M/s Andhra Sugars Ltd, Tanuku V. The ITO, Ward-1., Tanuku

ITA 213/VIZ/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0725 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-05-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 03-04-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Assessee Lawyers: C V K PRASAD
• Keywords: Recovery proceedings; Period of limitation; Retrospective amendment; Non-deduction of tax; Corroborative evidences; Time period of passing order
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.213 TO 217/VIZAG/2008 ASSESSMENT YEARS : 2003-04 TO 2007-08 RESPECTIVELY ANDHRA SUGARS LTD., TANUKU ITO, WARD-1 TANUKU (APPELLANT) VS. (RESPONDENT) PAN NO.AAACT 6357Q APPELLANT BY: SHRI C.V.K. PRASAD, ADVOCATE RESPONDENT BY: SHRI G.S.S. GOPINATH, DR ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAIN ST THE ORDER OF THE CIT(A) PERTAINING TO ASSESSMENT YEAR 2002-03 TO 200 6-07 ON COMMON GROUNDS WHICH ARE AS UNDER: 1) THE APPELLANT SUBMITS THAT THE C IT(A) ERRED, BOTH IN LAW AND ON FACTS, IN CONFIRMING THE ORDERS PASSED BY THE ASSES SING OFFICER U/S 201(1) OF THE I.T. ACT, 1961 TREATING THE APPELLANT COMPANY AS AN ASSESSEE IN DEFAULT IN RESPECT OF TAX UNDER THE A BOVE SAID PROVISIONS OF THE ACT. 2) THE APPELLANT SUBMITS THAT SINCE IT HAS NOT DEDUCTE D AT SOURCE THE IMPUGNED TAX, CONSEQUENTLY, IT HAS NO LIABILITY IN TERMS OF SECTION 200 OF THE INCOME TAX ACT, 1961 TO PAY ANY TAX TO THE CR EDIT OF THE CENTRAL GOVERNMENT. 3) THE APPELLANT SUBMITS THAT SUB-SECTION (2) OF SECTI ON 200 OF THE ACT IS ALSO NOT APPLICABLE IN VIEW OF THE OPTIONAL NATURE OF PROVISIONS RELATING TO TAX DEDUCTION AT SOURCE ON NON-MONETARY PERQUISI TE LAID DOWN IN SECTION 192(1A). 4) EVEN SUPPOSING THAT IT IS AN ASSESSEE IN DEFAULT, THERE IS NO MANDATE IN SECTION 201(1) TO DEMAND PAYMENT OF THE TAX. 5) THE APPELLANT SUBMITS THAT THE CLASSIFICATION OF TH E RESIDENTIAL ACCOMMODATION WITH REFERENCE TO ITS LOCATION IN CI TIES POPULATION WISE AND IN OTHER PLACES AS CONTAINED IN EXPLANATION 4 TO SUB-CLAUSE (1) OF SUB-SECTION (2) OF SECTION 17 OF THE INCOME TAX ACT 1961 AS AMENDED BY THE FINANCE ACT, 2007, IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 6) THE APPELLANT SUBMITS THAT THE CIT(A) IS NOT CORREC T IN CONCLUDING THAT THE ORDERS OF THE VARIOUS COURTS RELIED UPON BY IT ARE NOT RELEVANT TO THE CONTEXT, AND IN DOUBTING THE INTENT OF THE APPE LLANT IN SO RELYING ON THE SAID ORDERS, AND ATTRIBUTING MOTIVES TO THE APP ELLANT FOR ITS INTERPRETATION OF THE LAW. 3. THE BRIEF FACTS RELATING TO THE TAX AND INTEREST DEMAND U/S 201(1) AND 201(1A) OF THE ACT ARE THAT THE ASSESSING OFFICER O N NOTICING THAT ASSESSEE COMPANY HAD SHORT DEDUCTED TAX AT SOURCE U/S 192 OF THE ACT IN RESPECT OF PERQUISITES VALUE PERTAINING TO THE PROVISIONS OF R ENT FREE ACCOMMODATION TO ITS EMPLOYEES FOR THE FINANCIAL YEAR 2002-03 TO 200 4-05 AS WELL AS CONCESSIONAL RENT ACCOMMODATION FOR THE FINANCIAL Y EAR 2005-06 & 2006-07, HE SOUGHT THE NECESSARY INFORMATION FROM THE ASSESS EE COMPANY AND AFTER VERIFICATION OF SUCH INFORMATION, HELD THAT THE PER QUISITE VALUE OF THE RENT FREE ACCOMMODATION/CONCESSIONAL RENT ACCOMMODATION PROVI DED TO ITS EMPLOYEES HAD BEEN SHORT CONSIDERED, RESULTING IN SHORT DEDUC TION OF TAX AT SOURCE THEREBY ENTAILING RAISING OF AGGREGATE TAX AND INTE REST DEMANDS U/S 201(1) & 201(1A) FOR EACH OF THE AFORESAID FINANCIAL YEARS. ACCORDINGLY, THE TAX DEMAND WAS RAISED AT RS.67,820/-, RS.47,768/-, RS.5 4,741/-, RS.36,200/- & RS.12,49,680/- FOR THE FINANCIAL YEAR 2002-03, 2003 -04, 2005-06 & 2006-07 RESPECTIVELY. 4. THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE CIT(A) AND RAISED VARIOUS SUBMISSIONS WHICH ARE RECORDED BY THE CIT(A ) IN PARA-5 OF HIS ORDERS BUT THE CIT(A) WAS NOT CONVINCED WITH THE CONTENTIO NS OF THE ASSESSEES AND FINALLY CONFIRMED THE ORDER OF THE A.O. 5. NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSIONS THAT THE OBLIGATION TO DEDUCT TAX AT SO URCE U/S 192 OF THE ACT IN RESPECT OF INCOME CHARGEABLE UNDER THE HEAD `SALARI ES ARISES STRICTLY AT THE TIME OF PAYMENT IN CONTRA-DISTINCTIONS TO SAME OF T HE OTHER SECTIONS UNDER PART B OF CHAPTER XVII OF THE ACT WHEREUNDER TDS ON OTHER EXPENDITURE ARISES ON PAYMENT OF CREDIT TO THE ACCOUNT OF THE PAYEE. AS SUCH WHEN AN AMOUNT WHICH IS COVERED UNDER THE SALARIES IS NOT PAID, T HE OBLIGATION TO DEDUCT TAX AT SOURCE DOES NOT ARISE. HE FURTHER CONTENDED THA T AS PER SECTION 192(1A), 3 THE PERSON RESPONSIBLE FOR PAYING ANY INCOME IN THE NATURE OF PERQUISITES WHICH IS NOT PROVIDED FOR BY WAY OF MONETARY PAYMEN T, REFERRED TO IN CLAUSE (2) OF SECTION 17, MAY PAY AT HIS OPTION, TAX ON TH E WHOLE OR PART OF SUCH INCOME WITHOUT MAKING ANY DEDUCTION THERE FROM AT T HE TIME WHEN SUCH TAX WAS OTHERWISE DEDUCTIBLE UNDER THE PROVISIONS OF SU B-SECTION 1. IT IS THEREFORE, CLEAR THAT THE PAYMENT OF TAX IN RESPECT OF NON-MONETARY BENEFIT PROVIDED BY AN EMPLOYER TO AN EMPLOYEE IS ONLY OPTI ONAL AND CANNOT BE CONSTRUED AS AN OBLIGATION ON THE EMPLOYER. 