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2009 DIGILAW 960 (KAR)

Commissioner of Income Tax v. Wipro Systems

2009-12-04

ARAVIND KUMAR, K.L.MANJUNATH

body2009
JUDGMENT K.L. Manjunath, J.— The revenue has come up in this appeal challenging the legality and correctness of the order passed by the Income Tax Appellate Tribunal, Bangalore Bench in ITA No. 1024/Bang./1997, dated 20-8-2003 for the assessment year 1994-95. The appeal is admitted on the following substantial questions of law: (i) Whether the Tribunal was correct in setting aside the order of the Assessing Officer that the assessee is in default under Section 201(1) of the Act and consequently liable to pay interest under Section 201(1A) of the Act on account of the assessee failing to deduct tax at source from its employees in respect of perquisites provided, i.e., attire allowance, club membership and travel accessories allowance? (ii) Whether the Tribunal was correct in holding that the attire allowances, club membership and travel accessory allowance paid to the employees cannot be treated as perquisite under Section 17 of the Act? 2. The question is, whether the attire allowance, club membership fee paid to the employees of the assessee can be treated as perquisite or not? 3. A Division Bench of this Court in ITA No. 53 /2004, dated 23-11 -2009 has held that travel accessories paid to the employees cannot be treated as perquisites as the same is incidental to the work of the company and insofar as the attire allowance and club membership fees are concerned, the same would fall under perquisites if the club membership is purchased in the name of the employee and the fee payable to such club is reimbursed by the company for the personal use of the employee and further, held that if membership is standing in the name of the company and if any guest of the company is entertained by the employee for the business promotion of the company, the same cannot be treated as perquisites given to such employee. Therefore, following the aforesaid judgment, we dispose of this appeal directing the Assessing Officer to consider the deduction in regard to the attire allowance and examine the amount paid by the employer-assessee to the employees in respect of club membership fee subject to verification in each and every case. In view of our order, we are of the opinion that it is open for the assessee to raise the contention, why tax was not deducted at source under bona fireasons. In view of our order, we are of the opinion that it is open for the assessee to raise the contention, why tax was not deducted at source under bona fireasons. If such contention is raised, the Assessing Officer shall examine the same in accordance with law. 4. With the abovesaid observations, appeal is disposed of.