May 122021
 

Facts:

This issue relates to a gift of Rs.50,000 received from the father of the assessee and a gift of Rs.50,000 from the sister-in-law. However, the assessee is unable to explain the occasion of receiving such gifts.

Following are undisputed facts in the above case:

  1. Gifts have been received through the banking channel
  2. The identity of the donors is well established.
  3. Both the donors, i.e., the father and sister-in-law, fall under the category of relatives provided in explanation (e) of section 56(2).

Section 56(2)(v), (vi) & (vii)

Where any sum of money exceeding twenty-five thousand rupees is received without consideration by an individual or a Hindu undivided family from any person on or after the 1st day of September 2004 59[but before the 1st day of April 2006], the whole of such sum :

Provided that this clause shall not apply to any sum of money received—

 

(a) from any relative; or
(b) on the occasion of the marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer; or
60[(e) from any local authority as defined in the Explanation to clause (20) of section 10; or
(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
(g) from any trust or institution registered under 60a[60aa[section 12AA]].]

 

Explanation.—For the purposes of this clause, “relative”61 means—

 

(i) spouse of the individual;
(ii) brother or sister of the individual;
(iii) brother or sister of the spouse of the individual;
(iv) brother or sister of either of the parents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the individual;
(vii) spouse of the person referred to in clauses (ii) to (vi);]

 

62[(vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April 2006 63[but before the 1st day of October 2009], the whole of the aggregate value of such sum:

Analysis of Section 56(2):

From a perusal of section 56 sub-section (2) as well as explanation (e), we find that sections 56(2)(v), 56(2)(vi) & 56(2)(vii) which provides a cap of the sum received without consideration by an individual or Hindu Undivided Family (HUF) to be taxed as income from other sources, if amount exceeding the cap provided in these sub-sections is received by the assessee.

However, the above sub-sections 56(2)(v), 56(2)(vi) & 56(2)(vii) shall not be applicable if any sum is received from any relative ( as defined in explanation (e) to section 56).

There is no mention about the occasion to be a necessary condition for receiving any sum from any relative.

Conclusion:

In the instant case, the alleged gifts of Rs.50,000/-, Rs.1,00,000/- and Rs.50,000/- for A.Ys. 2004-05, 2005-06 & 2006-07 have been received from relatives of the assessee i.e. father and sister-in-law through account payee cheques/demand draft. Therefore, the same cannot be included in the income of the assessee by any cannon of law.

Hence, the above payments can not be added on account of unexplained gifts for all three assessment years.

May 102021
 

Facts:

Whether, a third partly viz., National Financial Switch and Cash Tree has been acting as an agent by collecting charges from the bank for its services rendered to the bank as an intermediary between the bank and its customers? Or

Whether there is a relationship between the parties shall be regarded as a principal-to-principal basis?

And therefore, whether the provisions of section 194H apply and whether the bank is liable to deduct TDS on each transaction of service charge payable to a third party.

Relevant Rules:

Section 194H – TDS on Commission, brokerage, etc.

(1) Any person, not being an individual or a Hindu Undivided Family, who is responsible for paying, on or after the 1st day of October 1991, but before the 1st day of June 1992 to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten percent.

(2) The provisions of sub-section (1) shall not apply-

(a) to such persons or class or classes of persons as the Central Government may, having regard to the extent of inconvenience caused or likely to be caused to them and being satisfied that it will not be prejudicial to the interests of the revenue, by notification in the Official Gazette 4, specify in this behalf;
(b) where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person referred to in sub-section (1) to the account of, or to, the payee, does not exceed two thousand five hundred rupees.
Explanation.- For the purposes of this section,-
(i) ” commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or concerning any transaction relating to any asset, valuable article or thing;
(ii) ” professional services” means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by the Board for the purposes of section 44AA;
(iii) where any income is credited to any account, whether called “Suspense Account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be the credit of such income to the account of the payee and the provisions of this section shall apply accordingly.

 

Analysis of facts and Section 194H:

Mode of working:

Suppose, the credit card issued by the bank was used on the swiping machine of another bank, the customer whose credit card was used got access to the internet gateway of acquiring bank resulting in the realization of the payment.

Subsequently, the acquiring bank realizes and recovers the payment from the bank, which had issued the credit card.

Analysis of working in the eyes of law:

The relationship between the assessee and any other bank is not of an agency but that of two independent bases on a principal-principal basis.

Even assuming that the transaction was being routed to National Financial Switch and Cash Tree, then also it is pertinent to mention here that the same is a consortium of banks and no commission or brokerage is paid to it.

if the payment was received or is receivable directly or indirectly by a person acting on behalf of another person for services rendered not being professional and for any services in the course of buying and selling of goods or in relation to any transaction relating to an asset, valuable article or thing.

