A bench headed by Justice S H Kapadia upheld the Delhi High Court's judgement that held that the question of penalty for not deducting tax does not arise.
According to the department, the failure to deduct TDS in respect of perquisites at the hands of employees could not be said to be a bonafide lapse and would attract penalty under Section 271C of the Income Tax Act 1961.
The circulars issued in this regard specifically stipulated that TDS was required to be deducted by employers in respect of perquisites at the hands of the employees, Solicitor General GE Vanhanvati said.
During the course of survey conducted in February 2000, the company was found providing car and furnishing to its employees under its scheme and the assessee was purchasing the same under its name.
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Under the scheme, the assesee after the prescribed period had allowed its officials to purchase the items at a price mutually agreed between them and in some cases the agreed prices were lesser than the market value or written down value (WDV) of the items.