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The Tax Publishers2012 TaxPub(DT) 0647 (Del-HC) : (2012) 044 (I) ITCL 0048 : (2012) 247 CTR 0317 : (2011) 203 TAXMAN 0081 : (2011) 063 DTR 0325 INCOME TAX ACT, 1961 --Tax deduction at source--Assessee-in-defaultLess deduction of TDS from total salary--Assessee school was providing free educational facilities to the wards of teachers/staff members. According to assessing officer survey operations were carried out in the case of many other schools and in the instant case, as per the fee structure furnished during the course of survey operation, the tuition fees alone ranged from Rs. 1,600 to Rs. 1,900 from Class Nursery to Class XII, excluding all other charges/fees. Therefore, assessing officer, based on his understanding of rule 3(5) held that assessee had committed a default by less deduction of TDS from total salary and was thus liable to be treated as assessee-in-default under section 201(1). Assessee contended that it had made an honest and bona fide estimate of income of employees chargeable to tax under the head 'salaries' and deducted TDS thereon and deposited the same, therefore, it should not be treated as assessee-in-default. Held: Employer was not expected to step into shoes of assessing officer and determine actual income, while deducting TDS from employees' income. Furthermore, if it was found that estimate made by employer was incorrect, this fact alone, would not inevitably lead to interference that employer had not acted honestly and fairly. Unless that interference can be reasonably raised against employer, it could not be said that he had not deducted tax on estimated income of employee. Further, on basis of accounts maintained by assessee, it was found that cost of education was less than Rs. 1,000 per month per child and, therefore, it was entitled for benefit of proviso to rule 3(5) and in view of above, it could not be said that assessee was assessee-in-default under section 201. Income Tax Act, 1961, Section 201(1) Income Tax Act, 1961, Section 192 Income Tax Rules, 1962, Rule 3(5) IN THE DELHI HIGH COURT DIPAK MISRA, ACTG. C.J. & SIDDHARTH MRIDUL, J. CIT v. Delhi Public School ITA Nos. 345, 414, 458, 780 & 787 of 2009, 610 to 612, 898 & 900 of 2010 31 October, 2011 *Decision:* In assessees favour. Appellantby : Rashmi Chopra Respondentby : Ajay Vohra, Kavita Jha and Somnath Shukla JUDGMENT Appeals of the revenue are admitted on the following substantial question of law: 'Whether on the facts and in the circumstances of the case, the learned ITAT erred in holding that assessee was not in default under section 201(1) and not liable for interest under section 201(1A) of the Income Tax Act, 1961.' SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 0647 (Del-HC) : (2012) 044 (I) ITCL 0048 : (2012) 247 CTR 0317 : (2011) 203 TAXMAN 0081 : (2011) 063 DTR 0325

INCOME TAX ACT, 1961

--Tax deduction at source--Assessee-in-defaultLess deduction of TDS from total salary--Assessee school was providing free educational facilities to the wards of teachers/staff members. According to assessing officer survey operations were carried out in the case of many other schools and in the instant case, as per the fee structure furnished during the course of survey operation, the tuition fees alone ranged from Rs. 1,600 to Rs. 1,900 from Class Nursery to Class XII, excluding all other charges/fees. Therefore, assessing officer, based on his understanding of rule 3(5) held that assessee had committed a default by less deduction of TDS from total salary and was thus liable to be treated as assessee-in-default under section 201(1). Assessee contended that it had made an honest and bona fide estimate of income of employees chargeable to tax under the head 'salaries' and deducted TDS thereon and deposited the same, therefore, it should not be treated as assessee-in-default. Held: Employer was not expected to step into shoes of assessing officer and determine actual income, while deducting TDS from employees' income. Furthermore, if it was found that estimate made by employer was incorrect, this fact alone, would not inevitably lead to interference that employer had not acted honestly and fairly. Unless that interference can be reasonably raised against employer, it could not be said that he had not deducted tax on estimated income of employee. Further, on basis of accounts maintained by assessee, it was found that cost of education was less than Rs. 1,000 per month per child and, therefore, it was entitled for benefit of proviso to rule 3(5) and in view of above, it could not be said that assessee was assessee-in-default under section 201.

Income Tax Act, 1961, Section 201(1)

Income Tax Act, 1961, Section 192

Income Tax Rules, 1962, Rule 3(5)

IN THE DELHI HIGH COURT

DIPAK MISRA, ACTG. C.J. & SIDDHARTH MRIDUL, J.

CIT v. Delhi Public School

ITA Nos. 345, 414, 458, 780 & 787 of 2009, 610 to 612, 898 & 900 of 2010

31 October, 2011

Decision: In assessees favour.

Appellantby : Rashmi Chopra

Respondentby : Ajay Vohra, Kavita Jha and Somnath Shukla

JUDGMENT

Appeals of the revenue are admitted on the following substantial question of law:

'Whether on the facts and in the circumstances of the case, the learned ITAT erred in holding that assessee was not in default under section 201(1) and not liable for interest under section 201(1A) of the Income Tax Act, 1961.'