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In favour of assessee.Contributions to the Anandalaya Education Society is towards the deficit of the fees towards wards of the employees, and therefore, rule 3 [e] would not apply to the facts of thiscaseand hence, no perquisite would arise in the hands of the employees for the assessment years in question. The legislation amended the said rule only for subsequent period to include even concessional eduction facility. Therefore, Rule 3 [2] read with Section 17 of the Act cannot be said to have been violated and the assessee cannot be held liable to recover tax under Section 201 [1] to the extent the tax is due from its employees. Hence, findings of the Tribunal that assessee has failed to deduct tax at source on such contributions in terms of provision 192 read with Section 17 of the IT Act appears to be not correct or legal. Assessee cannot be said to be a defaulter of the amount and liable under Section 201 [1] of the I.T Act or to make payment of interest leviable under Section 201 [1A] of the Act.

Shanti Prime Publication Pvt. Ltd.

Section 201 (1) & 201(1A) Income Tax Act, 1961—Deduction of tax at source—Contributions to the Anandalaya Education Society is towards the deficit of the fees towards wards of the employees,therefore, rule 3 [e] would not apply as no perquisite would arise in the hands of the employees, thus, assessee not liable to deduct TDS.

Facts: Whether Tribunal was right in law in confirming the action of the Revenue in levying penalty and penal interest under Section 201 [1] and 201 [1A] by holding that the contribution made by the assessee to the Anandalaya Education Society towards the deficit of education expenses of children of assessee’s employees is perquisite in the hands of the employees pursuant to the provisions of Section 17 [2](iii) and (iv) of the Income Tax Act read with Rule 3 of the Income Tax Rules, 1962 ?”

Held, that from the wordings of Rule 3 [e], it can be said that it would be applicable only for free educational facilities, as nothing is mentioned therein of concessional educational facilities. Contributions to the Anandalaya Education Society is towards the deficit of the fees towards wards of the employees, and therefore, rule 3 [e] would not apply to the facts of this case and hence, no perquisite would arise in the hands of the employees for the assessment years in question. The legislation amended the said rule only for subsequent period to include even concessional eduction facility. Therefore, Rule 3 [2] read with Section 17 of the Act cannot be said to have been violated and the assessee cannot be held liable to recover tax under Section 201 [1] to the extent the tax is due from its employees. Hence, findings of the Tribunal that assessee has failed to deduct tax at source on such contributions in terms of provision 192 read with Section 17 appears to be not correct or legal. Assessee cannot be said to be a defaulter of the amount and liable under Section 201 [1] or to make payment of interest leviable under Section 201 [1A]. In the result, Tax Appeal is allowed. - GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD. V/s ITO - [2020] 424 ITR 247 (GUJ)