6. IT WAS FURTHER CONTENDED THAT SECTION 17(2) OF TH E ACT WHICH DEFINES PERQUISITES SPEAKS OF MONETARY PERQUISITES LIKE MOT OR CAR EXPENSES, MEDICAL EXPENSES, INSURANCE PREMIUM EXPENSES AS WELL AS NON -MONETARY PERQUISITES LIKE RENT FREE ACCOMMODATIONS AND CONCESSION IN THE MATTER OF RENT. IT IS IN THE LIGHT OF ALL THIS DISTINCT NATURE OF DIFFERENT PERQUISITES THAT MIGHT BE PROVIDED BY AN EMPLOYER TO ITS EMPLOYEES THAT THE O BLIGATION OF DEDUCTION OF TAX AT SOURCE HAS BEEN STRUCTURED DISTINCTLY FOR MO NETARY PAYMENTS AND NON- MONETARY PROVISIONS. IT IS FOR THIS PRECISE REASON THAT EVEN IN SECTION 200 OF THE ACT CLEAR DISTINCTION HAS BEEN DRAWN BETWEEN TH E PERSON DEDUCTING TAX UNDER THE SECTIONS OF CHAPTER XVII AND A PERSON PAYI NG TAX REFERRED TO IN SECTION 192(1A) OF THE ACT. SUCH PROVISIONS HIGHLI GHTS THE FACTS THAT AN EMPLOYER WHO HAD AN OPTION TO PAY TAX CANNOT BE TRE ATED AS THE PERSON IN DEFAULT FOR NOT DEDUCTING TAX AT SOURCE. HOWEVER, IF SUCH AN EMPLOYER PAID TAX AS CONTEMPLATED U/S 192(1A) OF THE ACT, HE SHAL L CONSEQUENTLY BE OBLIGED TO PAY SUCH TAX CREDIT TO THE CENTRAL GOVERNMENT AC COUNT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 200(2) OF THE ACT. THIS DISTINCTION IS FURTHER HIGHLIGHTED IN THE PROVISIONS OF RULE 30 AND 31 OF THE I.T. RULES, 1962. IT NEEDS NO EMPHASIS THAT RENT FREE ACCOMMODATION OR A CONCESSIONAL RENT ACCOMMODATION PROVIDED BY THE ASSESSEE TO ITS EMPLO YEES IS A NON-MONETARY BENEFIT. THEREFORE, THE ASSESSEE HAS NO OBLIGATION WHATSOEVER TO DEDUCT TAX IN RESPECT OF SAID NON-MONETARY BENEFIT. THE TAX, IF ANY, DEDUCTED BY THE ASSESSEE WAS PURELY AT HIS OPTION AND FOR THE CONVE NIENCE OF ITS EMPLOYEES AND THE SAME WAS PAID TO THE CENTRAL GOVERNMENT DUR ING THE PRESCRIBED TIME LIMIT. THUS THE ASSESSEE SHOULD NOT BE TREATED AS DEFAULT U/S 201(1) OF THE ACT AND FOR NON-DEDUCTION OF TAX AT SOURCE NOR CAN INTEREST U/S 201(1A) OF THE ACT BE LEVIED IN ITS CASE FOR NON-PAYMENT OF TAX SO DEDUCTED. IT WAS FURTHER 4 CONTENDED THAT THE ORDER IN RESPECT OF FINANCIAL YE AR 2002-03 PASSED BY THE A.O. ON 3 RD OCTOBER, 2007 IS BARRED BY LIMITATION AS IT WAS PA SSED AFTER THE EXPIRY OF REASONABLE PERIOD OF TIME FROM THE END OF THE RELEVANT FINANCIAL YEAR. 7. THE CIT(A) EXAMINED ALL THE CONTENTIONS RAISED B Y THE ASSESSEES MINUTELY AND HAS FINALLY CONCLUDED THE ASSESSEE TO BE IN DEFAULT IN RESPECT OF TAXES AND APPROVED THE ACTION OF THE A.O. FOR RAISI NG TAX AND INTEREST DEMANDS U/S 201(1) AND 201(1A) OF THE ACT. 8. NOW THE ASSESSEE IS BEFORE US. BESIDES REITERAT ING THE CONTENTIONS RAISED BEFORE THE CIT(A), THE LD. COUNSEL FOR THE A SSESSEE HAS ARGUED THAT AS PER SECTION 201(1), THE ASSESSEE CANNOT BE HELD TO BE IN DEFAULT AS HE HAS DEDUCTED THE TAXES ON THE LESSER PERQUISITE VALUE C OMPUTED BY IT. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO CONTENDED THAT TH E PROVISIONS OF SECTION 201 CAN ONLY BE INVOKED WHERE THE ASSESSEE BEING AN EMPLOYER DOES NOT DEDUCT THE TDS OR AFTER SO DEDUCTING FAILS TO PAY T HE SAME. HE HAS ALSO ARGUED THAT AS PER SECTION 192(1A), IT WAS THE OPTI ON OF THE ASSESSEE TO DEDUCT TDS ON THE SAID PERQUISITE VALUE AND WHERE A N OBLIGATION IS NOT CAST UPON THE ASSESSEE AND DEDUCTION OF TDS IS LEFT UPON THE ASSESSEES OPTION AND HE CANNOT BE HELD TO BE THE ASSESSEE IN DEFAULT ON LESSER DEDUCTION OF TAX. 9. THE LD. D.R. ON THE OTHER HAND HAS EMPHATICALLY ARGUED THAT PROVISIONS OF SECTION 201 MAKES IT VERY CLEAR THAT WHERE ANY PERSON, INCLUDING THE PRINCIPAL OFFICER OF THE COMPANY WHO IS REQUIRED TO DEDUCT A TDS DOES NOT DEDUCT OR DOES NOT PAY OR AFTER SO DED UCTING FAILS TO PAY THE WHOLE OR ANY PART OF THE TAX AS REQUIRED BY OR UNDE R THIS ACT, THEN, SUCH PERSON SHALL WITHOUT PREJUDICE TO ANY OTHER CONSEQU ENCES WHICH HE MAY INCUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RE SPECT OF SUCH TAX. SECTION 201(1A) DEALS WITH THE LIABILITY OF CHARGING OF INT EREST FOR NON-DEDUCTION OF TAX AND ACCORDING TO IT IF ANY SUCH PERSON, PRINCIP AL OFFICER OF A COMPANY AS REFERRED TO IN SUB-SECTION 1 OF 201 DOES NOT DEDUCT THE WHOLE OR ANY PART OF THE TAX OR AFTER DEDUCTING FAILS TO PAY THE TAX AS REQUIRED BY OR UNDER THIS ACT, HE OR IT SHALL BE ALLOWABLE TO PAY SIMPLE INTEREST AT 12% P.A. ON THE AMOUNT 5 OF SUCH TAX FROM THE DATE ON WHICH SUCH TAX WAS DED UCTIBLE TO THE DATE ON WHICH SAID TAX IS ACTUALLY PAID. THE LD. D.R. FURT HER CONTENDED THAT UNDISPUTEDLY ASSESSEE HAS NOT DEDUCTED THE FULL TAX ON THE PERQUISITE VALUE DETERMINED, ON GIVING RENT FREE ACCOMMODATIONS TO I TS EMPLOYEES. THEREFORE, THE LOWER AUTHORITIES HAVE RIGHTLY CALCU LATED THE TAX AND THE INTEREST U/S 201(1A) OF THE ACT. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE ORDER OF THE LOWER AUTHORITIES BELOW AND DOCUMENTS PLACED ON RECORD AND WE FIND THAT UNDISPUTEDLY THE RENT FREE ACCOMMODATION/CONCE SSIONAL RENT ACCOMMODATION WAS PROVIDED TO ITS EMPLOYEES BY THE ASSESSEE. THOUGH HE HAS DETERMINED THE PERQUISITE VALUE OF THE SAME U/S 17(2) OF THE ACT BUT IT WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF LAW. THEREFORE, THE ASSESSING OFFICER HAS CONCLUDED THAT ASSESSEE HAS NOT DEDUCTE D A PROPER TAX ON THE VALUE OF THE PERQUISITE ON ACCOUNT OF RENT FREE ACC OMMODATIONS PROVIDED TO ITS EMPLOYEES. HE ACCORDINGLY HELD THE ASSESSEE TO BE IN DEFAULT AND CHARGED THE INTEREST U/S 201(1A) OF THE I.T. ACT. WHATEVER ARGUMENTS ARE RAISED BEFORE US THE SAME WERE RAISED BEFORE CIT(A) AND CI T(A) HAS DEALT WITH EACH AND EVERY CONTENTIONS OF THE ASSESSEES IN ITS ORDER IN PARA NO.6 RUNNING FROM PAGE NO.15 TO 16 OF HIS ORDER. ON ITS CAREFUL PERU SAL, WE FIND THAT CIT(A) HAS MADE A LUCID DISCUSSION OF ALL LEGAL ISSUES RAI SED BEFORE HIM. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE HAS RAISED THE SAM E ARGUMENTS WITH RESPECT TO THE SECTIONS 192(1A) AND 201(1) AND 201(1A) OF T HE I.T. ACT. HAVING READ BOTH THE SECTIONS CONJOINTLY WE ARE OF THE VIEW THA T THE ASSESSEE BEING AN EMPLOYER WAS REQUIRED TO DEDUCT A PROPER TAX ON VAL UE OF PERQUISITE DETERMINED AS PER PROVISIONS BUT THE ASSESSEE ADMIT TEDLY DID NOT DEDUCT THE PROPER TAX AND THE A.O. ACCORDINGLY HELD HIM TO BE ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAXES. THOUGH THE ASSESSEE HAS TAK EN A SHELTER OF SECTION 192(1A) OF THE ACT BUT ON READING OF BOTH THE SECTI ONS WE DO NOT FIND MUCH FORCE IN THE ARGUMENT OF THE ASSESSEES THAT AS PER SECTION 192(1A) ASSESSEE HAD AN OPTION TO DEDUCT THE TAX ON THE PERQUISITE V ALUE OF RENT FREE ACCOMMODATION. FOR THE SAKE OF REFERENCE WE EXTRAC T THE RELEVANT PORTION OF THE ORDER OF THE CIT(A) WHO HAS RIGHTLY ADJUDICATED THE ISSUE AS UNDER: 6 6. AFTER HEARING THE LEARNED AUTHORIZED REPRESENTA TIVES AND ON A CAREFUL CONSIDERATION OF THE FACTS RELATING TO THE ISSUE, T HE FOLLOWING OBSERVATIONS MADE AND DECISIONS TAKEN:- (I) IT IS DESIRABLE, AT THE OUTSET, TO SET OUT THE CORRECT FACTS FOR THE RELEVANT FINANCIAL YEARS AS APPEARING IN THE APPELL ANTS CASE BEFORE CONSIDERING THE MERITS OF THE CASE. FOR ALL THE RE LEVANT FINANCIAL YEARS FROM 2002-03 TO 2006-07, THE ASSESSING OFFICER HAS OBSER VED THAT THE PROVISIONS OF NOT RULE 3 OF THE I.T. RULES, BUT THOSE OF SECTION 1 7(2)(II)(A) OF THE ACT, ARE APPLICABLE IN THE APPELLANTS CASE. BUT, SUCH OBSE RVATION CAN BE SAID TO BE APPROPRIATE ONLY FOR THE FINANCIAL YEARS 2005-06 AN D 2006-07, BUT ERRONEOUS FOR THE FINANCIAL YEARS 2002-03, 2003-04 AND 2004-0 5, IN AS MUCH AS, THE PROVISIONS OF SECTION 17(2)(II)(A) OF THE ACT WITH RETROSPECTIVE EFFECT FROM 1.4.2002 PERTAIN TO THE METHOD OF VALUATION OF PERQ UISITE BY WAY OF ONLY CONCESSIONAL RENT ACCOMMODATION, AND NOT RENT FREE ACCOMMODATION. IT COULD BE OBSERVED THAT THE APPELLANT HAS PROVIDED R ENT FREE ACCOMMODATION TO ITS EMPLOYEES FOR THE FINANCIAL YEARS 2002-03 TO 2004-05, BUT, BARRING TWO EMPLOYEES, IT HAS PROVIDED CONCESSIONAL RENT ACCOMM ODATION TO ITS EMPLOYEES FOR THE FINANCIAL YEARS 2005-06 AND 2006- 07. SHRI V. BRAHMANANDAM (FINANCIAL YEAR 2005-06) AND SHRI R. N ANDA KUMAR (FINANCIAL YEAR 2006-07) HAVE BEEN PROVIDED RENT FREE ACCOMMOD ATION. THEREFORE, THE PROVISIONS OF RULE 3 OF THE I.T. RULES, 1962, AND NO T THOSE OF SECTION 17(2)(II)(A) OF THE ACT, ARE APPLICABLE IN RESPECT OF THE FINANCIAL YEARS 2002-03 TO 2004-05 DURING WHICH ONLY RENT FREE ACCOMMODATIO N HAS BEEN PROVIDED. FURTHER, SUCH RULE IS ALSO APPLICABLE IN THE CASES OF THE AFORESTATED TWO EMPLOYEES TO WHOM RENT FREE ACCOMMODATION HAVE BEEN PROVIDED DURING THE FINANCIAL YEARS 2005-06 AND 2006-07. THEREFORE, SU CH RENT FREE ACCOMMODATION IS REQUIRED TO BE VALUED ONLY AS PER RULE 3 OF THE I.T. RULES. (I-A) ON ACCOUNT OF UNDER COMPUTATION OF THE PERQ UISITE VALUE IN RESPECT OF THE SAID EMPLOYEES BY THE ASSESSING OFFI CER, IT WAS CONSIDERED IMPERATIVE TO ISSUE A NOTICE OF ENHANCEMENT TO THE APPELLANT, THEREBY AFFORDING AN OPPORTUNITY TO OFFER ITS OBJECTIONS, I F ANY. ACCORDINGLY, NOTICE DATED 18.1.2008 WAS ISSUED. IN RESPONSE, IT WAS SU BMITTED ON BEHALF OF THE APPELLANT-COMPANY THAT THE EMPLOYEE SHRI V. BRAHMAN ANDAM HAD RESIGNED AND WAS RELIEVED OF HIS DUTIES ON 31.3.2005 AND VAC ATED THE RENT FREE ACCOMMODATION ON THE DATE OF RELIEF. THE AMOUNT OF RS.1,23,083 RELATES TO THE ARREARS OF SALARY AND GRATUITY PAID TO HIM IN T HE FINANCIAL YEAR 2005-06. SINCE HE HAD VACATED THE QUARTER ON 31.3.2005, THE PERQUISITE VALUE OF RENT ACCOMMODATION DOES NOT ARISE IN HIS CASE. AS REGAR DS THE EMPLOYEE SHRI R. NANDA KUMAR, THE ACCOMMODATION PROVIDED TO HIM WAS A RENTED BUILDING TAKEN BY THE APPELLANT-COMPANY FROM A PRIVATE PARTY @ RS.3,600 PER MONTH, AND NOT OWNED BY THE APPELLANT-COMPANY. HOWEVER, S HRI R. NANDA KUMAR WAS RELIEVED ON 11.4.2006 AFTER WORKING HOURS, AND, THEREFORE, THE APPELLANT- COMPANY HAD TAKEN THE VALUE OF RENT FOR THE FULL MO NTH OF MARCH AND 11 DAYS FOR THE MONTH OF APRIL AGGREGATING TO RS.4,920 AS T HE PERQUISITE VALUE OF THE RENT FREE ACCOMMODATION PROVIDED TO HIM. THEREFORE , THERE WAS NO SCOPE FOR COMPUTING THE PERQUISITE VALUE BEYOND THE DATE OF H IS RELIEF. (I-B) AFTER CONSIDERING THE EXPLANATION TENDERED ON BEHALF OF THE APPELLANT-COMPANY, IT MAY BE STATED, THAT NEVER EVE R DURING THE PROCEEDINGS UNDER SECTIONS 201(1) AND 201(1A) OF THE ACT BEFORE THE ASSESSING OFFICER 7 HAD SUCH AVERMENT BEEN MADE WHILE FURNISHING THE DE TAILS OF THE SALARIES AND THE PERQUISITE VALUE OF THE RENT FREE ACCOMMODATION /CONCESSIONAL RENT ACCOMMODATION PROVIDED TO THE EMPLOYEES INCLUDING T HE SAID TWO EMPLOYEES, DURING THE RELEVANT FINANCIAL