ACIT, Circle-15(1) TDS, Range-15, Hyderabad V. Andhra Bank, Hyderabad

ITA 504/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66262 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 10-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K VISWANATHAM
• Assessee Lawyers: C P RAMASWAMY
• Keywords: Retrospective amendment
• Section: 133A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.504/HYD/2012 ASSESSMENT YEAR : 2005-06 ACIT, CIR-15(1), TDS, HYDERABAD. ... APPELLANT VS. ANDHRA BANK, HYDERABAD. RESPONDENT TAN: HYDAO 8387 B APPELLANT BY : SHRI K. VISWANATHAM RESPONDENT BY : SHRI C.P. RAMASWAMY DATE OF HEARING : 19-07-2012 DATE OF PRONOUNCEMENT: 07-09-2012 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 17-1-2012 PASSED BY THE CIT (A)-II, HYD ERABAD PASSED IN ITA NO.0278/CIT(A)-II, HYD/2008-09 AND I T PERTAINS TO THE ASSESSMENT YEAR 2005-06. 2. BRIEFLY THE FACTS ARE THE ASSESSEE IS A GOVERNME NT OF INDIA UNDERTAKING HAVING ITS HEAD OFFICE AT HYDERABAD. T HE ASSESSEE BEING THE EMPLOYER DEDUCTS TAX AT SOURCE U/S 192 FR OM THE 2 ITA NO. 504 OF 2012 ANDHRA BANK, HYD. SALARIES PAID TO THE EMPLOYEES AS PER THE GUIDELINE S ISSUED BY THE HEAD OFFICE. FOR THE FINANCIAL YEAR 2004-05 ALSO T HE ASSESSEE DEDUCTED TAX AT SOURCE AND FILED ITS TDS RETURN IN FORM NO.24 ALONG WITH FORM NOS. 16 AND CHALLANS. 3. THE ASSESSEE WAS SUBJECTED TO SURVEY ACTION U/S 133A OF THE ACT TO VERIFY COMPLIANCE TO THE TDS PROVISIONS AND MAINLY WITH REGARD TO CONCESSIONAL LEASED ACCOMMODATION PROVIDE D TO THE EMPLOYEES. AS A CONSEQUENCE OF THE SURVEY PROCEEDI NG U/S 201 WAS INITIATED BY THE AO. DURING THE PRECEDING THE AO ASKED THE ASSESSEE TO EXPLAIN WHY PERQUISITE VALUE ON LEASED ACCOMMODATION PROVIDED TO EMPLOYEES WAS NOT CONSIDE RED WHILE DEDUCTING TAX AT SOURCE ON SALARY PAYMENT. 4. THE ASSESSEE EXPLAINED BEFORE THE AO THAT THE RE SIDENTIAL ACCOMMODATION PROVIDED TO THE EMPLOYEES ON RECOVERY OF RENT CANNOT BE TREATED AS A CONCESSION WITHIN THE MEANIN G OF SECTION 17 (2) OF THE ACT. IT WAS CONTENDED THAT THE ASSESS EE BECAME LIABLE TO DEDUCT TAX AT SOURCE ON PERQUISITE ONLY A FTER INSERTION OF EXPLANATION-`1 TO SECTION 17(2) BY THE FINANCE ACT 2007 WITH RETROSPECTIVE EFFECT FROM 1-4-2002. THE ASSESSEE F URTHER CONTENDED THAT THE HONBLE AP HIGH COURT IN INTERIM ORDER DATED 31-3-2008 PASSED IN WP NO. 5664/96 HAD RESTRAINED T HE ASSESSEE FROM DEDUCTING TAX AT SOURCE FROM THE HOUSE PERQUIS ITE. THE AO HOWEVER REJECTING THE EXPLANATIONS OF THE ASSESSEE PASSED AN ORDER U/S 201(1) RAISING DEMAND OF RS.11,72,390 AND ALSO LEVIED INTEREST U/S 201(1A) OF THE AMOUNT OF RS.527576. 