Also, from a perusal of section 194H, it is evident that the provision would apply if the payment was received or is receivable directly or indirectly by a person acting on behalf of another person for services rendered not being professional and for any services in the course of buying and selling of goods or in relation to any transaction relating to an asset, valuable article or thing.

Conclusion:

Thus, in the instant case, the third party and the bank are acting as independent parties and hence, the bank is not liable to deduct TDS on service charges payable to a third-party agency.

May 052021
 

Facts:

Liabilities Assets
Capital a/c

Income earned during the year                         Rs 35,0000

Investment

(For claiming deduction u/s 80CCA & 80CCB)

National Savings Scheme – Rs 40,000

Unit Trust of India – Rs 10,000

Unsecured loans                                                 Rs 2,05,000 Loan and Advances

M/s. Ganesh Prasad Hira Lal – Rs 200,000

Less: withdrawals – (Rs 50,000)

(Invested in NSC and UTI) – Rs 150,000

Whether the above claims of deductions against investment be rejected on the ground that the same had not come out of income chargeable to tax?

Relevant rules:

Section 80CCA – Deduction in respect of deposits under National Savings Scheme or payment to a deferred annuity plan. (1) Where an assessee, being—

(a) an individual, or
(b) a Hindu undivided family, 19[***]
(c) 20[***]

has in the previous year—

(i) deposited any amount in accordance with such scheme as the Central Government may, by notification21 in the Official Gazette, specify in this behalf 22[* * *]; or
(ii) paid any amount to effect or to keep in force a contract for such annuity plan of the Life Insurance Corporation as the Central Government may, by notification23 in the Official Gazette, specify,

out of his income chargeable to tax, he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income of the whole of the amount deposited or paid (excluding interest or bonus accrued or credited to the assessee’s account, if any) as does not exceed the amount of twenty thousand rupees in the previous year :

Section 80CCB – Deduction in respect of investment made under Equity Linked Savings Scheme. (1) Where an assessee, being—

(a) an individual, or
(b) a Hindu undivided family, 31[* * *]
(c) 32[* * *]

has acquired in the previous year, out of his income chargeable to tax, units of any Mutual Fund specified under clause (23D) of section 10 or of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), under any plan formulated in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf (hereafter in this section referred to as the Equity Linked Savings Scheme), he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income of so much of the amount invested as does not exceed the amount of ten thousand rupees in the previous year :

Analysis of principles for claiming deductions out of investments made under section 80CCA etc:

  1. Investment in National Savings Certificates, etc. for claiming deduction under section 80C of the Act, need not be from the income earned up to that period.
  2. It is sufficient – if the total income for that year covers the investment

Thus, in the instant case assessee’s current year income is sufficient to cover the current year’s investment and hence deductions shall be allowed for the aforesaid investments. Thus, the mathematical rule for claiming deductions under section 80CCA and section 80CCB would be:

An aggregate of investments under section 80CCA and section 80CCB < Gross taxable income of the previous year whose tax liability needs to be calculated
May 032021
 

Facts:

Whether the assessees are not entitled to deduction u/s 80C of the Act on the LIC premium paid in respect of his LIC policies if:

  • Assessee derives salary income from a concern named M/s SME. Thus, filing his return of income under the salary and income from other sources and claiming deduction u/s 80C of Rs. 1,00,000/-.
  • The above premium amounts were paid by the Grandfather of the assessee
  • The grandfather was the proprietor of M/s SVR where –
    • LIC accounts were shown as assets
    • The above amounts were duly debited to the account of the assessee in the books of the proprietary concern of his grandfather.
    • The assessee could not pass corresponding credit entry, since he did not maintain books of account

So the question arises, whether LIC premium so paid by his grandfather would be eligible as a deduction to the assessee in a case where the assessee neither in receipt of any loan nor a gift from his grandfather? Or for ease in understanding can LIC premium be said to be paid by the assessee or his grandfather.

Analysis of section 80C:

Analysis of 80C before the introduction of rebate u/s 88 Analysis of 80C after the introduction of rebate u/s 88
The old provisions of sec. 80C which prescribed the condition that the eligible payments should have been made out of income chargeable to tax.

B. Deductions in respect of certain payments

The present provisions of sec. 80C do not contain the words “out of income chargeable to tax”.
54a[55[Deduction in respect of life insurance premia, contributions to provident fund, etc.

