THE DCIT, CIRCLE - 3(1),(TDS), Vijayawada V. Chief Engineer (O&M)/APGENCO,

ITA 427/VIZ/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6603 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 24-06-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R S ARAVINDAKSHM
• Assessee Lawyers: M CHANDRAMOULESWARA RAO
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 427 / VIZ /201 4 (ASST. YEAR : 20 09 - 1 0 ) DCIT, CIRCLE - 3(1) (TDS) , VIJAYAWADA. V S . CHIEF ENGINEER (O & M)/APGENCO, RAYALASEEMA THERMAL POWER PROJECT, V.V. REDDY NAGAR, KADAPA DISTRICT. T AN NO. HYDR 02587 E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M. CHANDRAMOULESWARA RAO C A. DEPARTMENT BY : SHRI R.S. ARAVINDAKSHM SR. DR DATE OF HEARING : 13 / 0 9 /201 7 . DATE OF PRONOUNCEMENT : 11 / 1 0 /201 7 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , VIJAYAWADA , DATED 27 /0 3 /201 4 FOR THE ASSESSMENT YEAR 200 9 - 1 0 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE HAS PROVIDED RESIDENTIAL ACCOMMODATION TO ITS EMPLOYEES AND VALUING THE PERQUISITE ARISING THEREOF AT A STANDARD RENT VARYING FROM 80 TO 300 PER MONTH DEPENDING ON THE TYPE OF ACCOMMODATION. THE ASSESSEE INCLUDED THE SAID STANDARD RENT WHILE MAKING DEDUCTION OF TD S UNDER SECTION 192 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT'). THE 2 ITA NO. 427/VIZ/2014 ASSESSING OFFICER POINTED OUT THAT THE TDS OF PERQUISITE REQUIRES TO BE MADE AS PER RULE 3 OF THE I.T. RULES, 1962 , WHICH PROVIDE THAT IN CASE OF EMPLOYEES OTHER T HAN GOVERNMENT , PERQUISITE HAS TO BE VALUED AT 7.5% OF THE SALARY WHERE THE ACCOMMODATION WAS PROVIDED TO A PLACE HAVING POPULATION OF BELOW 10 LAKHS . SINCE ASSESSEE UNDERVALUED THE PERQUISITE AND FAILED TO DEDUCT TAX AT SOURCE UNDER SECTION 192 PROPERLY, THE ASSESSING OFFICER ISSUED SHOW - CAUSE NOTICE UNDER SECTION 201(1) CALLING FOR OBJECTIONS FROM THE ASSESSEE . IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE IS WHOLLY - OWNED COMPANY OF GOVERNMENT OF ANDHRA PRADESH AND NO PROVISION IN THE I.T. RULE DISTINGUISHES STATE GOVERNMENT EMPLOYEES FROM THE EMPLOYEES OF A 100% OWNED GOVERNMENT COMPANY . THE ASSESSING OFFICER BY CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, CALCULATED THE SHORT DEDUCTION UNDER SECTION 192 BY 14,12,570/ - BY HOLDING THAT THE ASSESSEE IS IN DEFAULT IN TERMS OF PROVISIONS OF SECTION 201(1) OF THE ACT. 3 . ON APPEAL , LD. CIT(A) BY CONSIDERING THE PROVISO TO RULE 3 OF THE IT RULES , WAS OF THE OPINION THAT THE CASE OF THE ASSESSEE IS COVERED TO THE PROVIS O AND THE ASSESSING OFFICER HAS FAILED TO BRING ANY MATERIAL ON RECORD TO PROVE THAT EMPLOYEES ARE WORKING OFF - SHORE SITE AND NOT AT THE POWER GENERATION SITE . THEREFORE, HE DIRECTED THE ASSESSING OFFICER TO CANCEL THE DEMAND RAISED UNDER SECTION 201(1) OF THE ACT. 4 . ON BEING AGGRIEVED, REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 3 ITA NO. 427/VIZ/2014 5. THE ONLY ISSUE FOR CONSIDERATION BEFORE US IS WHETHER ASSESSEE HAS TO DEDUCT TDS UNDER SECTION 192 OF THE ACT ON RESIDENTIAL ACCOMMODATION PROVIDED TO ITS EMPLOYEES. THE CASE OF THE ASSESSING OFFICER IS THAT THE ASSESSEE IS UNDER OBLIGATION TO DEDUCT TDS ON RESIDENTIAL ACCOMMODATION PROVIDED TO THE EMPLOYEES AT 7.5% OF THE SALARY. THE ASSESSEE HAS EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE - COMPANY IS 100% OWNED BY THE STAT E OF ANDHRA PRADESH, HENCE, PROVISO TO RULE 3 OF I.T. RULES HAS NO APP LICATION TO THE ASSESSEE. WE FIND THAT THE ARGUMENT ADVANCED BY THE ASSESSEE IS NOT CORRECT. THOUGH, ASSESSEE - COMPANY IS WHOLLY OWNE D BY THE STATE GOVERNMENT, THE ASSESSEE IS A SEPARATE JURISTIC PERSON, THEREFORE, THE I.T RULES TOO APPLIES TO THE ASSESSEE. BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE CASE OF THE ASSESSEE FALLS UNDER THE PROVISO TO RULE 3 OF THE I.T. RULES. FOR THE SAKE OF CONVENIENCE , THE SAID PROVISO IS REPRODUCED AS UNDER: - 3. FOR THE PURPOSE OF COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD SALARIES, THE VALUE OF PERQUISITES PROVIDED BY THE 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 ACCORD ANCE WITH THE SUB - RULES . PROVIDED THAT NOTHING CONTAINED IN THIS SUB - RULE SHALL APPLY TO ANY ACCOMMODATION PROVIDED TO AN EMPLOYEE WORKING AT A MINING SITE OR AN ON - SHORE OIL EXPLORATION SITE OR A PROJECT EXECUTION SITE, OR A DAM SITE OR A POWER GENERATI ON SITE OR AN OFF - SHORE SITE (I) WHICH, BEING OF A TEMPORARY NATURE AND HAVING PLINTH AREA NOT EXCEEDING 800 SQUARE FEET, IS LOCATED NOT LESS THAN EIGHT KILOMETRES AWAY FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR A CANTONMENT BOARD; OR (II) WHICH IS LOCATED IN A REMOTE AREA: 4 ITA NO. 427/VIZ/2014 6 . WE FIND THAT NEITHER ASSESSING OFFICER NOR LD. CIT(A) HAS EXAMINED THE ABOVE PROVISO TO RULE 3 AND ITS APPLICATION TO THE ASSESSEES CASE. THE LD. CIT(A) SIMPLY FOLLOWED THE PROVISO TO RUL E 3 OF THE I .T. RULES WITHOUT CONSIDERING THE DETAILS HOW ASSESSEE COMES UNDER THE PURVIEW OF EXEMPT ION PROVIDED UNDER RULE 3 OF THE I.T. RULES. THEREFORE, WE SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE CASE OF THE ASSESSEE DENOVO WITH REFERENCE TO THE PROVISO TO RULE 3 ODF THE I.T. RULES. 7 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT ON TH IS 1 1 T H DAY OF OCTOBER , 201 7 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 1 T H OCTOBER , 201 7 . VR/ - COPY TO: 1. THE ASSESSEE - CHIEF ENGINEER (O & M)/ APGENCO, RAYALASEEMA THERMAL POWER PROJECT, V.V. REDDY NAGAR, KADAPA DISTRICT. 2. THE REVENUE - DCIT, CIRCLE - 3(1)(TDS), VIJAYAWADA. 3. THE CIT (TDS), HYDER A BAD. 4. THE CIT(A), VIJAYAWADA. 5. THE D.R. , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.