #8285 by amit
Section - 201(1), 17(1)(va), 192, 10(10AA), 10(10AA)(i)
Order Date - 04-01-2019
Favouring - Assessee
Court - Tribunal Bangalore
Appellant - ITO
Respondent - Karnataka Power Transmission Corporation Ltd.
Justice - N.V. VASUDEVAN VP & JASON P. BOAZ AM
Citation - 119Taxpundit82
Appeal No. - ITA 2223/Bang/2017
Asstt. Year - 2013-14

Order

PER : N V Vasudevan

These are Miscellaneous Petitions (MPs) filed by the Revenue u/s.254(2) of the Income Tax Act, 1961 [“the Act”] on the allegation that the order dated 02.05.2018 passed by the Tribunal in the aforesaid appeals suffers from mistakes apparent from record. The Revenue has prayed for the following reliefs in these MPs:-

“i) The Miscellaneous petition be kindly accepted;

ii) The Hon'ble Tribunal s conclusion in para 22 that circumstances explained by the Ld. Counsel for KPTCL and the action of the revenue in not questioning KPTCL's action in the past several years after its formation etc. were definitely factors which weighed with KPTCL when it made estimate of its employees' income under the head "salaries" and the conclusion drawn therefore requires reconsideration.

iii) The conclusion of Hon'ble Tribunal's that the assessee has discharged its obligation u/s 192 and hence proceedings u/s 201(1) & 201(1A) of the Act deserves to be quashed is incorrect and the Ground 10 should be adjudicated afresh.

iv) The appellate order of the Tribunal suffers from various mistakes which are apparent on record, and hence, the order passed has to be recalled.

v) The Revenue should be heard on all Grounds before disposing them on merits.”

2. The issue involved in the appeals was as to whether M/s Karnataka Power Transmission Corporation Ltd. [hereinafter referred to as KPTCL or Assessee], can be considered as “Assessee in Default” under the provisions of Section 201(1) of the Income Tax Act, 1961(Act) for not deducting tax at source and whether KPTCL is liable to pay interest on taxnot deducted at source u/s.201(1A) of the Act? The issue arises for consideration on the following facts and circumstances. KPTCL paid cash equivalent to its employees at the time of their retirement.

3. Under Section 17(1)(va) “Salary” includes—(va) any payment received by an employee in respect of any period of leave not availed of by him. Under Section 192 of the Act, “Any 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 computed on the basis of the rates in force for the financial year in which the payment is made on the estimated income of the assessee under this head for hat financial year. KPTCL as an employer was bound to deduct ax at source on the salaries paid to its employees by including the payment received by an employee in respect of any leave period not availed by the employee.

4. Section 10(10AA) of the Act provides for certain exemption when payments are received by an employee in respect of leave period not availed by the employee. Section 10(10AA) of the Act provides for the following exemption viz.,

“Section 10: Incomes not included in total income.

In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included— ………………………. (10AA)

(i) any payment received by an employee of the Central Government or a State Government, as the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise;

(ii) any payment of the nature referred to in sub-clause (i) received by an employee, other than an employee of the Central Government or a State Government, in respect of so much of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise as does not exceed ten months, calculated on the basis of the average salary drawn by the employee during the period of ten months immediately preceding his retirement whether on superannuation or otherwise, subject to such limit as the Central Government may, by notification in the Offi ial Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government:

5. It is not in dispu e that the Specified Limit in the case of employee other than an employee of the Central Government or a State Government i.e., employee falling within clause (ii) of Sec.10AA is Rs. 3,00,000 in salary to employees who retire, whether on superannuation or otherwise, after 1.4.1998 vide Notification No. 123/2002 dated 31-5-2002.

6. As can be seen from the above provisions, if the employee to whom payment is made for unutilized leave period is an employee or Central or State Government then the entire payment so made is exempt and therefore an employee in such circumstances is not obliged to deduct tax at source on such payment. If, on the other hand, the person to whom such

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