5680C.57[(1In computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this section, an amount calculated, with reference to the aggregate of the sums specified in sub-section (2), at the following rates, namely:

where such aggregate does not exceed Rs.6,000 the whole of such aggregate;
(b) where such aggregate exceeds Rs. 6,000 but does not exceed Rs. 12,000 Rs. 6,000 plus 50 percent of the amount by which such aggregate exceeds Rs. 6,000;
(c) where such aggregate exceeds Rs. 12,000 Rs. 9,000 plus 40 percent of the amount by which such aggregate exceeds Rs. 12,000.]

(2)       The sums referred to in sub-section (1) shall be the follow ing, namely:

            (a)        where the assessee is an individual, any sums paid in the previous year by the assessee out of his income chargeable to tax

77[Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc.

7880C.7980(1) In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted, in accordance with and subject to the provisions of this section, the whole of the amount paid or deposited in the previous year, being the aggregate of the sums referred to in sub-section (2), as does not exceed 81[one hundred and fifty thousand rupees].

 

Thus, it can be inferred that:

  1. The deduction under sec. 80C shall be made if the sums specified in sub-section (2) are paid or deposited in the previous year.
  2. It does not place any condition about the source for making the payments or deposit.
  3. Further, the deduction is given while computing the total income, i.e., out of gross total income.
Apr 292021
 

Facts:

An issue which is of serious concern for those salaried employees employed by Companies and Corporations, whose Promoters and persons in charge do not bother to issue, to the employees from whose salary, the tax is deducted at source, the certificates.

  1. Hence, the petitioner says that Form No. 16 having not been issued in time, the employees are suffering serious consequences and are proceeded against for breaching and violating legal provisions.
  2. Some of these employees are senior citizens.

HIGH COURT OF BOMBAY in the case of Ramprakash Biswanath Shroff v.Commissioner of Income-tax (TDS) had held that:

  1. We would, therefore, request the respondents, particularly the Commissioner of Income Tax (TDS), Mumbai to file a comprehensive affidavit.
  2. We want the Ministry of Finance, Department of Revenue also to be made aware of these serious lapses in Mumbai and around.

We have noticed that there is no transparency, in the sense, no information is ever displayed in relation to such defaulters by the Department. We expect the Department to provide information of such defaulters so that those seeking employment or awaiting either retiral benefits or such other sums from the employers would know in advance as to how they are expected to comply with the law.

In the instant case, the petitioner is a senior citizen of 65 years of age and because he is not in possession of Form No.16, he has suffered at the hands of the Department.

Let, therefore, the necessary steps be taken in law so that such occurrences are avoided in the future.

We would expect the Department of Revenue, particularly, Department of Income Tax to penalize such defaulters and take other strict measures contemplated by law against them.

We post this matter in the hope that this Writ Petition will be taken as a test case by respondent No. 1.

Legal position:

Section 205 – Bar against direct demand on assessee Where tax is deductible at the source under the foregoing provisions of this Chapter], the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income

Section 191  –  Direct payment. : [(1)] In the case of income in respect of which:

  1. Provision is not made under this Chapter for deducting income-tax at the time of payment, and
  2. In any case where income tax has not been deducted in accordance with the provisions of this Chapter,

income-tax shall be payable by the assessee direct.

1[Explanation.—For the removal of doubts, it is hereby declared that if any person including the principal officer of a company,—

(a) who is required to deduct any sum in accordance with the provisions of this Act; or
(b) referred to in sub-section (1A) of section 192, being an employer,

does not deduct, or after so deducting fails to pay, or does not pay, the whole or any part of the tax, as required by or under this Act, and where the assessee has also failed to pay such tax directly, then, such person shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default within the meaning of sub-section (1) of section 201, in respect of such tax.

Apr 262021
 

Facts:

Nature and business of transaction The company is engaged in the business of construction, development of real estate projects, and renting of a commercial building.
Interest on loan for pre-construction period Rs 19,52,752/-
Interest due and paid during the financial year to corporation bank for the purpose of construction and letting out of commercial building project Rs 20,19,618/- The interest of unsecured loan taken from Mrs. Kaveri Bai

(Taken and used for the purpose of repayment of loan taken from corporation bank)

Rs 30,22,041/-
Total expenses claimed u/s 24(b)   Rs 69,94,411/-

 

Details as to unsecured loan: Borrowed monies from Mrs. Kaveri Bai and repaid the loan that was availed by the Assessee from Corporation Bank for the purpose of construction of a commercial building project.

Relevant rule – Section 24(b):

Sec. 24 of the Act lays down that income chargeable under the head “Income from house property” shall be computed after making some deductions. One of the deductions allowed u/s. 24(b) is as follows:

“Sec. 24(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:

Provided that in respect of property referred to in section 23(2) (self-acquired property etc.), the amount of deduction shall not exceed thirty thousand rupees :

Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April 1999 and such acquisition or construction is completed 50[within three years from the end of the financial year in which capital was borrowed], the amount of deduction under this clause shall not exceed one lakh fifty thousand rupees.

Explanation.—Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal installments for the said previous year and for each of the four immediately succeeding previous years:

Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of

o    such acquisition or construction of the property, or,

o    conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.

Explanation.—For the purposes of this proviso, the expression “new loan” means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital.”

Analysis of the above provision:

  1. The expression used in sec. 24(b) is ‘property’ and not residential or commercial property. Therefore, irrespective of the nature of the property whether it is residential or commercial, the deduction has to be allowed under section 24(b) of the Act.

All the provisos to sec. 24(b) of the Act deal with property referred to in section 23(2), i. e., residential property. The proviso only carves out an exception to section 24(b) of the Act, in so far as it relates to property used for residential purposes and does not deal with the right of an assessee to get a deduction on interest paid on loans borrowed for the purpose of constructing a commercial property.

Apr 222021
 

The assessee was a shareholder and director in M/s Associated Cine Exploiters Pvt. Ltd. (ACEL) and obtained a loan of Rs.1,00,000/-.

Reason for such advance: The assessee has received Rs.1,50,000/- as commercial advance for granting rights for distribution of the movie and the amount was paid to M/s Sukrit Pictures on 03.05.2010 was a commercial advance for screening of the movie. It is a fact on record that the amount received from ACEL which is running a Cinema Theatre in Rohtak has given a loan to Sukrit Pictures which is the distributor. Thus, this is the amount received from the theatre owner to the distributor of the films.

Whether 2(22)(e) is attracted on commercial transactions:

To attract the provision of section 2(22)(e), the important consideration is that there should be a loan and/or advance by a company to its shareholder. Every payment by a company to its shareholder may not be a loan/advance. To treat the payment as a loan following is worthwhile to note:

  • Amount paid must make the company a creditor of shareholder
  • If at the time of making payment, the company is already a debtor, the payment would merely a repayment by the company.
  • If, an amount so paid exceeds the already existing debt, the amount so exceeds will be treated as a loan to the assessee and would attract section 2(22)e).
  • If, the assessee has a current account with the company, the above position as regards each debit will have to be considered individually. However, credits to the account will have to be completely ignored.
  • Thus, the amount does not bear the characteristics of loans, and advance section 2(22)(e) is not applicable.
  • Even, advance given by the company in exchange for an advantage conferred upon the company by such shareholders can not be treated as deemed dividend.
  • Section 2(22)(e) is applicable even if the whole amount is repaid before the close of the previous year.
  • Also, a bona fide loan, whether in the form of overdraft or otherwise, for a short duration is treated as a dividend if all the conditions of section 2(22)(e) are satisfied.
  • This section is applicable even if the loan is given in kind.

Thus, section 2(22)(e) covers not only advances and loans to shareholders but any other payments by the company on behalf of or for the individual shareholders, such as payment of shareholders’ personal expenses, insurance premia, etc., to the extent of the accumulated profits of the company.

The distinction between the other dividend and deemed dividend u/s 2(22)(e):

Dividend declared by a company or deemed dividend falling under section 2(22)(a) to (d) Deemed dividend u/s 2(22)(e)
If the dividend is covered by the above sections, the dividend distribution tax is paid by the assessee company and what the assessee would receive is the tax-free income. However, this situation is changed with budget 2020. In case of deemed dividend under section 2(22)(e) – the same is taxable in the hands of shareholders since the inception at the applicable slab rate of shareholder. However, after the applicability of budget 2020, TDS have to be deducted in both cases.

 

Conclusion:

Where amounts are advanced to the assessee by another company for business purpose wherein both entities are having common directors and if it is in nature of a commercial transaction, provisions of section 2(22)(e) are not attracted.

Apr 192021
 

Facts of the case:

Rental receipt of trust Rs. 1,16,88,161/-
standard deduction u/s 24(a) of the IT Act of Rs. 35,06,448/- (30% of rental receipts)

Now, the issue arises, whether the computation of trust income is to be made on purely commercial considerations or as per taxation law. If income is to be computed on commercial considerations the deduction of Rs 35,06,448/- would have not been allowed. However, from a taxation point of view assessee trust is eligible for deduction.

Section 24 of the act:

Deductions from income from house property.

  1. Income chargeable under the head “Income from house property” shall be computed after making the following deductions, namely:—

(a) a sum equal to thirty per cent of the annual value;

(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:

A bare reading of the above makes it amply clear that the provisions of the Act do not provide any restriction whatsoever that any category of the taxpayer is excluded from this deduction.

It is settled law that the provisions of the Act have to be construed in a strict manner when there is no ambiguity whatsoever in the provisions of the Act. Hence, extrapolation made by learned CIT(A) that the Trust shall not be entitled to deduction u/s. 24 of the Act in computation of income from house property is totally unsustainable in law.

In the case of CIT v. Institute of Banking Personnel Selection, wherein capital expenditure for acquiring asset which was already shown as the application of income was held to be eligible for depreciation which was denied by the Revenue.

Conclusion:

Hence, the assessee trust is eligible for standard deduction from income from house property and thus, 30% of rental income is deemed to be utilized for purposes of the trust.

Apr 162021
 

Gujarat Minimum wages have been revised from 1st Apr 2021 to 30th Sep-2021

Notification:-Gujarat VDA 01.04.2021 to 30.09.2021

Detail Industry-wise Breakup:- Gujarat Minimum Wages 1st Apr-2021 to 30th Sep-2021

 

SOURCES: PRAKASH CONSULTANCY SERVICES

Apr 152021
 

Facts of the case:

As per provisions of section 10(5) of the Act, only that reimbursement of travel concession or assistance to an employee is exempted which was incurred for travel of the individual employee or his family members to anyplace in India. Nowhere in this clause, it has been stated that even if the employee travels to foreign countries, the exemption would be limited to the expenditure incurred to the last destination in India. Section 10(5) and the relevant rule is reproduced below:

Section 10(5)- exemption in respect of leave travel concession

  1. 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
** ** **

(5) in the case of an individual, the value of any travel concession or assistance received by, or due to, him,—

(a) from his employer for himself and his family, in connection with his proceeding on leave to any place in India;
(b) from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service,

subject to such conditions as may be prescribed (including conditions as to the number of journeys and the amount which shall be the exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government;

Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel

Conditions for the purpose of section 10(5) as prescribed under rule 2 B of the Income-tax Rules, 1962

2B. (1) The amount exempted under clause (5) of section 10 in respect of the value of travel concession or assistance received by or due to the individual from his employer or former employer for himself and his family, in connection with his proceeding—

(a) on leave to any place in India;
(b) to any place in India after retirement from service or after the termination of his service,

shall be the amount actually incurred on the performance of such travel subject to the following conditions, namely:—

(i) where the journey is performed on or after the 1st day of October 1997, by air, an amount not exceeding the air economy fare of the national carrier by the shortest route to the place of destination;
(ii) where places of origin of journey and destination are connected by rail and the journey is performed on or after the 1st day of October 1997, by any mode of transport other than by air, an amount not exceeding the air-conditioned first-class rail fare by the shortest route to the place of destination; and
(iii) where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed on or after the 1st day of October 1997, between such places, the amount eligible for exemption shall be:—
(A) where a recognized public transport system exists, an amount not exceeding the 1st class or deluxe class fare, as the case may be, on such transport by the shortest route to the place of destination; and
(B) where no recognized public transport system exists, an amount equivalent to the air-conditioned first-class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail.

Liability to deduct TDS:

There is a subtle line of demarcation between what is taxable in the hands of the assessee and what is the amount of estimated income in respect of which tax is required to be deducted at source by the employer.

Section 192 (1), which imposes tax withholding obligations on the employers in respect of payments for salaries, requires that tax deduction is made by the employer “on the estimated income of the assessee under this head (i.e., income from salaries) for that financial year“. Thus, the tax withholding obligation is clear in respect of “estimated income of the assessee” and not in respect of “taxable income of the assessee”.

There can be situations in which the employer genuinely and reasonably estimates income of the employees under the head salaries, and yet actual taxability of income under the head salaries of the related employees may be higher than the employer’s estimation.

Therefore, while examining the question as to whether the employer has properly discharged his duties under section 192, all that is to be seen is whether the employer has reasonably, or bonafide, estimated the income of the employees and deducted tax in respect of such estimated income.

Conclusion:

Under section 192 a duty is cast on an employer to form an opinion about the tax liability of his employee in respect of the salary income. While forming this opinion, the employer is undoubtedly expected to act honestly and fairly. But if it is found that the estimate made by the employer is incorrect, this fact alone, without anything more, would not inevitably lead to the inference that the employer has not acted honestly and fairly. Unless that inference can be reasonably raised against an employer, no fault can be found with him. It cannot be held that he has not deducted tax on the estimated income of the employee.