5. THE ASSESSEE CHALLENGED THE ORDER PASSED BEFORE THE CIT (A). IN COURSE OF HEARING OF APPEAL BEFORE THE CIT (A) APART FROM REITERATING ITS STAND TAKEN BEFORE THE AO, THE ASSE SSEE CONTENDED 3 ITA NO. 504 OF 2012 ANDHRA BANK, HYD. THAT THE RETROSPECTIVE AMENDMENT TO SECTION 17(2)(I I) BY THE FINANCE ACT, 2007 COULD NOT HAVE BEEN ANTICIPATED B Y THE ASSESSEE FOR THE PURPOSE OF EFFECTING TDS ON PERQUI SITES RELATING TO CONCESSIONS TOWARDS RENTAL ACCOMMODATION. FURTHE RMORE THE HONBLE AP HIGH COURT HAD RESTRAINED THE ASSESSEE F ROM DEDUCTING ANY TAX AT SOURCE IN RELATION TO HOUSE PERQUISITE I N TERMS OF SEC. 17(2)(II). THEREFORE, THE ASSESSEE CANNOT BE TREAT ED AS AN ASSESSEE IN DEFAULT. IT WAS CONTENDED THAT AFTER IN SERTIONS OF EXPLANATION 1 TO SECTION 17(2)(II) BY THE FINANCE ACT, 2007 WITH RETROSPECTIVE EFFECT FROM 1-4-2002 THE ASSESSEE HAD STARTED DEDUCTING TAX AT SOURCE ON HOUSE PERQUISITE FROM FI NANCIAL YEAR 2- 007-08 ONWARDS. 6. THE CIT (A) RELYING UPON THE JUDGMENT OF THE HON BLE SUPREME COURT IN CASE OF CIT VS. HINDUSTAN ELECTRO GRAPHITES LTD. (243 ITR 48) ACCEPTED THE CONTENTIONS OF THE ASSESS EE AND HELD IN THE FOLLOWING MANNER:- IN THE PRESENT APPEAL VALIDITY OF THE PROVISIONS O F SECTION 17(2)(II), EXPLANATION 1 IS TO QUESTION, BUT THE AP PLICABILITY OF RETROSPECTIVE AMENDMENT TO THE TDS PROVISIONS A ND THEREBY CHARGING TAX AND INTEREST U/S 201(1) AND 20 1(1A) OF THE IT ACT. AS THE AMENDMENT HAS BEEN BROUGHT O UT WITH RETROSPECTIVE EFFECT, I AM OF THE OPINION THAT IT M AY BE APPLICABLE FOR TREATMENT OF THE VALUE OF THE PERQUI SITE IN THE HANDS OF THE RECIPIENTS, I.E., THE EMPLOYEES, B UT CANNOT BE APPLIED TO THE EMPLOYER. THE PROVISIONS OF SECT ION 192 ARE APPLICABLE WHEN THE PAYMENTS IN QUESTION ARE MA DE OR CREDITED TO THE RECIPIENT. IT MAY BE NOTED THAT IN THIS CASE BOTH PAYMENTS/CREDIT HAVE HAPPENED LONG BACK AND NO TDS WAS MADE BY THE BANK BECAUSE OF THE MANDAMUS ISSUED BY THE JURISDICTIONAL AP HIGH COURT. THEREFORE, APPLI CATION OF TDS PROVISIONS NOW DUE TO BE RETROSPECTIVE AMENDMEN T 4 ITA NO. 504 OF 2012 ANDHRA BANK, HYD. BROUGHT ABOUT SUBSEQUENTLY TO THE PAYMENTS MADE LON G BACK, IN MY OPINION, IS NOT JUSTIFIED. AT THE MOST , TAX MAY BE COLLECTED FROM THE EMPLOYEES ON THE AMOUNT OF PERQUISITE AS CALCULATED AS PER THE PROVISIONS OF S EC. 17(2)(II) OF THE IT ACT. THE APPELLANT CANNOT BE P ENALISED FOR THE RETROSPECTIVE AMENDMENT BROUGHT ABOUT BY TH E FINANCE ACT, 2007. 7 . WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MAT ERIALS ON RECORD. THERE WAS LONGSTANDING DISPUTE BETWEEN ASSESSEES AND INCOME-TAX DEPARTMENT IN THE MATTER OF VALUATIO N PERQUISITE UNDER RULE 3 READ WITH SECTION 17(2)(II) WITH REGAR D TO CONCESSION TOWARDS ACCOMMODATION PROVIDED BY THE EMPLOYER. THE HONBLE SUPREME COURT ULTIMATELY SETTLED THE DISPUTE IN CAS E OF ARUN KUMAR VS. UNION OF INDIA 286 ITR 89. THE HONBLE SUPREME COURT HELD THAT THOUGH RULE 3 CANNOT BE HELD ARBITR ARY, DISCRIMINATORY OR ULTRA VIRES, HOWEVER IT IS OPEN T O THE ASSESSEE TO CONTEND THAT THERE IS NO CONCESSION IN THE MATTE R OF ACCOMMODATION PROVIDED BY EMPLOYER. AFTER THE HON BLE SUPREME COURT DELIVERED THE AFORESAID JUDGMENT ON 1 5-9-2006 AN AMENDMENT WAS BROUGHT TO SEC.17(2)(II) BY THE FINAN CE ACT, 2007 BY INSERTING EXPLANATION 1 WITH RETROSPECTIVE EFFECT FROM 1- 4-2002 LAYING DOWN WHAT SHOULD BE TREATED AS CONCES SION IN THE MATTER OF RENT. IT IS A FACT THAT CONCESSION IN THE MATTER OF RENT WAS NOT TREATED AS PERQUISITE FOR THE PURPOSE OF D EDUCTION OF TAX PRIOR TO AMENDMENT BROUGHT BY FINANCE ACT,2007 TO S ECTION 17(2)(II) AND THE ASSESSEE WAS ALSO RESTRAINED BY T HE HONBLE HIGH COURT FROM DEDUCTING TAX ON HOUSE PERQUISITE. THE DEPARTMENT HAD ALSO ACCEPTED THE RETURNS FILED U/S 206 TILL THE DATE OF SURVEY. THE AMENDMENT TO SEC. 17(2)(II) B ROUGHT BY THE FINANCE ACT, 2007 WITH RETROSPECTIVE EFFECT FROM 1- 4-2002 COULD 5 ITA NO. 504 OF 2012 ANDHRA BANK, HYD. NOT HAVE BEEN FORESEEN BY THE ASSESSEE FOR DEDUCTIN G TAX AT SOURCE WHILE MAKING PAYMENT OF SALARY. AS SOON AS THE AMENDMENT HAS BEEN BROUGHT TO THE STATUTE THE ASSES SEE HAS STARTED DEDUCTING TAX ON HOUSE PERQUISITE FROM THE FINANCIAL YEAR 2007-08. IN THE AFORESAID CIRCUMSTANCES, THE ASSES SEE CANNOT BE FASTENED WITH LIABILITY U/S 201(1) AND 201(1A) FOR NON DEDUCTION OF TAX AT SOURCE. THE CIT (A) WAS THEREFORE CORREC T IN DELETING THE TAX DEMAND OF RS.11,72,390 AND INTEREST OF RS.5 ,27,576 LEVIED U/S 201(1) & 201 (1A) RESPECTIVELY. IN VIEW OF THE ABOVE, WE UPHOLD THE FINDINGS OF THE CIT (A) AND DISMISS T HE GROUNDS RAISED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 07-9-2012. SD/- SD/ - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 7 TH SEPT., 2012. COPY TO:- 1) ACIT,CIR-15(1) (TDS), RANGE-15, HYDERABAD. 2) ANDHRA BANK, HRD, HEAD OFFICE, DR. PATTABHI BHAV AN, 8- 9-11, SAIFABAD, HYDERABAD. 3) CIT (A)-II, HYDERABAD. 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* 6 ITA NO. 504 OF 2012 ANDHRA BANK, HYD. 7 ITA NO. 504 OF 2012 ANDHRA BANK, HYD.