M/s RINL., Visakhapatnam V. The ACIT, Circle-6(1)., Visakhapatnam

ITA 473/VIZ/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1662 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 08-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRATA SARKAR
• Keywords: Salary income; Retrospective amendment; TDS; Set aside
• Section: 133A; 234B; 201; 192; 2

Judgement Text

PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.472 & 473/VIZAG/2008 ASSESSMENT YEAR: 2006-07 & 2007-08 RASHTRIYA ISPAT NIGAM LTD, VISAKHAPATNAM VS. ACIT, CIRCLE-6(1), VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO. AABCR 0435 L APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI SUBRATA SARKAR, DR ORDER PER SHRI B R BASKARAN, ACCOUNTANT MEMBER : BOTH THE APPEALS FILED AT THE INSTANCE OF THE ASSE SSEE ARE DIRECTED AGAINST THE COMMON ORDER DATED 10-07-2008 PASSED BY THE LD CIT(A)-I, VISAKHAPATNAM AND THEY RELATE TO THE FINANCIAL YEAR S 2005-06 AND 2006-07. SINCE THE ISSUE AGITATED IN THESE TWO APPEALS IS CO MMON IN NATURE, BOTH THE APPEALS ARE DISPOSED OFF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE DEMAND RAISED BY THE ASSESSING OFFICER U/S 2 01(1) AND 201(1A) BY TREATING THE ASSESSEE COMPANY AS AN ASSESSEE IN DEFAULT, HAVING BEEN CONFIRMED BY THE LD CIT (A), THE ASSESSEE IS IN APP EAL BEFORE US. 3. THE FACTS RELATING TO THE ISSUE ARE SET OUT IN B RIEF. THE ASSESSEE IS A GOVERNMENT OF INDIA UNDERTAKING, OPERATING A STEEL P LANT IN VISAKHAPATNAM. A SURVEY OPERATION U/S 133A WAS CONDUCTED ON 22-01- 2008, IN ORDER TO VERIFY THE COMPLIANCE ON PROVISIONS OF TDS IN RELAT ION TO THE VALUATION OF PERQUISITES. THE SURVEY OFFICIALS NOTICED THAT THE ASSESSEE HAS FAILED TO PAGE 2 OF 7 DEDUCT TAX AT SOURCE ON THE HOUSING ACCOMMODATION P ROVIDED TO THE EMPLOYEES AT CONCESSIONAL RENT IN ACCORDANCE WITH T HE PROVISIONS OF SECTION 17(2)(II) OF THE ACT. HENCE THE AO TREATED THE ASS ESSEE AS AN ASSESSEE IN DEFAULT. IT IS PERTINENT TO NOTE THAT AS PER THE PROVISIONS OF SEC 17(2)(II), THE VALUE OF ANY CONCESSION IN THE MATTER OF RENT I N RESPECT OF ANY ACCOMMODATION PROVIDED TO THE ASSESSEE BY HIS EMPLO YER IS TREATED AS PERQUISITES. THE FINANCE ACT 2007 BROUGHT IN CERTAI N AMENDMENTS WITH RETROSPECTIVE EFFECT FROM 1.4.2002 DEFINING THE RE NT CONCESSION. THE VIEW OF THE AO WAS THAT THE ASSESSEE SHOULD HAVE DEDUCTE D TAX BY TAKING INTO ACCOUNT THE AMENDMENT BROUGHT OUT BY THE FINANCE AC T, 2007. IT IS NECESSARY TO FURTHER ELABORATE THE FACTS RELATING T O THE ISSUE. THE ASSESSEE HEREIN WAS CHARGING STANDARD