YEARS. EVEN IN THE A PPELLATE PROCEEDINGS, NO GROUND TO THAT EFFECT HAS BEEN TAKEN UP. IT WAS FOR THE FIRST TIME IN RESPONSE TO THE ENHANCEMENT NOTICE, THAT SUCH EXPLANATION HA S BEEN GIVEN. SUCH EXPLANATION HAVING NOT BEEN MADE BEFORE THE ASSESSI NG OFFICER DURING THE SAID PROCEEDINGS, IT CANNOT BE SAID TO HAVE EMANATE D THEREFROM, AND, DISPASSIONATE EVALUATION OF SUCH EXPLANATION OF THE APPELLANT-COMPANY IN RESPONSE TO THE NOTICES OF ENHANCEMENT, IT MAY BE S TATED THAT EXCEPT FOR RILING THE PHOTO COPIES OF THE RELIEVING ORDERS OF THE SAID TWO EMPLOYEES, NOTHING WORTHWHILE HAS BEEN DONE TO FURNISH ANY EVI DENCE SO AS TO INDICATE THE RESPECTIVE DATES OF VACATION OF THE RENT FREE A CCOMMODATION OF THE SAID TWO EMPLOYEES. THEREFORE, SUCH EXPLANATION OF THE APPELLANT-COMPANY WITHOUT PROPER SUPPORTING EVIDENCE IS, HEREBY, DISM ISSED AS DEVOID OF MERIT, AND, AS SUCH, THE PERQUISITE VALUE COMPUTED BY THE ASSESSING OFFICER IS REQUIRED TO BE SUITABLY ENHANCED BY APPLYING 15% OF THE SALARY OF THE SAID TWO EMPLOYEES. THE ASSESSING OFFICER SHALL DO THE NEEDFUL IN THIS REGARD. (II) AS REGARDS THE CONTENTION OF THE APPELLANT T HAT SINCE RENT FREE/CONCESSIONAL RENT ACCOMMODATIONS PROVIDED TO I TS EMPLOYEES FOR THE RELEVANT FINANCIAL YEARS, ARE SITUATED IN A TWON BY THE NAME, TANUKU, WEST GODAVARI DISTRICT, AND NOT FITTING INTO THE DEFINIT ION OF CITY AS DESCRIBED IN RULE 3(1) OF THE I.T. RULES, AND, THEREFORE, IT WAS NOT LIABLE UNDER LAW TO COMPUTE THE PERQUISITE VALUE OF RENT FREE/CONCESSIO NAL RENT ACCOMMODATION, AND CONSEQUENTLY, NOT REQUIRED TO DEDUCT TAX AT SOU RCE THEREOF AND PAY TO THE CENTRAL GOVERNMENT, IT MAY BE STATED THAT IT IS WONDERED AS TO WHY, AT ALL, THE APPELLANT HAD COMPUTED THE PERQUISITE VALU E OF THE SAID RENT FREE/CONCESSIONAL RENT ACCOMMODATION. SURELY, BY D OING SO, THE APPELLANT IS NOT DOING OUT ANY CHARITY OR EXTENDING A LARGESS TO THE GOVERNMENT. THERE IS NO MIDDLE PATH ENVISAGED UNDER THE LAW FOR BRINGING TO TAX THE PERQUISITE VALUE OF RENT FREE UNFURNISHED ACCOMMODATION; EITHE R THE PERQUISITE VALUE HAS TO BE TAKEN AS NIL, IF IT DOES NOT FIT INTO THE SCO PE/SCHEME OF RULE 3(1) OF I.T. RULES, OR THE PERQUISITE VALUE HAS TO BE COMPUTED O NLY WITH REFERENCE TO RULE 3(1) OF THE I.T. RULES. THE LAW DOES NOT PROVIDE FO R ANY CHOICE OF ALTERNATIVE METHOD OF VALUATION OF PERQUISITES. ONCE RENT FREE ACCOMMODATION IS TREATED AS A PERQUISITE U/S 17(2) OF THE ACT, THEN AUTOMATI CALLY RULE 3(1) OF THE I.T. RULES COMES INTO PLAY FOR THE PURPOSE OF METHOD OF VALUATION OF SUCH PERQUISITE. FOR THE SAKE OF CLARITY AND EMPHASIS, THE OPERATIVE PART OF RULE 3 IS EXTRACTED BELOW:- 3. VALUATION OF PERQUISITES. FOR THE PURPOSE OF COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD SALARIES, THE VALUE OF PERQUISITES PROVIDED BY TH E EMPLOYER DIRECTLY OR INDIRECTLY TO THE ASSESSEE (HEREINAFTER REFERRED TO AS EMPLOYEE) OR TO ANY MEMBER OF HIS HOUSEHOLD BY REASON OF HIS EMPLOYMENT SHALL BE DETERMINED IN ACCORDANCE WITH THE SUB-RULES, NAMELY.. THE EXPRESSION SHALL BE DETERMINED MAKES IT MANDA TORY TO COMPUTE THE VALUE OF RESIDENTIAL ACCOMMODATION PROVIDED BY AN E MPLOYER ONLY IN ACCORDANCE WITH SUB-RULE (1), AND NO OTHER METHOD. THEREFORE, EITHER THE 8 APPELLANT HAD TO CLAIM THAT IT WAS NOT OBLIGED TO D ETERMINE THE PERQUISITE VALUE OF RENT FREE ACCOMMODATION TO ITS EMPLOYEES, AND NOT DEDUCT ANY TAX THEREOF, OR IT SHOULD HAVE FOLLOWED THE METHOD CONT AINED IN RULE 3(1) OF THE I.T. RULES. HENCE, PRIMA FACIE, THE ACTION ON THE P ART OF THE APPELLANT IN DETERMINING THE PERQUISITE VALUE OF THE SAID RENT F REE ACCOMMODATION IN ACCORDANCE WITH SOME OTHER METHOD, HOWSOEVER, REASO NABLE OR AUTHENTIC, IS NOT IN ACCORDANCE WITH THE STATUTORY PROVISIONS PRE SCRIBED FOR SUCH PURPOSE. (II-A) IT IS WELL SETTLED THAT FOR A PROPER, COMPREH ENSIVE, MEANINGFUL AND HOLISTIC INTERPRETATION OF A SPECIFIC PROVISION OF LAW, NOT ONLY THE OPERATIVE PORTION, BUT ALSO THE PROVISOS, EXPLANATIONS, NON-O BSTANTE CLAUSES ETC., ARE REQUIRED TO BE TAKEN INTO CONSIDERATION AND THEIR S UBTLE NUANCES AND RAMIFICATIONS PERCEIVED, SO AS TO APPRECIATE THE TR UE AND FULL IMPORT OF SUCH SPECIFIC PROVISION. THE FIRST PROVISO TO RULE 3(1) OF THE I.T. RULES SPEAKS OF THE CONDITIONAL EXCLUSION FROM THE SCOPE OF RULE 3( 1) OF ACCOMMODATION PROVIDED BY CERTAIN INDUSTRY SPECIFIC BUSINESS ESTA BLISHMENTS, SO AS TO SET FREE SUCH ACCOMMODATION FROM THE STATUTORY REQUIREM ENT OF DETERMINATION OF PERQUISITE VALUE THEREOF. IN OTHER WORDS, AS PER T HE SAID PROVISO, THE PERQUISITE VALUE OF SUCH ACCOMMODATION HAVE TO BE T AKEN AS NIL, THEREBY RELIEVING THE EMPLOYER OF ANY BURDEN AND OBLIGATION OF DEDUCTION OF TAX AT SOURCE IN RESPECT OF SUCH NIL PERQUISITE VALUE. AC CORDINGLY, AND IN SIMPLE TERMS, THE EXCLUSION FROM THE AMBIT OF VALUATION OF PERQUISITE TOWARDS RENT FREE ACCOMMODATION WOULD BE LIMITED TO BUSINESS ACT IVITIES INVOLVING; (A) MINING SITE, (B) ONSHORE OIL EXPLORATION SITE, (C) PROJECT EXECUTION SITE, (D) DAM SITE, (E) POWER GENERATION SITE, (F) OFFSHORE S ITE, WITH THE CONDITIONS THAT (I) THE ACCOMMODATION SHOULD BE OF TEMPORARY NATURE , (II) AND THE PLINTH AREA OF SUCH ACCOMMODATION SHOULD BE LIMITED TO 800 SFT. , (III) AND SUCH ACCOMMODATION IS LOCATED ATLEAST 8 KMS., AWAY FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR A CANTONMENT BOARD, OR (IV) IF THE ACCOMMODATION IS OF A PERMANENT NATURE AND ALSO HAVING PLINTH AREA EXCEED ING 800 SFT., SUCH ACCOMMODATION SHOULD BE LOCATED IN A REMOTE AREA I. E. 40 KMS., AWAY FROM A TOWN HAVING THE POPULATION STRENGTH NOT EXCEEDING 2 0,000 BASED ON LATEST PUBLISHED ALL INDIA CENSUS. ONLY IF THE ABOVE COND ITIONS ARE FULFILLED IN RESPECT OF THE SPECIFIED BUSINESSES/INDUSTRIES, THE N THE NEED FOR VALUATION OF PERQUISITE AS PER RULE 3(1) WOULD NOT ARISE, AND, A CCORDINGLY, BE DETERMINED AT NIL, OTHERWISE NOT. ANALYZING THE PROVISO CONVE RSELY IN THE CONTEXT OF THE PRESCRIBED CONDITIONS NOT BEING FULFILLED WITH REGA RD TO THE RENT FREE ACCOMMODATION PROVIDED IN RESPECT OF THE SPECIFIED BUSINESSES/INDUSTRIES FALLING UNDER THE CONDITIONAL EXCLUSION CATEGORY, O NE CANNOT HELP BUT INEXORABLY CONCLUDE THAT THE EXEMPTION WOULD SIMPLY VANISH, THEREBY CASTING LIABILITY UPON THE EMPLOYER TO COMPUTE THE PERQUISI TE VALUE OF SUCH ACCOMMODATION IN TERMS OF RULE 3(1) OF THE I.T. RUL ES, IF (A) THE ACCOMMODATION PROVIDED IS OF A PERMANENT NATURE, EV EN THOUGH THE PLINTH AREA OF SUCH ACCOMMODATION IS LIMITED TO 800 SFT., AND SUCH ACCOMMODATION IS LOCATED ATLEAST 8 KMS., AWAY FROM THE LOCAL LIMI TS OF ANY MUNICIPALITY OR A CANTONMENT BOARD, (B) THE PLINTH AREA OF THE ACCOMM ODATION EXCEEDS 800 SFT., EVEN THOUGH SUCH ACCOMMODATION IS OF A TEMPOR ARY NATURE, AND SUCH ACCOMMODATION IS LOCATED ATLEAST 8 KMS., AWAY FROM THE LOCAL LIMITS OF A MUNICIPALITY OR A CANTONMENT BOARD, (C) THE ACCOMMO DATION IS LOCATED WITHIN 8 KMS., FROM THE LOCAL LIMITS OF ANY MUNICIPALITY O R A CANTONMENT BOARD, ALTHOUGH SUCH ACCOMMODATION IS OF TEMPORARY NATURE AND THE PLINTH AREA OF 9 SUCH ACCOMMODATION IS LIMITED TO 80 SFT. IN A CONVE NTIONAL SENSE, THE CONCEPT OF CITY IMPLIES AN AREA CORRESPONDING TO THE LOCAL LIMITS OF A MUNICIPALITY OR A CANTONMENT BOARD, OF THAT PARTICU LAR CITY; THE AREA BEYOND THE LOCAL LIMITS OF ANY MUNICIPALITY OR A CANTONMEN T BOARD DOES NOT RELATE TO THE CITY. BUT AS PER THE ABOVE ANALYSIS, THE REN T FREE ACCOMMODATION PROVIDED BY THE SPECIFIED BUSINESSES/INDUSTRIES IN AREAS FALLING BEYOND THE TERRITORIAL LIMITS OF A CITY, WHETHER LOCATED UPT O 8 KMS., OR BEYOND AND UPTO 40 KMS., AWAY FROM A TOWN WITH A POPULATION STRENGT H NOT EXCEEDING 20,000 BASED ON LATEST PUBLISHED ALL INDIA CENSUS (REMOTE AREA), IS LIABLE FOR VALUAT ION OF THE PERQUISITE THEREOF IN TERMS OF RULE 3(1) OF THE I.T. RULES, IF THE AFOR ESAID PRESCRIBED CONDITIONS ARE NOT FULFILLED. ANALYZING THE MATTER FURTHER, I T MAY BE STATED THAT IF THE RESIDENTIAL ACCOMMODATION PROVIDED IN RESPECT OF TH E SPECIFIED BUSINESSES/ INDUSTRIES FALLING UNDER THE EXCLUSION CATEGORY, WH ERE THE ABOVE CONDITIONS ARE NOT FULFILLED, ARE LIABLE TO BE BROUGHT WITHIN THE NET OF VALUATION OF PERQUISITE THEREOF AS PER RULE 3(1), THEN LOGICALLY AND IMPLIEDLY, THE RESIDENTIAL ACCOMMODATION PROVIDED IN AREAS FALLING BEYOND THE MUNICIPAL AND CANTONMENT BOARD LIMITS AND ALSO LOCATED IN REMOTE AREAS IN RESPECT OF OTHER TYPES OF BUSINESSES (AS IN THE CASE OF THE APPELLAN T), NOT FALLING UNDER THE EXCLUSION CATEGORY, ARE LIABLE, AT THE OUTSET, FOR COMPUTATION OF THE PERQUISITE VALUE UNDER RULE 3(1) OF THE I.T. RULES, EVEN IF THE PRESCRIBED CONDITIONS UNDER THE PROVISO ARE FULFILLED. IN THIS SENSE, THE SAID PROVISO IMPLIEDLY AMPLIFIES THE DEFINITION, SCOPE, AND EXTENT OF THE EXPRESSION OTHER CITIES, SO AS TO MEAN ANY PLACE EVEN IF SUCH PLACE IS LOCATED IN A REMOTE AREA. IN THIS VIEW OF THE BROAD MEANING EMERGING FROM THE ANALYSI S OF RULE 3(1) READ WITH FIRST PROVISO, THE EXPRESSION OTHER CITIES HAVE T O BE READ AS PLACES BEYOND THE MUNICIPAL LIMITS AND ALSO REMOTE AREAS. ALT HOUGH THERE APPEARS TO BE SOME APPARENT AMBIGUITY WHEN RULE 3(1) IS CONSIDERE D IN ISOLATION FROM THE FIRST PROVISO, YET THE READING OF RULE 3(1) IN CONJ UNCTION WITH THE FIRST PROVISO THERETO MAKES IT ABUNDANTLY CLEAR THAT EXCEPT IN TH E SPECIFIED INDUSTRY/ BUSINESS CASES FALLING UNDER THE CONDITIONAL EXCLUS ION CATEGORY, RENT FREE ACCOMMODATION PROVIDED IN RESPECT OF OTHER TYPES OF BUSINESSES/INDUSTRIES THAT ARE LOCATED BEYOND THE MUNICIPAL LIMITS OF A C ITY/TOWN OR EVEN LOCATED IN REMOTE AREAS, IS TO BE VALUED AT THE PRESCRIBED RAT E OF SALARY, IN TERMS OF RULE 3(1) OF THE I.T. RULES. THEREFORE, THE CONTENTIONS, ARGUMENTS AND SUBMISSIONS MADE ON BEHALF OF THE APPELLANT ON THE ISSUE, BEING BEREFT OF ANY SUBSTANCE AND DEVOID OF ANY MERIT, ARE HEREBY DISMI SSED. (III) REGARDING THE APPELLANTS CONTENTION THAT THE PROVISIONS OF SECTION 17(2)(II), EXPLANATION 1(A) OF THE ACT, AS INTRODUC ED BY THE FINANCE ACT, 2007, WITH RETROSPECTIVE EFFECT, OUGHT NOT TO HAVE BEEN R ETROSPECTIVELY INVOKED IN THE APPELLANTS CASE, ON THE REASONING THAT DEDUCTI ON OF TAX AT SOURCE IN RESPECT OF PAST EXPENDITURES AND RECOVERY THEREFROM WAS IMPOSSIBLE TO BE ENFORCED, IT MAY BE STATED THAT THE GROUND CHALLENG ING THE LEGALITY AND VALIDITY OF ANY LEGISLATION ENACTED BY THE HONBLE INDIAN PARLIAMENT AS BEING VIOLATIVE OF THE COINSTITUTION OF INDIA OR ANY ESTA BLISHED JUDICIAL PRINCIPLE, DO NOT FALL WITHIN THE DOMAIN OF ANY AUTHORITY OR COUR T BELOW THE LEVEL OF HIGH COURT. THE VARIOUS INCOME-TAX AUTHORITIES IMPLEMEN TING THE INCOME-TAX STATUTE AS WELL AS THE INCOME TAX APPELLATE TRIBUNA L, ARE THE CREATIONS OF THE INCOME-TAX STATUTE ITSELF, AND, THEREFORE, THEY ARE DUTY BOUND TO IMPLEMENT THE VARIOUS PROVISIONS OF THE INCOME-TAX STATUTE AS AMENDED AND APPLICABLE FROM TIME TO TIME. 10 (III-A) EVEN ON MERITS OF THIS SUB-ISSUE, THE APPEL LANT HAS NO CASE AT ALL. ASSUMING BUT NOT ACCEPTING THAT THE APPELLANT HAS A VALID POINT, IT NEEDS TO BE REMINDED THAT SECTION 17(2)(II) OF THE ACT, DEAL ING WITH THE METHOD OF VALUATION OF PERQUISITES IN RESPECT OF CONCESSIONAL RENT ACCOMMODATION HAS MERELY SUBSTITUTED THE APPLICABILITY OF RULE 3 OF T HE I.T. RULES, 1962. HAD SECTION 17(2)(II) OF THE ACT NOT BEEN INTRODUCED AT ALL, PERQUISITE IN THE NATURE OF CONCESSIONAL RENT ACCOMMODATION WOULD HAVE, AS I N THE PAST, CONTINUED TO BE VALUED AS PER RULE 3 OF THE I.T. RULES, 1962, WI TH A HEAVIER BURDEN OF HAVING TO VALUE SUCH PERQUISITE AT A HIGHER RATE OF 15% (INSTEAD OF 7.5% AS PER SECTION 17(2)(II) OF THE ACT), THEREBY, RENDERI NG THE APPELLANT OTHERWISE TOO, A CLEAR DEFAULTER U/S 192 OF THE ACT. IN FACT , THE APPELLANT SHOULD CONSIDER ITSELF AS RELATIVELY FORTUNATE ON ACCOUNT OF THE APPLICABILITY OF SECTION 17(2)(II) OF THE ACT, BECAUSE THE EXTENT OF DEFAULT IN TERMS OF TAX AND INTEREST LIABILITIES UNDER SECTIONS 201(1) AND 201(1A) OF TH E ACT, RESPECTIVELY, IS FAR LESSER THAN WHAT IT WOULD HAVE BEEN, IF THE SAID PE RQUISITE WERE VALUED AS PER RULE 3 OF THE I.T. RULES. HENCE, THE PLEA OF THE A PPELLANT TO IGNORE THE NEWLY INTRODUCED AMENDED PROVISIONS OF SECTION 17(2)(II) OF THE ACT WITH RETROSPECTIVE EFFECT, CANNOT BE ENTERTAINED AT THE OUTSET, AND, THEREFORE, HEREBY, DISMISSED AS NOT MAINTAINABLE. (IV) DEALING WITH THE PLEA OF THE APPELLANT THAT A CTION FOR RAISING DEMANDS UNDER SECTIONS 201(1) AND 201(1A) OF THE ACT FOR TH E FINANCIAL YEAR 2002-03 STOOD BARRED BY LIMITATION ON THE REASONING THAT SU CH ORDER HAS BEEN PASSED AFTER THE EXPIRY OF A REASONABLE PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT FINANCIAL YEAR, IN THE LIGHT OF THE DECISION OF THE HONBLE ITAT, IN THE CASE OF STATE BANK OF INDIA VS. ACIT(SUPRA) IT MAY, WITH DU E RESPECT TO THE DECISION OF THE HONBLE BENCH OF THE TRIBUNAL, BE STATED THA TG SUBSEQUENT TO THE DELETION OF THE PROVISIONS OF SECTION 231 OF THE AC T THAT PRESCRIBED LIMITATION OF TIME FOR COMMENCING RECOVERY PROCEEDINGS (THEREB Y INDICATING THAT THERE IS NO TIME LIMIT FOR TAKING ACTION FOR RECOVERY OF TAX DUES INCLUDING THOSE UNDER SECTIONS 201(1) AND 201(1A) OF THE ACT), NO ALTERNA TIVE PROVISIONS UNDER THE I.T. STATUTE STIPULATING LIMITATION PERIOD IN RESPEC T OF THE PROCEEDINGS UNDER SECTIONS 201(1) AND 201(1A) OF THE ACT HAVE BEEN IN TRODUCED. HITHERTO, THE PROVISIONS OF SECTION 153 PRESCRIBES TIME LIMIT IN RESPECT OF THE ACTIONS UNDER SECTIONS 115WE, 115WG, 143, 144, 147 OF THE ACT, AN D, THEREFORE, SUCH TIME LIMIT CANNOT BE SAID TO BE APPLICABLE IN RESPECT OF ANY ACTION UNDER SECTIONS 201(1) AND 201(1A) OF THE ACT. ON RECOGNITION OF T HE FACT THAT THE DEFAULTS UNDER SECTIONS 201(1) AND 201(1A) ARE OF THE NATURE OF CONTINUING DEFAULTS, THE LEGISLATURE HAS REMOVED TIME BAR FOR INITIATION OF PROCEEDINGS THEREUNDER. THE LEGISLATURE HAVING NOT INTENDED TO PUT ANY REST RICTION OF TIME LIMIT WITH REGARD TO INITIATION OF ACTION UNDER SECTIONS 201(1 ) AND 201(1A) OF THE ACT, IT CANNOT BE SAID THAT THE ACTION TAKEN THERE-UNDER IN THE FIFTH YEAR FROM THE END OF THE FINANCIAL YEAR 2002-03, IN THE CASE OF T HE APPELLANT, HAS GOT BARRED BY LIMITATION OF TIME. LEGAL SUPPORT IS DRAWN FROM THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF GRINDLAYS BANK L TD. VS. CIT (193 ITR 457) [FOR SECTION 201(1)], AND THAT OF HONBLE KERALA HI GH COURT IN THE CASE OF SECRETARY, SULTAN BATTERY CO-OP. HOUSING SOCIETY VS . CIT (261 ITR 364) [FOR SECTION 201(1A)]. EVEN OTHERWISE, THERE IS NO UNRE ASONABLE DELAY IN THE NATURE OF INORDINATE LACHES IN THE APPELLANTS CASE FOR THE FINANCIAL YEAR 2002- 03, AND, AS SUCH, THE CONTENTIONS AND ARGUMENTS ON BEHALF OF THE APPELLANT 11 CAN BE SAID TO BE WITHOUT ANY MERIT, AND, HENCE, SU CH PLEA IS, HEREBY, REJECTED. (V) DEALING WITH THE MERITS OF THE ISSUE IN THE LI GHT OF THE PROVISIONS OF SECTIONS 192(1) AND 192(1A) OF THE ACT, IT MAY, AT THE OUTSET, BE STATED THAT AN ATTEMPT HAS BEEN MADE, WITH A DISHONEST INTENT, TO MISLEAD THE APPELLATE AUTHORITY BY CITING THE RATIOS OF THE DECISIONS IN THE CASES OF Y.S.C. BABU & ANOTHER VS. CHAIRMAN AND MANAGING DIRECTOR, SYNDICA TE BANK & OTHERS (SUPRA) AND CIT VS. TEJ QUEBECOR PRINTING LTD., (SU PRA), WHICH ARE CONTEXTUALLY IRRELEVANT AND TOTALLY OFF THE MARK. IN THE CITED CASE-LAWS, THE COURTS HAVE HELD THAT IN THOSE CASES WHERE SALARY, AS DEFINED U/S 17(1) OF THE ACT, (INVOLVING MONETARY PAYMENTS) AND NOT PERQUISI TE AS DEFINED U/S 17(2) OF THE ACT, WAS NOT ACTUALLY PAID TO AN EMPLOYEE, I N SUCH CASES NO OBLIGATION WOULD BE CAST UPON THE EMPLOYER TO DEDUCT TAX AT SO URCE U/S 192(1) OF THE ACT. ON THE OTHER HAND, THE APPELLANTS CASE COVER S PAYMENT OF INCOME IN THE NATURE OF PERQUISITE AS DEFINED U/S 17(2) OF TH E ACT, (INVOLVING NON- MONETARY PAYMENTS), WHICH, ADMITTEDLY, STOOD PAID T O THE EMPLOYEES BY WAY OF HAVING GIVEN THEM POSSESSION OF RENT FREE ACCOMM ODATION OR CONCESSIONAL RENT ACCOMMODATION. (V-A) FOR THE CONVENIENCE OF READY REFERENCE AND FO R THE SAKE OF ELUCIDATION OF THE RELEVANT EXPRESSIONS CONTAINED THEREIN, THE PROVISIONS OF SECTIONS 192(1) AND 192(1A) OF THE ACT ARE REPRODUCED HEREUN DER:- SECTION 192. SALARY: (1) ANY PERSON RESPONSIBLE FOR PAYING ANY INCOME C HARGEABLE UNDER THE HEAD SALARIES SHALL, AT THE TIME OF PAYMENT, DEDU CT INCOME-TAX ON THE AMOUNT PAYABLE AT THE AVERAGE RATE OF INCOME-TAX CO MPUTED ON THE BASIS OF THE RATES IN FORCE FOR THE FINANCIAL YEAR IN WHICH THE PAYMENT IS MADE, ON THE ESTIMATED INCOME OF THE ASSESSEE UNDER THIS HEAD FO R THAT FINANCIAL YEAR. (1A) WITHOUT PREJUDICE TO THE PROVISIONS CONTAINED IN SUB-SECTION (1), THE PERSON RESPONSIBLE FOR PAYING ANY INCOME IN THE NAT URE OF A PERQUISITE WHICH IS NOT PROVIDED FOR BY WAY OF MONETARY PAYMENT, REF ERRED TO IN CLAUSE (2) OF SECTION 17, MAY PAY, AT HIS OPTION, TAX ON THE WHOL E OR PART OF SUCH INCOME WITHOUT MAKING ANY DEDUCTION THEREFROM AT THE TIME WHEN SUCH TAX WAS OTHERWISE DEDUCTIBLE UNDER THE PROVISIONS OF SUB-SE CTION (1). THE EXPRESSION AT THE TIME OF PAYMENT AS APPEARING U/S 192(1) OF THE ACT REFERS TO NOT ONLY MONETARY PAYMENTS, BUT ALSO PAYM ENTS IN THE NATURE OF SERVICES AND FACILITIES PROVIDED TO THE EMPLOYEES. THE MEANING AND IMPORT OF SUCH EXPRESSION HAS BEEN AMPLIFIED IN SECTION 192(1 A) OF THE ACT, IN THE EXPRESSION FOR PAYING ANY INCOME IN THE NATURE OF PERQUISITE WHICH IS NOT PROVIDED FOR BY WAY OF MONETARY PAYMENT, SO AS TO IMPLY THAT THE OBLIGATION TO DEDUCT TAX AT SOURCE U/S 192(1) WOULD INDISPUTAB LY ARISE WHERE PAYMENT OF INCOME IN THE NATURE OF RENT FREE ACCOMMODATION OR CONCESSIONAL RENT ACCOMMODATION (WHICH DOES NOT INVOLVE ANY MONETARY PAYMENT) IS MA DE. IF IT IS THE CONTENTION OF THE APPELLANT THAT THE OBLI GATION TO DEDUCT TAX U/S 192(1) OF THE ACT WOULD ARISE ONLY IN THE EVENT OF MONETARY PAYMENT, ENTAILING FLOW OF FUND FROM EMPLOYER TO EMPLOYEE, A ND NOT IN THE EVENT OF PROVISION OF NON-MONETARY PERQUISITES, HOW ELSE DOE S IT EXPLAIN THE RATIONALE 12 BEHIND THE USE OF THE EXPRESSION PAYING, WITH REF ERENCE TO INCOME IN THE NATURE OF NON-MONETARY PERQUISITE, AS APPEARING IN SECTION 192(1A) OF THE ACT? DOES IT HAVE ANY SOUND, LOGICAL AND COGENT EX PLANATION, OTHER THAN WHAT HAS BEEN ENUNCIATED ABOVE? IT IS AN ADMITTED FACT THAT RENT FREE ACCOMMODATION OR CONCESSIONAL RENT ACCOMMODATION HA D BEEN PROVIDED TO ITS EMPLOYEES DURING THE RELEVANT FINANCIAL YEARS, THER EBY UNDERSCORING THE PAYMENT OF INCOME IN THE NATURE OF NON-MONETARY PER QUISITE, AND ACCORDINGLY, SUCH PAYMENT SQUARELY FITS INTO THE EX PRESSION AT THE TIME OF PAYMENT AS MENTIONED U/S 192(1) OF THE ACT. THERE FORE, IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE PAYMENT OF PERQUISITES IN THE NATURE OF RENT FREE ACCOMMODATION OR CONCESSIONAL R ENT ACCOMMODATION, AS INCOME CHARGEABLE UNDER THE HEAD SALARIES, HAD CL EARLY CAST THE OBLIGATION ON THE APPELLANT TO DEDUCT TAX AT SOURCE. (V-B) HOWEVER, AS PER THE PROVISIONS OF SECTION 192 (1A) OF THE ACT, THE LEGISLATURE, IN ITS WISDOM, HAS GIVEN AN OPTION TO THE EMPLOYERS, PRESUMABLY, AS A MEASURE TO ENABLE THEM TO MITIGATE ANY HARDSHI P THAT WOULD BE CAUSED TO THE EMPLOYEES IN THE EVENT OF DEDUCTION OF TAX A T SOURCE IN RESPECT OF SUCH RENT FREE ACCOMMODATION OR CONCESSIONAL RENT ACCOMM ODATION, TO PAY, ON THEIR OWN ACCOUNT, TAX ON THE WHOLE OR PART OF SUCH NON-MONETARY PERQUISITE INCOME, WITHOUT MAKING, ANY DEDUCTION FROM THE WHOL E OR PART OF SUCH INCOME, AS THE CASE MAY BE. ACCORDINGLY, IF THE EM PLOYER CHOOSES TO PAY TAX ON THE WHOLE OF SUCH INCOME, ON HIS OWN ACCOUNT, TH EN HE WOULD BE SPARED FROM THE OBLIGATION OF DEDUCTION OF TAX AT SOURCE U /S 192(1) OF THE ACT. IF THE EMPLOYER CHOOSES TO PAY TAX ONLY ON PART OF SUCH IN COME, THEN IT WOULD BE SPARED OF THE OBLIGATION TO DEDUCT TAX AT SOURCE IN RESPECT OF ONLY PART OF SUCH INCOME, ON WHICH HE HAS OPTED TO PAY TAXES, ON HIS OWN ACCOUNT, BUT THE OBLIGATION TO DEDUCT TAX AT SOURCE CONTINUES TO BE BURDENED ON THE EMPLOYER IN RESPECT OF REMAINING PART OF INCOME, ON WHICH, AN EMPLOYER HAS NOT CHOSEN TO PAY TAX, ON HIS OWN ACCOUNT. IF, HOW EVER, THE EMPLOYER CHOSES NOT TO EXERCISE THE OPTION OF PAYMENT OF TAX ON EIT HER WHOLE OR PART OF SUCH NON-MONETARY PERQUISITE INCOME, AND DOES NOT PAY TA X ON HIS OWN ACCOUNT, THEN HE CONTINUES TO BE OBLIGED U/S 192(1) OF THE A CT TO DEDUCT TAX FROM THE WHOLE OF SUCH INCOME, FAILING WHICH, HE WILL BE LIA BLE TO BE TREATED AS A DEFAULTER UNDER SECTIONS 201(1) AND 201(1A) OF THE ACT. IT IS AN ADMITTED POSITION THAT THE APPELLANT HAS MADE DEDUCTION OF T AX ONLY IN RESPECT OF PART OF THE SAID PERQUISITE INCOME, BUT HAS NOT PAID TAX , ON HIS OWN ACCOUNT, ON THE BALANCE PART OF THE SAID PERQUISITE INCOME, AND , ACCORDINGLY, ABANDONED THE OPTION TO PAY TAX, ON HIS OWN ACCOUNT, IN LIEU OF THE OBLIGATION TO DEDUCT TAX AT SOURCE, THEREBY RENDERING ITSELF A DEFAULTER ON ACCOUNT OF ITS FAILURE TO DISCHARGE ITS OBLIGATION TO DEDUCT TAX IN RESPECT O F THE BALANCE PART OF THE SAID PERQUISITE INCOME. (VI) A SEEMINGLY AS WELL AS INTRINSICALLY CLEAR AND STRAIGHT-FORWARD PROVISIONS OF LAW AS CONTAINED IN SECTIONS 192(1) A ND 192(1A) OF THE ACT, WITH NO REPORTED CASE-LAW RELATING TO THE TERMS PAYMENT AND PAYING, HAVE BEEN DELIBERATELY BLOWN OUT OF PROPORTION AND PROJE CTED AS HIGHLY CONTENTIOUS AND CONTROVERSIAL BY THE APPELLANT, WITH THE PRETEN SION THAT THE INTERPRETATION OF SUCH PROVISIONS ON BEHALF OF THE APPELLANT HAS S UBSTANTIAL FORCE, WITH THE ULTERIOR MOTIVE TO GAIN UNDUE ADVANTAGE FROM SUCH M ISLEADING INTERPRETATION. IF SUCH INTERPRETATIONS WERE TO BE ACCEPTED, IT WOUL D HAVE THE DISASTROUS CONSEQUENCE OF RENDERING THE PROVISIONS OF SECTIONS 192(1) AND 192(1A) OF 13 THE ACT, OTIOSE WITH REGARD TO EMPLOYERS WHO NEITHE R DEDUCT TAX AT SOURCE NOR PAY TAX, ON THEIR OWN ACCOUNT, IN RESPECT OF PAYMEN T OF NON-MONETARY PERQUISITE TO THEIR EMPLOYEES. HENCE, THE INTERPRE TATION PUT FORTH ON BEHALF OF THE APPELLANT CAN BE SAID, TO PUT IT MILDLY, TO BE OUTRAGEOUS, BIZARRE AND PERVERSE, WHICH ACTION IS TANTAMOUNT TO INDULGENCE IN LEGAL SKULLDUGGERY. (VII) A REFERENCE TO THE PROVISIONS OF SECTION 200 OF THE ACT, ON BEHALF OF THE APPELLANT IS ALSO AN ATTEMPT TO MISLEAD THE APP ELLATE AUTHORITY. SECTION 200(1) OF THE ACT, CASTS AN OBLIGATION ON THE DEDUC TOR OF TAX TO PAY THE DEDUCTED TAX WITHIN THE PRESCRIBED TIME TO THE CRED IT OF THE CENTRAL GOVERNMENT, AND SECTION 200(2) OF THE ACT, REQUIRES AN EMPLOYER, WHO HAS EXERCISED THE OPTION TO PAY TAX, ON HIS OWN ACCOUNT , ON THE INCOME IN THE NATURE OF NON-MONETARY PERQUISITE, IN LIEU OF THE O BLIGATION TO DEDUCT TAX AT SOURCE FROM SUCH INCOME, TO PAY SUCH TAX TO THE CRE DIT OF THE CENTRAL GOVERNMENT. THE APPELLANT, ADMITTEDLY HAVING NOT E XERCISED THE OPTION TO PAY TAX, ON HIS OWN ACCOUNT, IN LIEU OF THE OBLIGAT ION TO DEDUCT TAX IN RESPECT OF THE NON-MONETARY PERQUISITE IN THE NATURE OF REN T FREE ACCOMMODATION OR CONCESSIONAL RENT ACCOMMODATION, HE WAS, OBVIOUSLY NOT OBLIGED TO PAY ANY TAX U/S 200(2) OF THE ACT. THEREFORE, THE PROVISIO NS OF SECTION 200 OF THE ACT ARE CONTEXTUALLY IRRELEVANT WITH REGARD TO THE DEFA ULT OF THE APPELLANT FOR SHORT DEDUCTION OF TAX AT SOURCE, IN WHICH CASE, THE PROV ISIONS OF SECTIONS 201(1) AND 201(1A) OF THE ACT, ARE SQUARELY APPLICABLE. (VIII) A REFERENCE TO THE RELEVANT PORTIONS OF THE ANNUAL CIRCULARS OF CBDT ISSUED FOR CLARIFYING THE VARIOUS PROVISIONS RELATI NG TO TAX DEDUCTION AT SOURCE U/S 192 OF THE ACT, AMPLIFY THE STATUTORY PROVISION S CONTAINED IN SECTIONS 192(1) AND 192(1A) OF THE ACT, CLARIFYING, INTER AL IA, THAT IN RESPECT OF PAYMENT OF NON-MONETARY PERQUISITES TO AN EMPLOYEE, AN EMPLOYER MAY OPT TO MAKE PAYMENT OF TAX THEREOF ON HIS OWN ACCOUNT W ITHOUT MAKING ANY TAX DEDUCTION THEREFROM, AND IF SUCH OPTION TO PAY TAX IS EXERCISED BY THE EMPLOYER, THEN HE IS LAW BOUND TO PAY SUCH TAX TO T HE CREDIT OF THE CENTRAL GOVERNMENT AT THE TIME WHEN SUCH TAX WAS OTHERWISE DEDUCTIBLE U/S 192(1) OF THE ACT. IN FACT, THE RELEVANT PORTIONS OF SUCH CIRCULARS NEGATE THE CLAIM OF THE APPELLANT THAT IT WAS NOT OBLIGED TO DEDUCT TAX IN RESPECT OF THE NON- MONETARY PERQUISITE OF RENT FREE ACCOMMODATION OR C ONCESSIONAL RENT ACCOMMODATION PROVIDED TO ITS EMPLOYEES, IN VIEW OF THE APPELLANT HAVING NOT EXERCISED THE OPTION TO PAY TAX, ON HIS OWN ACC OUNT, IN RESPECT OF SUCH PERQUISITES. (IX) IN VIEW OF THE FOREGOING ANALYSIS AND INTERPRE TATION OF THE RELEVANT PROVISIONS OF THE I.T. STATUE, AS APPLICABLE TO THE ADMITTED AND UNDISPUTED FACTS APPEARING IN THE APPELLANTS CASE, THE ACTION OF THE ASSESSING OFFICER RAISING TAX AND INTEREST DEMANDS UNDER SECTIONS 201 (1) AND 201(1A) OF THE ACT, RESPECTIVELY, ARE, HEREBY, UPHELD IN PRINCIPLE . HOWEVER, SINCE THE ASSESSING OFFICER HAS COMMITTED AN ERROR IN UNDERCO MPUTING THE PERQUISITE VALUE OF RENT FREE ACCOMMODATION TO THE EMPLOYEES B Y INCORRECTLY APPLYING A LOWER RATE OF SALARY AS REGARDS THE EMPLOYEES SHRI V. BRAHMANANDAM, GENERAL MANAGER, MATERIALS (FINANCIAL YEAR 2005-06) AND SHRI R. NANDA KUMAR, CHIEF EXECUTIVE (FINANCIAL YEAR 2006-07), TH E ASSESSING OFFICER WOULD DO WELL TO RECOMPUTED SUCH PERQUISITE VALUE AT 15%, INSTEAD OF 7.5%, OF THE EMPLOYEES SALARIES, AS A CONSEQUENCE OF WHICH, THE AGGREGATE TAX DEMANDS 14 INCLUDING INTERESTS FOR THE FINANCIAL YEARS 2005-06 AND 2006-07, WOULD STAND ENHANCED. 11. SINCE NO DEFECT IN THE ORDER OF THE CIT(A) IS P OINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEES EXCEPT REITERATING ITS CO NTENTIONS WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). WE ACCORDING LY, CONFIRM THE SAME. 12. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE D ISMISSED. PRONOUNCED IN THE OPEN COURT ON 2.6.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 2 ND JUNE, 2010 COPY TO 1 THE ANDHRA SUGARS LIMITED, VENKATARAYAPURAM, TANU KU-534 215, W.G. DIST. 2 ITO, WARD-1, TANUKU 3 THE CIT, RAJAHMUNDRY 4 THE CIT(A), RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM