M/s The Bazpur Coop. Sugar Factory Ltd, Nainital V. DCIT, Kashipur

ITA 1715/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3503 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 27-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS PRATIMA KAUSHIK
• Assessee Lawyers: P L BANGA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMEBR AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T.A NO. 1715/DEL/09 ASSTT. YEAR 2006-07 THE BAZPUR COOP. SUGAR FACTORY LTD. C/O. M/S. BANGA & CO., CAS, BANGA HOUSE,MALLITAL, NAINITAL VS. DCIT, KASHIPUR (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI P.L. BANGA, CA RESPONDENT BY: MRS. PRATIMA KAUSHIK, SR. DR ORDER PER RAJPAL YADAV, JM: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LD. CIT (A) DATED 11 TH FEBRUARY, 2009 PASSED FOR ASSTT. YEAR 2006-07. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH RULE 8 OF I TAT RULES. THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIEF THE SOLITARY GRIEVANCE OF THE ASSESSEE IS WHETHER SUPPLY OF FREE ELECTRICITY ENERGY FROM THE RESOURCE OF ASSESSEE TO THE RESIDENCE OF EMPLOYEES IS A PERQUISITES TAXABLE IN THE HANDS OF EMPLOYEE OR IS A FRINGE BENEFIT WITHIN THE MEANING OF SECTION 115 B (1) OF THE INCOME TAX ACT. ITA NOS. 1715/DEL/09 ASSTT. YEAR 2006-07 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN MANUFACUTER OF SUGAR, COUNTRY LIQUOR AND IMFL. I T HAS FILED ITS RETURN OF INCOME ON 26.10.2006 DECLARING A LOSS AT RS. 13676552/-. DURI NG THE COURSE OF ASSESSMENT PROCEEDING LD. AO FOUND THAT ASSESSEE USED TO PURC HASE BHUSI AND BAGASSE IN ORDER TO RUN BOILERS WHICH GENERATE STEAM FOR MANU FACTURING PROCESS. THE ASSESSEE USED TO PRODUCE ELECTRICITY BY RUNNING A TURBINE WI TH THE HELP OF STEAM WHICH WAS GENERATED BY USING BAGASSE. THE ELECTRICITY WAS SUP PLIED TO THE STAFF QUARTERS ALSO IN ADDITION TO ITS UTILIZATION FOR STREET LIGHTS IN TH E FACTORY CAMPUS. ACCORDING TO THE AO IT IS A STAFF WELFARE MEASUREMENT AND THEREFORE IT I S A FRINGE BENEFIT EXTENDED TO THE STAFF. HE ESTIMATED 20% OF THE TOTAL EXPENSES AS FR INGE AS LEVIED THE TAX. 3. APPEAL TO THE LD. CIT(A) DID NOT BRING ANY RELIE F TO THE ASSESSEE. 4. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ISSU E IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE TRIBUNAL RENDERED IN ITA NO. 2109/D/09 IN THE CASE OF KISAN SAHKARI CHINI MILLS LTD. FOR ASSTT. YEAR 2006-07. HE PLACED ON RECORD COPY OF THE TRIBUNALS ORDER IN IT A NO. 265/D/2010 WHERE ALSO A SIMILAR ISSUE WAS INVOLVED. LD. DR WAS UNABLE TO CO NTROVERT THE CONTENTION OF LD. COUNSEL FOR THE ASSESSEE. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT IN THE CASE OF KISAN SAHKAR I CHINI MILLS TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE. THE OBSERVATION OF T HE TRIBUNAL IN ITA NO. 265/DEL/2010 READ AS UNDER :- 2. AT THE TIME OF HEARING NOONE WAS PRESENT ON BEH ALF OF THE ASSESSEE. LD. DR SUBMITTED THAT IDENTICAL ISSUE AROSE IN THE CASE OF KISAN SAHKARI CHINI MILLS LTD., SITAGANJ, KASHIPUR FOR ASSTT. YEAR 2006 -07 IN ITA NO. 2109 (DEL)/2009 DATED 11.12.2009. IN THE SAID CASE THE T IRIBUNAL HAS HELD THAT THE SUPPLY OF FREE ELECTRICITY ENERGY FROM THE RESOURCE S OF THE ASSESSEE IS A PERQUISITE TAXABLE IN THE HANDS OF THE EMPLOYEES AN D HENCE OUTSIDE THE SCOPE ITA NOS. 1715/DEL/09 ASSTT. YEAR 2006-07 3 FRINGE BENEFIT ASSESSABLE U/S 115B (1). THEREFORE THE ASSESSEE SUCCEEDS IN THE APPEAL. 3. WE HAVE PERUSED THE ORDER OF TRIBUNAL. THE TRIBU NAL IN ITS ORDER SUPRA HELD AS UNDER :- WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMI SSIONS MADE BEFORE US. SUB-SECTION 115WB(3) PROVIDES THAT THE P RIVILEGE, SERVICE, FACILITY OR AMENITY DOES NOT INCLUDE PERQUISITES IN RESPECT OF WHICH TAX IS PAID OR PAYABLE BY THE EMPLOYEE. THUS, IF PROVIDING FACILITY OF FREE ELECTRICITY TO THE EMPLOYEES CONSTITUTES PERQUISITE S IN THEIR HANDS, THEN SUCH FACILITY WILL NOT AMOUNT TO FRINGE BENEFIT U/S 115WB(1) AS SUBSECTION (3) IS ENACTED FOR THE PURPOSE OF SUB SE CTION (1), AS EXPRESSEDLY MENTIONED THEREIN. WE ALSO FIND THAT RU LE 3 (4) OF THE INCOME-TAX RULES, 1962, PROVIDES FOR INTER-ALIA QUA NTIFYING THE PERQUISITE ARISING FROM FREE SUPPLY OF ELECTRIC ENE RGY, WHICH IS TO BE DETERMINED AS THE SUM EQUAL TO THE AMOUNT PAID ON T HAT ACCOUNT BY THE EMPLOYER TO THE AGENCY SUPPLYING ELECTRIC ENERGY. H OWEVER, WHERE SUCH SUPPLY IS MADE FROM RESOURCES OWNED BY THE EMP LOYER, WITHOUT PURCHASING IT FROM ANY OTHER OUTSIDE AGENCY, THE VA LUE OF PERQUISITE WOULD BE THE MANUFACTURING COST PER UNIT INCURRED B Y THE EMPLOYER. IT IS ALSO PROVIDED THAT THE AMOUNT PAID BY THE EMPLOYEES FOR THE SERVICE SHALL BE DEDUCTED TO ARRIVE AT THE NET VALUE OF THE PERQUISITE. FROM THE RULE, IT IS CLEAR THAT FREE SUPPLY OF ELECTRIC ENER GY FROM THE RESOURCES OF AN ASSESSEE, WHICH THE CASE AT HAND, IS A PERQUISIT E TAXABLE IN THE HANDS OF THE EMPLOYEE. THE AFORESAID SUB-SECTION (3 ) USES THE WORDS IN RESPECT OF WHICH TAX IS PAID OR PAYABLE. THE A RGUMENTS FURNISHED BY THE LOWER AUTHORITIES AND THE LD. DR LEAD TO A C LEAR CONCLUSION THAT TAX HA SNOT BEEN DEDUCTED BY THE EMPLOYER OR PAID B Y THE EMPLOYEE IN RESPECT OF THIS FACILITY. HOWEVER, IT IS ALSO CLEAR THAT TAX IS PAYABLE BY THE EMPLOYEES. IN VIEW THEREOF, IT IS HELD THAT SUC H SERVICE, FACILITY OR AMENITY DOES NOT CONSTITUTE FRINGE BENEFIT. 6. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE ABOVE CASE WE HOLD THAT THE SUPPLY OF FREE ELECTRICITY FROM ASSESSEES OWN RESOURCES WILL BE A PERQUISITE TO THE EMPLOYEES AND HENCE NOT A FRINGE BENEFIT ASSESS ABLE IN THE HANDS OF THE ASSESSEE. WE ALLOW THE APPEAL OF ASSESSEE AND DELET E THE ESTIMATED ADDITION OF RS. 988934/-. NO OTHER ISSUE WAS PRESSED BY THE LD. COU NSEL FOR THE ASSESSEE. ITA NOS. 1715/DEL/09 ASSTT. YEAR 2006-07 4 7. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON .23.7.2010 SD/- [K.G. BANSAL] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER VEENA DATED: 23.7.10 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT