Self-declaration by employee that he had incurred exp. towards uniform is sufficient for non-deduction of TDS

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Self-declaration by employee that he had incurred exp. towards uniform is sufficient for non-deduction of TDS

CIT (TDS) v. Oil and Natural Gas Corporation Ltd. – [2020] 122 taxmann.com 159 (Gujarat)
Short overview of the case:
During the survey conducted at the assessee’s premises, it was noticed that assessee had made payments under the head “Uniform allowance” to its employees, however, it had neither included this allowance to the total salary payment nor had deducted tax at source on such income.
According to Assessing Officer (AO), such allowances firstly become part of the salary and exempt to the extent of spending.
Assessee had not included these allowances as part of the salary and had not examined the aspect of actual expenditure and instead had taken self-certification at the beginning of the financial year from all employees without verification of the claim to ascertain whether such expenditure had actually been incurred for the purpose.
On appeal, Gujarat HC held that the employer is liable to deduct tax at source to the extent of the taxable income of the employee.
If any part of such income is exempt, there is no liability to deduct tax at source from such income.
Since liability to pay tax is of employee and the liability on the part of the employer is only to deduct tax at source, Circular No. 15, dated 8-5-1969, provides that self-certification on the part of the employee is sufficient for the disbursing officer for calculation of the tax deductible at source.
While the said circular relates to conveyances, the underlying principle can well be applied even in the case of uniform allowance.
Therefore, if an employee gives a certificate certifying that he had incurred certain expenditure towards uniforms and maintenance thereof, insofar as the disbursing officer is concerned, that would be adequate while calculating the tax deductible at source.
If AO has any doubt about the claim made by any individual employee, he can always take upon the issue during assessment proceedings of such employee.
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