RENT FROM ALL EMPLOYEE S IN RESPECT OF ACCOMMODATION PROVIDED TO THEM. SINCE STANDARD RE NT WAS CHARGED FROM THE EMPLOYEES, THEY CONTENDED THAT THERE WAS NO CO NCESSION GIVEN TO THEM REQUIRING TAXABILITY THEREOF IN ACCORDANCE WIT H PROVISIONS OF SECTION 17(2)(II). IN THIS CONNECTION, THE STEEL EXECUTIVES ASSOCIATION FILED A WRIT PETITION BEFORE THE HONBLE HIGH COURT OF ANDHRA PR ADESH. THE HONBLE HIGH COURT IN ITS DECISION, WHICH IS REPORTED IN (241 IT R 20) HELD THAT WHERE STANDARD RENT HAD BEEN CHARGED FROM ALL EMPLOYEES, THERE CAN BE NO CONCESSION IN RESPECT OF ACCOMMODATION PROVIDED TO THE EMPLOYEES AND ACCORDINGLY THE EMPLOYER, THE ASSESSEE HEREIN WAS D IRECTED NOT TO DEDUCT THE TAX AT SOURCE IN RESPECT OF ACCOMMODATION PROVI DED TO THE EMPLOYEES. IN VIEW OF THE SAID ORDER OF JURISDICTIONAL HIGH COU RT, THE ASSESSEE DID NOT DEDUCT THE TAX. HOWEVER, BY FINANCE ACT 2007, SEC. 17(2) (II) WAS AMENDED WITH RETROSPECTIVE EFFECT FROM 1.4.2002 TO DEFINE T HE WORD CONCESSION FOR THE PURPOSE OF THE SAID SECTION. IN VIEW OF THE RET ROSPECTIVE AMENDMENT, THE AO TOOK THE VIEW THAT THE ASSESSEE HEREIN HAS F AILED TO DEDUCT THE TAX ON THE VALUE OF CONCESSIONAL ACCOMMODATION PROVIDED TO THE EMPLOYEES PAGE 3 OF 7 4. THE LD CIT (A) CONFIRMED THE ORDER OF THE AO FOR THE FOLLOWING REASONS: A) SEC. 17(2)(II) IS A PROCEDURAL LAW AND HENCE ANY AMENDMENT MADE THERETO WILL HAVE RETROSPECTIVE EFFECT. B) THE SAID AMENDMENT WAS MADE IN VIEW OF THE DECIS ION OF THE HONBLE SUPREME COURT IN THE CASE OF ARUN KUMAR VS. UNION OF INDIA REPORTED IN (286 ITR 89) WHEREIN THE HONBLE A PEX COURT HELD THAT IN ORDER TO INVOKE SEC. 17(2)(II) AND RUL E 3 OF INCOME-TAX RULES, THE AUTHORITY EXERCISING THE POWER MUST CAME TO A POSITIVE CONCLUSION THAT IT IS A CONCESS ION. CONCESSION IS THUS A FOUNDATIONAL, FUNDAMENTAL OR JURISDICTIONAL FACT. HENCE, IN ORDER TO PLUG THE L OOPHOLES POINTED OUT BY THE HONBLE SUPREME COURT, THE LEGIS LATURE HAS BROUGHT OUT AMENDMENT TO THE MACHINERY PROVISIONS. C) AS PER THE PROVISIONS OF SEC. 192(1A), THE EMPLO YER AT HIS OPTION MAY HIMSELF PAY THE TAX ON THE NON MONETARY PERQUISITES PORTION OF SALARY. AGGRIEVED AGAINST THE ORDER OF THE LD CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. THE LD CIT (A) HAS HELD THAT THE AMENDMENT CARRIED TO SEC. 17(2)(II), BY THE FINANCE ACT 2007 WITH RETROSPECTIVE EFFECT FROM 1.4 .2002, IS A CLARIFICATORY ONE AND HENCE IT WILL HAVE RETROSPECTIVE EFFECT. A CCORDINGLY HE HAS UPHELD THE ORDER OF THE AO IN RAISING DEMAND U/S 201. THE RE CANNOT BE ANY DISPUTE THAT TAX IS PAYABLE ON THE PERQUISITE AMOUNT CALCUL ATED AS PER SECTION 17(2)(II) OF THE ACT. HOWEVER THE ISSUE BEFORE IS N OT WITH REGARD TO THE TAXABILITY OF THE PERQUISITE. THE CRUX OF THE ISSU E IS - WHETHER, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE C AN BE TREATED AS AN ASSESSEE IN DEFAULT IN TERMS OF THE PROVISIONS OF SEC. 201 VIS--VIS SEC.192 PAGE 4 OF 7 OF THE ACT. FOR THE SAKE OF CONVENIENCE, WE EXTRA CT BELOW SEC. 192(1), WHICH READS AS UNDER: 192 (1) ANY PERSON RESPONSIBLE FOR PAYING ANY INCO ME CHARGEABLE UNDER THE HEAD SALARIES SHALL, AT THE TIME OF PAYMENT, DEDUCT INCOME TAX ON THE AMOUNT PAYABLE AT THE AVERAGE RATE OF INCOME-TAX COMPUTED ON THE BASIS OF THE (RATES IN FORCE) FOR THE FINANCIAL YEAR IN WHICH THE PAYME NT IS MADE ON THE ESTIMATED INCOME OF THE ASSESSEE UNDER THIS HEAD FOR THAT FINANCIAL YEAR 5.1 IN THIS CONNECTION, THE ASSESSEE HAS PLACED ITS RELIANCE ON THE ORDER DATED 31.10.2008 PASSED BY THIS BENCH OF THE TRIBUN AL, IN THE CASE OF OIL & NATURAL GAS CORPORATION LTD., RAJAHMUNDRY VS. ITO W ARD-5 (TDS) IN ITA NO. 703/V/04. IN THE ABOVE SAID CASE THE EMPLOYEES OF OIL AND NATURAL GAS CORPORATION OBTAINED STAY FROM THE HONBLE HIGH COU RT OF MADRAS FOR NON- DEDUCTION OF TAX AT SOURCE ON CERTAIN AMENITIES PRO VIDED TO THEM. IN VIEW OF THE STAY, THE ASSESSEE THEREIN DID NOT DEDUCT TAX O N THOSE AMENITIES. SUBSEQUENTLY THE HONBLE MADRAS HIGH COURT DISMISSE D THE WRIT PETITION FILED BY THE EMPLOYEES. THE REVENUE RAISED DEMAND U/S 201 FOR NON DEDUCTION OF TDS. THE TRIBUNAL ACCEPTED THE PLEA OF THE ASSESSEE THAT (A) IT IS UNDER AN OBLIGATION NOT TO DEDUCT TAX ON THE A MENITIES DURING THE PERIOD OF OPERATION OF STAY. (B) DEDUCTION U/S 192 HAS TO BE MADE ON AN ESTIMATED FI GURE AND NOT ON AN ADJUDICATED FIGURE AS HELD BY THE HONBLE AND HRA PRADESH HIGH COURT IN THE CASE OF P V RAJAGOPAL AND OTHERS VS. UNION OF INDIA (1998) (233 ITR 678). (C) THE ESTIMATION OF SALARY INCOME HAS BEEN MADE FAIR LY AND HONESTLY. IN THE SAID ORDER, THE TRIBUNAL HAD AN OCCASION TO I NTERPRET THE PROVISIONS OF SEC. 192(1). FOR THE SAKE OF CONVENIENCE, WE EXTRA CT BELOW THE PARAGRAPHS 14 & 15 OF THE SAID ORDER. PAGE 5 OF 7 14. THE NEXT QUESTION ARISING FOR CONSIDERATION IS WHETHER IT IS DUTY ON THE ASSESSEE TO DEDUCT TAX UNDER S. 192 FOR THE FINANCIAL YEAR 2002-03, AFTER THE INTERIM STAY WAS VACATED BY THE MADRAS HIGH COURT ON 30.4.2003. WE HAVE CAREFUL LY GONE THROUGH THE PROVISIONS OF S.192 OF THE ACT. S.192(1 ) MAKES IT OBLIGATORY FOR ANY PERSON RESPONSIBLE FOR PAYING AN Y INCOME CHARGEABLE UNDER THE HEAD SALARIES TO DEDUCT INCO ME TAX ON THE AMOUNT PAYABLE AT THE AVERAGE RATE OF INCOME-TA X, COMPUTER ON THE BASIS OF THE RATES PRESCRIBED FOR THE FINANCIAL YEAR IN WHICH THE PAYMENT IS MADE ON THE ESTIMATED INCOME OF THE ASSESSEE UNDER THE HEAD SALARY FOR THAT FINANCIAL YEAR. THE LANGUAGE OF S.192 IS V ERY CLEAR THAT THE ASSESSEE HAS TO DEDUCT TAX ON THE ESTIMATED INCOME OF THE EMPLOYEE UNDER THE HEAD SALARY FOR THAT FINANCIAL YEAR IN WHICH PAYMENT WAS MADE . FOR THE FINANCIAL YEAR 2002-03, THE PAYMENTS HAVE ALREADY B EEN MADE BEFORE 31.3.2003, ON WHICH DATE, THE INTERIM S TAY OF THE MADRAS HIGH COURT WAS IN OPERATION. IT IS NOT TH E CASE OF THE REVENUE THAT ANY PART OF ARREARS RELATED TO FIN ANCIAL YEAR 2002-03 I.E. RELEVANT TO ASSESSMENT YEAR 2003-04, W AS PENDING TO BE PAID BY THE ASSESSEE TO ITS EMPLOYEES . IN THESE CIRCUMSTANCES, STRICTLY SPEAKING, AS CONTENDED BY T HE LEARNED COUNSEL FOR THE ASSESSEE, THE PROVISIONS OF S.192(1 ) OF THE ACT DO NOT MAKE IT OBLIGATORY FOR THE ASSESSEE TO DEDUC T IN THE SUBSEQUENT ASSESSMENT YEAR. 15. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMEN TS OF VARIOUS HIGH COURTS REFERRED TO BY THE LEARNED COUN SEL FOR THE ASSESSEE. ALL THE HIGH COURTS SAY THAT THE EMPLOYER HAS TO ESTIMATE THE INCOME OF THE YEAR FAIRLY AND HONES TLY AND DEDUCT TAX THEREON. ONCE THE INCOME OF THE EMPLOYEES UNDER THE HEAD SALARY WAS ESTIMATED HONESTLY AND FAIRLY, MERELY BECAUSE THERE WAS SHORT DEDUCTION OF TAX, THE PROVISIONS OF S.201 ARE NOT ATTRACTED. THE ANDHRA PRADESH HIGH COURT IN THE CASE OF P.V. RAJAGOPAL (SUPRA) EXAMINED THIS ISSUE ELABORAT ELY AND FOUND THAT THE EMPLOYEE, WHO IS IN RECEIPT OF OTHER INCOME, MAY SEND TO THE EMPLOYER A VERIFIED STATEMENT TO TA KE THAT ALSO INTO ACCOUNT FOR DEDUCTION OF TAX AT SOURCE. IN DOING SO, THE EMPLOYEE WILL BE TAKING A GREAT RESPONSIBILITY BECAUSE IF THE INCOME IS OTHERWISE TAXABLE, HE WILL BE LIABLE TO PAY LARGER ADVANCE TAX AND FOR DEFAULT OR DEFERMENT, SUCH ADVA NCE TAX WILL BE LIABLE TO PAY INTEREST UNDER SECTIONS 234B AND 234C. THE A.P HIGH COURT FURTHER OBSERVED THAT DEDUCTION OF TAX AT SOURCE IS NOT ON ANY ADJUDICATED FIGURE, BUT ON PAGE 6 OF 7 AN ESTIMATED FIGURE OF SALARY INCOME . IN THE CASE BEFORE US, THE ASSESSEE ESTIMATED THE SALARY INCOME OF ITS EMPLOYEES EXCLUDING THE VALUE OF PERQUISITES/AMENITIES, IN VI EW OF THE OPERATION OF THE INTERIM STAY GRANTED BY THE MADRAS HIGH COURT. THEREFORE, THE ASSESSEE HAS FAIRLY AND HONES TLY ESTIMATED THE INCOME. IT IS NOT THE CASE OF THE REVE NUE THAT THE ESTIMATION OF THE ASSESSEE IS NOT FAIR OR HONES T. WHEN THE ASSESSEE ESTIMATED THE INCOME FAIRLY AND HONESTLY I N COMPLIANCE WITH THE ORDER OF THE MADRAS HIGH COURT, WE CANNOT SAY THAT THE ASSESSEE HAS COMMITTED A DEFAUL T IN DEDUCTING TAX. IN OUR OPINION, THE ASSESSEE HAS EST IMATED THE INCOME HONESTLY AND FAIRLY AND ALSO COMPLIED WITH T HE INTERIM ORDER OF THE MADRAS HIGH COURT. SO, THE ASSESSEE CA NNOT BE TREATED AS AN ASSESSEE IN DEFAULT FOR THE ASSESSMEN T YEAR 2003-04. 5.2 IN THE INSTANT CASE, THOUGH THE FACTS ARE SLIGHT LY DIFFERENT, YET AS PER THE PRINCIPLES LAID DOWN IN THAT CASE, IT IS NOT IN DISPUTE THAT THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF STEEL EXEC UTIVES ASSOCIATION, SUPRA HAS HELD THAT THERE CAN BE NO CONCESSION IN R ESPECT OF ACCOMMODATION PROVIDED TO THE EMPLOYEES WHEN STANDARD RENT IS CHA RGED FROM THEM. HENCE, ON THE DATE OF DEDUCTION, THE ASSESSEE HEREI N WAS UNDER AN OBLIGATION TO ABIDE BY THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT. AS OBSERVED BY THE TRIBUNAL IN THE CASE OF OIL AND NATURAL GAS CORPORATION, FOR THE PURPOSE OF SECTION 192, THE AS SESSEE HAS TO DEDUCT TAX ON THE ESTIMATED INCOME AND NOT ON AN ADJUDICATED F IGURE. THEN THE NEXT QUESTION IS WHETHER THE ASSESSEE HAS MADE A FAIR AN D HONEST ESTIMATE. BARRING THE NON DEDUCTION OF TAX ON PERQUISITE RELA TING TO RENT CONCESSION, THE REVENUE HAS FAILED TO SHOW THAT THE ASSESSEE DI D NOT MAKE FAIR AND HONEST ESTIMATE OF SALARY INCOME OF EACH EMPLOYEE F OR THE PURPOSE OF MAKING DEDUCTION U/S 192 OF THE ACT. EVEN OTHERWIS E, THE AMENDMENT MADE BY FINANCE ACT, 2007 COULD NOT BE FORESEEN BY THE ASSESSEE COMPANY IN AN EARLIER YEAR. IN VIEW OF THE FOREGOING DISC USSION, WE ARE OF THE VIEW THAT, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE , THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT. ACCORDINGLY, WE SET ASIDE THE ORDER OF PAGE 7 OF 7 LD CIT(A) AND DIRECT THE ASSESSING OFFICER TO CANCE L THE DEMAND RAISED U/S 201 OF THE ACT FOR BOTH THE YEARS UNDER APPEAL BEFO RE US. 6. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE AR E ALLOWED. PRONOUNCED IN THE OPEN COURT ON 12-11-2009 SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, 12 TH NOVEMBER, 2009. COPY TO 1 RASHTRIYA ISPAT NIGAM LIMITED, VISAKHAPATNAM STEEL PLANT, CORPORATE ACCOUNTS SECTION, F&A DEPTT. 2 ND FLOOR, MAIN ADMINISTRATIVE BUILDING, VISAKHAPATNAM 530 031 2 THE ACIT, CIRCLE-6 (1), VISAKHAPATNAM 3 THE CIT VISAKHAPATNAM 4 THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM