Income tax Officer (TDS) -I, Kanpur V. M/S M/s Kanpur Electricity Supply Co. Ltd., Kanpur

ITA 702/LKW/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83402 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-09-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 25-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: O P SHUKLA
• Keywords: Salary income; Non-deduction of tax
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NOS.702 TO 706/LKW/2011 ASSESSMENT YEARS:2005-06 TO 2009-10 INCOME TAX OFFICER (TDS)-I KANPUR V. M/S KANPUR ELECTRICITY SUPPLY COMPANY LIMITED 14/71, CIVIL LINES, KANPUR PAN/PAN:KNPK00003D (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. RAJIV JAIN, CIT(DR) RESPONDENT BY: SHRI. O. P. SHUKLA, ADVOCATE DATE OF HEARING: 15 09 2014 DATE OF PRONOUNCEMENT: 12 11 2014 O R D E R PER SUNIL KUMAR YADAV: THESE APPEALS ARE PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) ON COMMON GROUNDS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF SHORT DEDUCTION OF TAX HOLDING THAT SUPPLY OF ELECTRICITY IS NOT COVERED UNDER SECTION 17(2)(III) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT') AS PERQUISITE. 2. WE, HOWEVER, FOR THE SAKE OF REFERENCE EXTRACT THE GROUNDS RAISED IN I.T.A. NO. 702/LKW/2011 AS UNDER:- 1.1 THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION ON ACCOUNT OF SHORT DEDUCTION OF RS.3,95,892/- HOLDING THAT THE SUPPLY OF THE ELECTRICITY IS NOT COVERED U/S 17(2)(III) OF THE INCOME TAX ACT, 1961 AS PERQUISITE. 1.2 IN DIRECTING SO, CIT(A) HAS FAILED TO APPRECIATE THE FOLLOWING- :- 2 -: (I) THAT THE SUPPLY OF UNMETERED ELECTRICITY BY KESCO TO ITS EMPLOYEES UNDER SPECIAL TARIFF LMV-10 IS TAXABLE AS PERQUISITES U/S 17(2)(III) AND THE DEDUCTOR KESCO IS LIABLE TO DEDUCT TAX ON THE SUCH VALUE OF PERQUISITES PROVIDED TO ITS EMPLOYEES U/S 192 READ WITH RULE 26A(2)(Q) IN FORM NO.L2BA OF THE INCOME TAX ACT, 1961. IN THIS CASE, NEITHER THE VALUE OF PERQUISITES HAVE BEEN TAKEN INTO CONSIDERATION FOR TDS BY THE EMPLOYER NOR THE EMPLOYEES HAVE PAID TAXES ON THE VALUE OF PERQUISITES IN THEIR RETURN OF INCOME. (II) THAT THE EMPLOYEES OF KESCO ARE BEING PROVIDED BENEFIT FOR UNMETERED CONSUMPTION OF ELECTRICITY BY OPTION OF SPECIAL TARIFF TERMED AS LMV-10 WITH THE RECOVERY OF NEGLIGIBLE FIXED AMOUNT FOR CONSUMING HEAVY ELECTRICITY CONSUMPTION [IN UNITS] FROM THEIR SALARY. (III) THAT THE KESCO DURING THE COURSE OF ASSESSMENT PROCEEDINGS DID NOT FILE ANY SPECIFIC DETAILS AND INFORMATION NOR SUBMITTED ANY COPIES OF FORM 16 OF ITS EMPLOYEES. (IV) THAT THE THERE IS NO NOTIFICATION ISSUED BY THE CBDT FOR TREATING THE VALUE OF PERQUISITES FOR CONSUMPTION OF ELECTRICITY UNDER LMV-10 AS EXEMPT. (V) THAT THE BASIS ADOPTED BY THE AO FOR CALCULATING THE VALUE OF PERQUISITES ON THE CONSUMPTION OF ELECTRICITY ON LMV-10 IN COMPARISON TO LMV-1 IS BASED ON FACTS AND MERIT. 3. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE IS A GOVERNMENT PUBLIC LIMITED COMPANY AND SUBSIDIARY OF HOLDING COMPANY OF U.P. POWER CORPORATION LIMITED AND ENGAGED IN DISTRIBUTION OF POWER TO ITS CONSUMER LIKE GOVERNMENT, SEMI-GOVERNMENT AND PRIVATE BODIES. THE BOARD OF DIRECTOR OF THE COMPANY IS APPOINTED BY THE GOVT. OF UTTAR PRADESH AND THE PRINCIPAL SECRETARY ENERGY IS THE CHAIRMAN OF THE COMPANY. THE :- 3 -: DAY-TO-DAY FUNCTIONING OF THE COMPANY IS LOOKED AFTER BY THE MANAGING DIRECTOR AND CHIEF ENGINEER WHO ARE APPOINTED BY THE GOVT. OUT OF THE TOTAL SHARE 59999300 SHARE ARE HELD BY UPPCL (HOLDING COMPANY) AS FULLY PAID UP IN PURSUANT TO UTTAR PRADESH TRANSFER OF KESA ZONE ELECTRICITY DISTRIBUTION SCHEME 2000 AND 700 SHARE ARE HELD BY OTHER SHARE HOLDERS NOMINEE OF UP STATE GOVT. THE ASSESSEE-COMPANY IS INCORPORATED ON 21.07.1999 FOR THE PURPOSE OF TRANSFER OF BUSINESS OF ELECTRICITY DISTRIBUTION DONE BY ERST WHILE KESA AS UNIT OF UP ELECTRICITY BOARD. THE COMPANY TOOK OVER THE ASSETS AND LIABILITY OF KESA ZONE OF UPPCL W.E.F. 15.01.2000 VIDE UP GOVT. NOTIFICATION DATED 15.01.2000. THE TARIFF OF ELECTRICITY IS DETERMINED BY THE U.P. REGULATORY AUTHORITY COMMISSION (UPREC) WHICH IS BINDING ON HOLDING COMPANY, M/S UPPCL AS WELL AS THE SUBSIDIARIES I.E. POORVANCHAAL VIDYUT VITRAN NIGAM LIMITED, MADHYANCHAL VIDHYUT VITRAN NIGAM LIMITED, UTTARANCHAL VIDYUT VITRAN NIGAM LIMITED AND DAKSHINANCHAL VIDYUT VITRAN NIGAM LIMITED. THE RATE OF TARIFF OF SEVERAL TYPE OF CONSUMERS HAS ALREADY BEEN DETERMINED AND THE ASSESSEE HAS NO POWER TO CHANGE THE TARIFF AS DECIDED BY UPREC. THE ASSESSEE-COMPANY IS WHOLLY AND EXCLUSIVELY ENGAGED TO SUPPLY OF ELECTRICITY WITHOUT ANY PROFIT WHICH IS COVERED UNDER THE DEFINITION OF CHARITABLE ACTIVITY. 4. THE DCIT HAS ISSUED A NOTICE UNDER SECTION 201(201(1A) READ WITH SECTION 192/17(2)(III) OF THE ACT STATING THEREIN THAT RATE PER SCHEDULED OF LMV 10, THE METERED EMPLOYEES OF KESCO WERE GIVEN 50% REBATE SUPPLY OF ELECTRICITY AND IN CASE OF UN-METERED SUPPLY, THE ELECTRICITY WERE PROVIDED AT CONCESSIONAL RATE AS PRESCRIBED IN THE SCHEDULED RATE. IT IS, THEREFORE, EVIDENT THAT THE EMPLOYEES WERE PROVIDED PERQUISITES AND TAXABLE UNDER SECTION 17(2)(IIII) OF THE ACT AND THE SAME SHOULD BE INCLUDED FOR THE TAX DEDUCTION AT SOURCE BY THE EMPLOYER I.E. THE ASSESSEE. THE ASSESSING OFFICER FURTHER NOTED THAT NEITHER THE VALUE OF PERKS HAVE BEEN TAKEN INTO CONSIDERATION FOR MAKING TDS BY THE EMPLOYER NOR THE EMPLOYEES HAVE INCLUDED THE PERK VALUE IN THEIR RETURN OF INCOME. THE VALUE OF PERK SHOULD HAVE BEEN COMPUTED UNDER SECTION 17(2)(III) OF THE ACT READ WITH RULE 26A (2)(B) IN FORM NO.12BA. THE ASSESSING OFFICER ACCORDINGLY CALCULATED THE NOTIONAL VALUE OF PERQUISITES ON THE BASIS OF LMV 10 AND IDF RATE AS PER LMV 1 AND CALCULATED THE PERQUISITES AMOUNTS. THE ASSESSING OFFICER :- 4 -: ACCORDINGLY ESTIMATED THE PERK VALUE AND RAISED NOTIONAL LIABILITY OF TDS UNDER SECTION 192 AT RS.1,13,966/- AND CHARGED INTEREST UNDER SECTION 201(1A) OF THE ACT AT RS.32,690/- + RS.48,934/-, TOTALING TO RS.81,624/- IN ASSESSMENT YEAR 2005-06.. 5. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THE RATES FOR SUPPLY OF ELECTRICITY TO ITS CONSUMER INCLUDING THE DEPARTMENTAL EMPLOYEES ARE FIXED AND DECIDED BY UPERC AND SUCH RATE IS BINDING ON ALL THE CONSUMERS LIKE GOVERNMENT, SEMI-GOVERNMENT AND PRIVATE BODIES AS WELL AS DEPARTMENTAL EMPLOYEES OF ALL THE ELECTRICITY DEPARTMENT. THE RATE SCHEDULED FOR DEPARTMENTAL EMPLOYEES HAS BEEN FIXED AS PER SCHEDULE LMV 10 WHICH IS APPLICABLE IN F.Y. 2004-05. IT WAS FURTHER CONTENDED THAT SCHEDULED RATE OF EMPLOYEES HAS BEEN DETERMINED BY UPERC UNDER TWO CATEGORIES ONE IS METERED AND THE OTHER IS UN- METERED. IN THE FIRST CATEGORY WHERE EMPLOYEES WHO OPTED METERED POWER SUPPLY, THEY SHALL BE ENTITLED TO PAY BILL AFTER DEDUCTION OF 30% OF REBATE AS APPLICABLE NORMS ON OTHER METERED CONSUMER UNDER LMV 1 CATEGORY; AND THE SECOND CATEGORY I.E. EMPLOYEES OPTED UN-METERED POWER SUPPLY, THEY SHALL BE ENTITLED TO PAY FIXED CHARGE AS PER PRESCRIBED RATE OF LMV 10. IT WAS FURTHER EXPLAINED TO THE LD. CIT(A) THAT NONE OF THE EMPLOYEES HAS OPTED THE FIRST CATEGORY I.E. METERED AND ALL THE EMPLOYEES AND PENSIONERS OF THE ASSESSEE-COMPANY HAVE OPTED UN-METERED SUPPLY OF ELECTRICITY SO THAT THERE IS NO METER IN ANY PREMISES OF THE EMPLOYEES WHERE THEY RESIDE. BUT THE ASSESSING OFFICER AS PER FORM NO.24Q HAS CATEGORISED THE LOAD WISE CONNECTION MINIMUM TWO TO FIVE KVA ON THE BASIS OF THE SALARY RECEIVED BY EACH OF THE EMPLOYEE AS MENTIONED IN PARA 4 AND ESTIMATED UNWANTED LOAD ON THE BASIS OF SALARY RECEIVED AND ESTIMATED THE RATE AS PER LMV-1 OF RS.240 PER KVA ON THE BASIS THAT THOSE METERS ARE NOT IN WORKING CONDITION. THE ASSESSEE HAS ALSO PLACED RELIANCE UPON VARIOUS JUDICIAL PRONOUNCEMENTS IN SUPPORT OF ITS CONTENTION THAT SINCE THE RATES ARE PRESCRIBED BY THE REGULATORY AUTHORITIES AND ASSESSEE HAS NO CONTROL OVER IT, THE SUPPLY OF ELECTRICITY AT REDUCED RATES CANNOT BE TERMED AS PERQUISITES IN THE HANDS OF THE ASSESSEE. THE LD. CIT(A) RE-EXAMINED THE CLAIM OF THE ASSESSEE IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS AND BEING :- 5 -: CONVINCED WITH IT, HE DELETED THE ADDITION. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER:- I) AS REGARD, THE ADDITION MADE UNDER THE HEAD PERQUISITES RS.3,95,982/- AND AGAINST NON-DEDUCTION OF TAX AT SOURCE U/S 192 /17(2)(III)RAISED TAX AT RS.1,94,940/-, I HAVE GONE THROUGH THE WRITTEN SUBMISSION, ALL OTHER ARGUMENTS AS RAISED BY THE AUTHORIZED REPRESENTATIVE AND ASSESSMENT ORDER PASSED BY THE INCOME TAX OFFICER (IDS), KANPUR. I OBSERVE THAT THE ASSESSING OFFICER HAS ESTIMATED NOTIONAL PERQUISITES ON ITS EMPLOYEES ADOPTED THE BASIS OF THE CATEGORY OF SALARY RECEIVED BY THE EMPLOYEES AND ESTIMATED CONNECTED LOAD ON THE BASIS OF SALARY AND MULTIPLIED AT THE TARIFF RS. 2.08 PER UNIT. THE ASSESSING OFFICER HAS CATEGORIZED THE EMPLOYEES ON THE BASIS OF SALARY INTO FOUR CATEGORIES AND ESTIMATED CONNECTED LOAD FROM 5 KVA TO 2 KVA. THE ASSESSING OFFICER HAS ALSO ESTIMATED BASE OF UNIT AS PER LMV-1(IDF CATEGORY) OF 240 UNIT EQUAL TO 1 KVA WHICH IS REPRODUCED BELOW:- SI. NO F.Y. 2004-05 LOAD ESTIMATED CONSIDERING USES OF AC, GEYSER BASE OF UNIT ESTIMATION 1. SALARY AS PER FORM 24Q DOWNLOADED 1. ABOVE RS. 5.50 LAC 2. RS. 3.50 LAC TO RS. 5.50 LAC 3. RS. 2.50 LAC TO 3.50 LAC 4. BELOW RS. 2.50 LAE 5 KVA*240 UNIT=1200 4KVA*240 UNIT=960 3KVA*240 UNIT=720 2 KVA*240 UNIT=480 240 UNIT PER KW ESTIMATED AS CHARGED BY THE COMPANY IN OTHER UN- METERED CONSUMER CASE OF LMV 1 THE ASSESSING OFFICER HIMSELF MENTIONED IN HIS ORDER THAT, 'THE UNDERSIGNED IS DETERMINING THE PERQUISITES VALUE TAXABLE IN THE HAND OF EMPLOYEES OF THE ASSESSEE'S COMPANY ON ESTIMATED BASIS BY ADOPTING REFERENCE DETAILS AND INFORMATION AVAILABLE ON THE WEBSITES AND AST (TDS) MODEL OF THIS OFFICE THE EMPLOYEES HAVE BEEN CLASSIFIED IN FOUR CATEGORIES AND LOAD/UNIT OR BEING ESTIMATED.' BASIS :- 6 -: AND PARAMETERS ADOPTED TO DETERMINE THE PERQUISITES IS REPRODUCED BELOW:- SI. F.Y. 2004-05 LOAD ESTIMATED UNIT BASE OF UNIT NO ESTIMATED CONSUMED / FIXED ESTIMATION CONSIDERING CHARGE RECOVERED USES OF AC, UNDER LMV 10 GEYSER PER MONTH 1. SALARY AS PER FORM 24Q DOWNLOADED 240 UNIT PER KW 1. ABOVE RS. 5.50 LAC 5 KVA 1200/ RS. 300/- ESTIMATED AS 2. RS. 3.50 LAC TO RS. 5.50 LAC 4 KVA 960/ RS. 240/- CHARGED BY THE 3. RS. 2.50 LAC TO 3.50 LAC 3 KVA 720/ RS 180/- COMPANY IN OTHER/- 4. BELOW RS. 2.50 LAC 2 KVA 480/ RS. 120/- UN-METERED CONSUMER CASE (*F LMV1 THE ASSESSEE'S COMPANY IS A SUBSIDIARY OF HOLDING COMPANY U.P. POWER CORPORATION LTD. AND IS A FULLY GOVERNMENT OWNED ORGANIZATION. THE TARIFF OF THE CONSUMER LIKE GOVERNMENT, SEMI- GOVERNMENT AND NON-GOVERNMENT SECTOR HAS BEEN DETERMINED BY U.P. REGULATORY AUTHORITY COMMISSION WHICH IS FORMED BY LEGISLATIVE DEPARTMENT OF PARLIAMENT AS PER ELECTRICITY REFORM ACT, 1999, IN EXERCISE OF POWER VESTED IN THE ELECTRICITY ACT, 2003 VIDE SECTION 62, THE REGULATORY AUTHORITY COMMISSION DETERMINED THE TARIFF OF EACH AND EVERY TYPE OF CONSUMERS WHICH IS BINDING ON THE CONSUMERS. THE ASSESSEE HAS REFERRED THE SECTION 61, 62 AND 63 OF ELECTRICITY REFORM ACT, 2003 COPY OF WHICH IS PLACED ON RECORD VIDE PAGE NO. 47 TO 49 OF PAPER BOOK. IT STATES THAT 'NOT WITH STANDING ANY THING CONTAINED IN SECTION 62 THE APPROPRIATE COMMISSION SHALL ADOPT THE TARIFF IF SUCH TARIFF HAVE BEEN DETERMINED THROUGH TRANSPARENT PROCESS OF BIDDING' IN ACCORDANCE WITH THE GUIDELINE ISSUED BY THE CENTRAL GOVERNMENT.' 'IT IS OBSERVED THAT THE REGULATORY AUTHORITY COMMISSION IS A SUPREME BODY OF THE GOVERNMENT TO DETERMINE TARIFF AND IT IS BINDING ON EACH AND EVERY TYPE OF CONSUMER. IT ALSO PROVIDES THAT THE APPROPRIATE COMMISSION MAY IN CASE OF SHORTAGE OF SUPPLY OF ELECTRICITY, FIX THE MAXIMUM AND MINIMUM CEILING OF TARIFF FOR SALE AND PURCHASE OF ELECTRICITY 'IN PURSUANCE OF AN AGREEMENT INTERRED INTO :- 7 -: BETWEEN A GENERATING COMPANY AND A LICENSEE OR BETWEEN LICENSEES OF A PERIOD NOT EXCEEDING ONE YEAR TO ENSURE THE REASONABLE PRICE OF ELECTRICITY. I FIND THE JUSTIFICATION IN THE SUBMISSION OF THE ASSESSEE THAT, THE REGULATORY AUTHORITY COMMISSION HAS FIXED TARIFF AS PER SCHEDULE LMV-1 TO LMV-10, IDF, UN-METERED, NON-INDUSTRIAL SECTOR, LARGE AND HEAVY POWER SECTOR, RAILWAY TRACTION, LIFT IRRIGATION WORK, DEPARTMENTAL EMPLOYEES LICE SERVICE EMPLOYEES, PENSIONER, FAMILY PENSIONER FOR OWN USE OF LIGHT, FAN AND POWER FOR DOMESTIC APPLIANCES. THE RATE AND CHARGE INDICATED IN THE SCHEDULE AS PER ELECTRICITY ACT, FOR THE DIFFERENT CATEGORIES ARE STRICTLY IN ADHERENCE TO THE ABOVE STATUTORY PRO VISION. THE ASSESSING OFFICER HAS ADOPTED THE FIXED TARIFF OF THE EMPLOYEE AS PER SCHEDULE OF LMV-10 AND COMPARED WITH THE RATE OF SCHEDULED LMV-1. THE ASSESSEE SUBMITTED THAT THE FIXED CHARGE IN SCHEDULE LMV-1 CATEGORY IS ONLY APPLICABLE FOR DEFECTIVE METERS OR THOSE METERS WHICH ARE NOT IN WORKING CONDITIONS. THE FIXED RATE IN SCHEDULED LMV-1 IS ADOPTED ON THE BASIS OF THE LOAD AND PRESCRIBED RATE, THE BILL IS FINALIZED BY THE DEPARTMENT. BUT IN LMV-10 ON UN-METERED SCHEME, NO SUCH TYPE OF CONCESSION HAS BEEN PROVIDED EXCEPT CHARGE OF PRESCRIBED RATE AS PER PARA V OF 5 AND THESE BENEFITS ARE ALSO APPLICABLE TO THE PENSIONERS. I HAVE FURTHER CONSIDERED THE SUBMISSION OF THE ASSESSEE THAT AS PER SCHEDULED RATE OF LMV-10 TO ITS EMPLOYEE, TWO OPTIONS HAVE BEEN PROVIDED TO ITS EMPLOYEES 1 ST METERED AND 2 ND UN-METERED. THE APPLICABLE RATE FOR THE BOTH THE CATEGORIES ARE DIFFERENT. THOSE EMPLOYEES WHO HAVE OPTED FOR METER, THEY SHALL BE ENTITLED TO PAY OUR BILLS AFTER 30% REBATE ON RATE OF CHARGE APPLICABLE TO OTHER CONSUMER AND THOSE EMPLOYEES WHO OPTED FOR UN-METERED SCHEME THEY SHALL BE ENTITLED TO PAY FIXED CHARGE AS PER PRESCRIBED RATE OF LM\A10. A COPY OF RATE SCHEDULE LMV-10 IS PLACED ON RECORD AS PER PAPER BOOK PAGE NO 62 TO 67. IT IS SEEN THAT THE NONE OF THE EMPLOYEE / CONSUMER OF THE ASSESSEE'S COMPANY HAS OPTED METER-SCHEME. ALL THE EMPLOYEES HAVE OPTED FOR UN-METERED SUPPLY OF ELECTRICITY AND IS BEING PAID FIXED :- 8 -: CHARGE OF ELECTRICITY AS PER PRESCRIBED RATE OF SCHEDULE LMV-10 WHICH IS ENCLOSED AS PER PAPER BOOK PAGE NO.65. THE FIXED CHARGE OF THE EMPLOYEES HAS BEEN DETERMINED BY THE UPERC BY CONSIDERING ALL THE FACTS NAMELY LINE LOSS, NON REALIZATION OF BILL TO ITS CONSUMERS, REPAIR AND MAINTENANCE OF SUPPLY LINES, TRANSFORMER, SUB-STATION AND ESTABLISHMENT COST AND INTEREST COST ETC. THE ASSESSEE'S COMPANY HAS REALIZED 100% OF BILL EVERY MONTH WITHOUT INCURRING ANY FURTHER COST FOR THE RECOVERY OF BILLS AS TO THE COST OF ELECTRICITY IS BEING RECOVERED FROM THEIR SALARY ON MONTHLY BASIS. FURTHER THE COST SAVES COST OF TAKING METER READING, COST OF PREPARATION OF BILLS, COST OF DISTRIBUTION OF BILLS AND COST OF COLLECTION ETC. AS PER SECTION 12(2) ELECTRICITY REFORM ACT, 1999, THE U.P. GOVERNMENT IS EMPOWERED TO ISSUE POLICY / DIRECTION WITH RESPECT FOR SUPPLY OF ELECTRICITY TO ANY CLASS OF OR CLASSES OF PERSON AND IN EXERCISE OF POWER THE ENERGY DEPARTMENT OF GOVERNMENT OF U.P. HAS AGREED TO PROVIDE TARIFF TO ITS EMPLOYEES AND THE TARIFF DETERMINED BY UPERC HAS BEEN FIXED ONLY FOR A YEAR UNTIL THE TERM AND CONDITION OF TARIFF ARE SPECIFIED U/S 61 OF ELECTRICITY REFORM ACT, 2003. IN THE LIGHT OF THE SUBMISSION OF THE ASSESSEE, I FIND THAT, THE ASSESSING OFFICER HIMSELF TOOK THE VIEW THAT THE PERQUISITES VALUE DETERMINED ON ESTIMATE BASIS BY ADOPTING AND CLASSIFYING THE EMPLOYEES OF THE COMPANY ON THE BASIS OF THE SALARY INTO FOUR CATEGORIES AND ARE BEING ESTIMATED ON THE FIXED RATE OF TARIFF DETERMINED DURING THE YEAR. THE ASSESSEE'S COMPANY CAN NOT TO BE TREATED IN DEFAULT FOR NON-DEDUCTING TAX AT SOURCE U/S 192/17(2)(III) R.W. SECTION 201(1) OF THE INCOME TAX ACT, 1961. RELIANCE IS PLACED ON HON'BLE SUPREME COURT IN CASE OF CIT VS. L.W. RUSSELL (1964) 53 ITR 91 WHEREIN IT IS HELD THAT THE EMPLOYEES MUST HAVE A VESTED RIGHT TO PERQUISITES. ONE CAN NOT BE SAID TO ALLOW A PERQUISITES TO AN EMPLOYEE IF THE EMPLOYEE HAS NO RIGHT TO THE SAME, IT CAN NOT APPLY TO CONTINGENT TO WHICH THE EMPLOYEE HAVE NO RIGHT TILL THE CONTINGENCY OCCURS. IN THE ASSESSEE'S CASE THE ELECTRICITY IS A BASIC AMENITY TO BE PROVIDED BY STATE GOVERNMENT AND IS ALSO COVERED UNDER THE ESSENTIAL COMMODITIES ACT AND THE EMPLOYEES OF THE ASSESSEE HAVE NO RIGHT TO CHANGE / DETERMINE THE TARIFF, HENCE, NO CONTINGENT LIABILITY. IN THE :- 9 -: SAME CASE THE HON'BLE SUPREME COURT HELD FURTHER WHERE THE EMPLOYEES CONTRIBUTED SUM TOWARDS PREMIUM PAYABLE BY THE ASSESSEE'S COMPANY TO WHICH EMPLOYEES COULD BE ENTITLED ON ATTENDING HIS SUPERANNUATION THE SAID SUM WAS NOT A PERQUISITES WITHIN THE MEANING OF SECTION 17(2)(III) OF THE INCOME TAX ACT, 1961. SIMILARLY THE SAME VIEW HAS BEEN TAKEN BY THE HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF SARA BHAI SETTY AND SONS VS. CIT (1967) 64 ITR 175, THE HON'BLE MADRAS HIGH COURT IN THE CASE OF MAYSOOR FERTILIZER COMPANY VS. CIT (1966) 59 ITR 268 AND HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COKA COLA BEVERAGE PVT. LTD VS. CIT (2007) 293 ITR 226 HAS GIVEN THE SAME FINDING. RELIANCE IS ALSO PLACE ON HON'BLE SUJRAT HIGH COURT IN THE CASE OF CIT (TDS) VS. RELIANCE INDUSTRIES LIMITED (2008) 175 TAXMAN 367 WHEREIN IT IS HELD THAT THE COMPANY HAS DISTRIBUTED FREE MILLS FOOD / COUPON TO ITS EMPLOYEES IT SHOULD NOT BE TREATED THE SAME AS PERQUISITES AND ASSESSEE COULD NOT TREATED IN DEFAULT FOR NON DEDUCTING OF TAX AT SOURCE U/S 192 R.W. SECTION 17(2)(III)OF THE INCOME TAX ACT 1961. THE SAME FINDING IS ALSO HELD BY THE HON'BLE KERNATKA HIGH COURT IN THE CASE OF CIT VS. INFOSYS TECHNOLOGY LTD. (2007) 159 TAXMAN 440 AND HON'BLE UTTRANCHAL HIGH COURT IN THE CASE OF CIT DEHRADOON VS. CHIEF OFFICER ZONAL OFFICE STATE BANK OF INDIA (2006) 155 TAXMAN 477. FURTHER I AM CONVINCED WITH THE ARGUMENT MADE BY THE ASSESSEE'S AUTHORISED REPRESENTATIVE THAT THE ASSESSEE'S COMPANY IS INCORPORATED ON 21.07.1999 FOR THE PURPOSE OF ELECTRICITY DISTRIBUTION, KNOWN AS KESA, A SUBSIDIARY OF U.P. ELECTRICITY BOARD, THE U.P. ELECTRICITY REFORM ACT WAS PASSED ON 27.07.1999 IN PURSUANCE OF THE PROVISION OF CLAUSE 3 OF ARTICLE 348 OF CONSTITUTION OF INDIA BY GOVERNOR OF UTTAR PRADESH TO PROVIDE FOR THE RESTRUCTURING OF ELECTRICITY INDUSTRY IN THE STATE OF UTTAR PRADESH ALONGWITH THE RATIONALIZATION OF GENERATION, TRANSMISSION, DISTRIBUTION AND SUPPLY OF ELECTRICITY. THE OBJECT OF THIS ACT IS TO TRANSFER OF THE BOARD (UPSEB) PROPERTIES, POWER, FUNCTION, DUTIES AND PERSONNEL, U/S 23 (7) OF THE U.P. ELECTRICITY REFORM ACT, 1999 THE PERSONNEL SHALL HAVE CONTINUITY :- 10 -: OF SERVICE IN ALL RESPECT OF THE BENEFITS OF SERVICE. AS STATED IN SECTION 23 (8) OF THE ELECTRICITY REFORM ACT 1999, 'WITH OR FOR THE STATE GOVERNMENT OR THE CONCERN TRANSFREE AND ALL THE SUITS OR OTHER LEGAL PROCEEDINGS INSTITUTED BY OR AGAINST THE BOARD MAY BE CONTINUES OR INSTITUTED BY OR AGAINST THE STATE GOVERNMENT OR CONCERNED TRANSFREE AS THE CASE MAY BE. 'THE SAID SCHEME IS MADE FOR THE PURPOSE OF THE TRANSFER AND VESTING ALL THE PROPERTIES AND ALL INTEREST, RIGHT, AND LIABILITY OF THE BOARD IN THE STATE GOVERNMENT AND REVERSING THEREFORE BY THE STATE GOVERNMENT IN THE CORPORATION UPPCL. UPRPVVNL WHICH EVIDENCE THAT THE EMPLOYEE OF THE KESCO ARE THE GOVERNMENT EMPLOYEES AFTER RESTRUCTURING OF ITS DIVISION LIKE GENERATION, TRANSMISSION AND DISTRIBUTION. MANY OTHER EVIDENCES PLACED ON RECORD SPECIALLY NOTIFICATION NO. 151/P-1/2000-24 DATED 14.01.2000 SIGNED BY SECRETARY OF U.P. GOVERNMENT FOR DECLARING THE UTTAR PRADESH POWER CORPORATION LTD. A GOVERNMENT COMPANY WHICH EVIDENCES THE KESCO AS A SUBSIDIARY OF THE U.P. POWER CORPORATION LTD. VIS A VIS THE EMPLOYEES ARE ALSO GOVERNMENT-EMPLOYEES AFTER RESTRUCTURING. RELIANCE IS PLACED ON THE JUDGMENT OF HON'BLE AGRA INCOME TAX /APPELLATE TRIBUNAL ITA NO. 673/ASR/2008 IN THE CASE OF THE ASSESSEE'S SUBSIDIARY COMPANY HARDUAGANJ THERMAL POWER PROJECTS, WHEREIN IT IS HELD THAT EMPLOYEES OF THE ASSESSEE'S COMPANY IS A GOVERNMENT EMPLOYEES AFTER RESTRUCTURING, THEREFORE IN THE CIRCUMSTANCE AND FACTS OF THE CASE THE SUPPLY OF ELECTRICITY AS PER LMV-10 IS NOT COVERED U/S 17(2)(III) OF THE INCOME TAX ACT, 1961 AS PERQUISITES. I FIND THE JUSTIFICATION IN THE SUBMISSION OF THE ASSESSEE THAT THE ASSESSMENT HAS BEEN COMPLETED ON 30/12/2007 BY THE A.O U/S.143(3) OF THE I.T. ACT BUT THE A.O HAS ALSO NOT TREATED THE SAME AS PERQUISITES. HENCE, TAX DEMAND RAISED U/S. 201/201(1A) ON ESTIMATED PERQUISITES STANDS DELETED. 6. NOW THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND HAS PLACED HEAVY RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER; WHEREAS THE LD. COUNSEL FOR THE ASSESSEE, BESIDES PLACING RELIANCE UPON THE ORDER OF THE LD. CIT(A), HAS CONTENDED THAT THE RATES FOR THE EMPLOYEES OF THE :- 11 -: ASSESSEE-COMPANY WERE FIXED BY THE UPERC. WHATEVER REBATE WAS GIVEN TO THE EMPLOYEES BY THE BOARD, IT WAS ON ACCOUNT OF LESSER EXPENDITURE IN REALIZING ELECTRICITY CHARGES. THERE IS NO MIDDLEMAN INVOLVED IN ISSUING BILLS AND COLLECTING ELECTRICITY CHARGES. THEY WERE DIRECTLY DEDUCTED FROM THE SALARIES OF THE EMPLOYEES. HE HAS ALSO PLACED RELIANCE UPON THE FOLLOWING JUDGMENTS IN SUPPORT OF HIS CONTENTION THAT SUPPLY OF ELECTRICITY IS AT LESSER RATE TO ITS EMPLOYEES CANNOT BE TERMED TO BE PERQUISITE IN THE HANDS OF THE EMPLOYEES:- (I) CIT VS. RANGOON ELECTRIC TRAMWAY & SUPPLY CO. LTD., 1 ITR 315. (II) BHARAT HEAVY ELECTRICAL LIMITED VS. CIT, 121 TAXMANN 702. (III) CIT VS. CHIEF OFFICE, ZONAL OFFICE, STATE BANK OF INDIA, 155 TAXMANN 477. (IV) CIT VS. INFOSYS TECHNOLOGY LIMITED, 159 TAXMAN 440. (V) CIT (TDS) VS. RELIANCE INDUSTRIES LIMITED, 175 TAXMAN 367. (VI) CIT VS. LW RUSSEL, 53 ITR 91. (VII) SARABHAH SETTY AND SONS VS. CIT, 64 ITR 175 (VIII) MYSOOR FERTILIZER CO. VS. CIT, 59 ITR 268. (IX) SURAJ MAL CHAMPA LAL VS. CIT, 66 ITR 396 (X) WEST BENGAL STAGE ELECTRICITY BOARD VS. DCIT, 248 ITR 152 (XI) P.B. RAJGOPAL & OTHERS VS. UNION OF INDIA & OTHER, 233 ITR 678. (XII) HINDUSTAN COCA COLA BEVERAGE PVT. LTD. VS. CIT, 293 ITR 226. 7. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT UNDISPUTEDLY ASSESSEE-COMPANY IS A GOVERNMENT PUBLIC LIMITED COMPANY AND SUBSIDIARY OF HOLDING COMPANY, U.P. POWER CORPORATION LIMITED AND ALSO ENGAGED IN DISTRIBUTION OF POWER TO ITS CONSUMERS LIKE GOVERNMENT, SEMI-GOVERNMENT AND PRIVATE BODIES. IT IS ALSO AN UNDISPUTED FACT THAT THE :- 12 -: RATES FOR SUPPLY OF ELECTRICITY INCLUDING DEPARTMENTAL EMPLOYEES ARE FIXED AND DECIDED BY THE UPERC AND SUCH RATES ARE BINDING ON ALL THE CONSUMERS AS WELL AS DISTRIBUTION COMPANIES. AS PER LMV-10, THE UPERC HAS FIXED THE RATES OF CHARGES FOR METERED AND UN-METERED SUPPLY TO THE DEPARTMENTAL EMPLOYEES AND PENSIONERS. ADMITTEDLY THE RATES OF CHARGES FOR SUPPLY OF ELECTRICITY TO DEPARTMENTAL EMPLOYEES AND PENSIONERS ARE LESSER THAN THE ORDINARY CONSUMERS. THE REASON FOR DOING SO HAS BEEN STATED THAT THE ASSESSEE-COMPANY HAS TO INCUR MINIMAL EXPENDITURE IN SUPPLYING ELECTRICITY AND RECOVERY OF ELECTRICITY CHARGES. MOREOVER, THE ASSESSEE-COMPANY HAS NO CONTROL OVER THE RATES OF CHARGES, AS IT WAS FIXED BY THE UPERC. IN THAT SITUATION WHERE THE ASSESSEE-COMPANY HAS NO CONTROL IN GRANTING REBATE TO ITS EMPLOYEES IN CONSUMPTION OF ELECTRICITY, THE REBATE GIVEN TO THE EMPLOYEES CANNOT BE CALLED TO BE PERQUISITE IN THE HANDS OF THE EMPLOYEES AND THE ASSESSEE-COMPANY CANNOT BE HELD RESPONSIBLE FOR DEDUCTION OF TDS ON THE PERQUISITE AVAILED BY THE EMPLOYEES. 8. AS WAY BACK IN 2005, IT HAS BEEN CLARIFIED BY THE HON'BLE HIGH COURT OF UTTARANCHAL IN THE CASE OF CIT VS. CHIEF OFFICER, STATE BANK OF INDIA (SUPRA) THAT WHERE THE ASSESSEE-BANK HAS PROVIDED LEASED ACCOMMODATION TO SOME OF ITS EMPLOYEES AND CHARGED FROM THEM STANDARD RENT FIXED FOR EACH TYPE OF ACCOMMODATION AND EMPLOYEES SIMILARLY SITUATED IN BANK ALSO MADE PAYMENT OF RENT IN SAME MANNER AND TO SAME EXTENT, IT COULD BE SAID THAT NO CONCESSION WAS ENJOYED BY ANY EMPLOYEES IN MATTER OF RENT WITHIN THE MEANING OF SECTION 17. ACCORDINGLY IT WAS HELD THAT NO PERQUISITE VALUE COULD BE ADDED IN THE HANDS OF THE ASSESSEE. THEREFORE, NO INTEREST WOULD BE CHARGED UNDER SECTION 201/201(1A) OF THE ACT FROM THE ASSESSEE ON ACCOUNT OF LESSER DEDUCTION OF TAX. 9. IN THE CASE OF BHARAT HEAVY ELECTRICALS LTD. . CIT (SUPRA), THE HON'BLE ANDHRA PRADESH HIGH COURT HAS EXPRESSED SIMILAR VIEWS. IN THAT CASE THE EMPLOYEES WERE IN RECEIPT OF INTEREST SUBSIDY WHICH WAS EXCLUDED FROM :- 13 -: RESPECTIVE SALARY RECEIPT FOR PURPOSE OF COMPUTING TAX DEDUCTIBLE FROM THEIR SALARIES. THE ASSESSING OFFICER TREATED INTEREST SUBSIDY AS SALARY INCOME LIABLE TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 192 OF THE ACT AND SINCE EMPLOYER HAD FAILED TO DO SO, HE HELD THE COMPANY AS AN ASSESSEE-IN- DEFAULT IN TERMS OF SECTION 201(1) OF THE ACT. THEIR LORDSHIPS OF THE HIGH COURT HAVE HELD THAT SINCE THERE IS NO LEGAL OBLIGATION ON EMPLOYER TO DEDUCT TAX AT SOURCE FROM INTEREST SUBSIDY AS IT CANNOT BE TREATED AS A PERQUISITE WITHIN THE MEANING OF SECTION 17(1)(IV) OF THE ACT. 10. IN THE CASE OF CIT VS. RELIANCE INDUSTRIES LTD (SUPRA), THE HON'BLE GUJARAT HIGH COURT HAS ALSO EXPRESSED THE SAME VIEW AS IN THAT CASE THE ASSESSEE-COMPANY HAD DISTRIBUTED FREE FOOD/MEAL COUPONS TO ITS EMPLOYEES FOR PURCHASE OF MEALS ONLY AT SPECIFIED EATING POINTS AND SUCH COUPONS WERE NOT TRANSFERABLE AND VALUE OF EACH COUPON DID NOT EXCEED MONETARY LIMIT PROVIDED BY RULE 3()(III). MERELY BECAUSE SOME EMPLOYEES HAD MISUSED SAID FACILITY BY USING COUPONS FOR OTHER PURPOSES, ASSESSEE- COMPANY COULD NOT BE TREATED TO BE IN DEFAULT FOR NON-COMPLIANCE WITH REQUIREMENT OF DEDUCTING TAX AT SOURCE UNDER SECTION 192 OF THE ACT. 11. IN THE CASE OF P.V. RAJAGOPAL AND OTHERS VS. UNION OF INDIA AND OTHERS (SUPRA), THE HON'BLE ANDHRA PRADESH HIGH COURT HAVE ALSO EXPRESSED THE SAME VIEW BY HOLDING THAT INTEREST SUBSIDY IS NOT PART OF SALARY. THEREFORE, TAX NEED NOT TO BE DEDUCTED IN RESPECT OF SUCH SUBSIDY. 12. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS, WE ARE OF THE CONSIDERED VIEW THAT WHATEVER RATES OF ELECTRICITY CHARGES ARE FIXED, THEY WERE FIXED BY THE UPERC AND THE ASSESSEE HAS NO CONTROL THEREON. THE REASONS FOR CHARGING LESSER RATE OF ELECTRICITY WERE ALSO EXPLAINED. THEREFORE, UNDER THESE CIRCUMSTANCES, THE ASSESSEE CANNOT BE HELD TO BE IN DEFAULT FOR NON-DEDUCTION OF TDS ON THE VALUE OF PERQUISITES AS ALLEGED TO BE AVAILED BY THE EMPLOYEES ON ACCOUNT OF LESSER RATE OF ELECTRICITY CHARGES. :- 14 -: WE HAVE CAREFULLY EXAMINED THE ORDER OF THE LD. CIT(A) AND WE FIND THAT THE LD. CIT(A) HAS ADJUDICATED THE ISSUE IN THE LIGHT OF VARIUS JUDICIAL PRONOUNCEMENTS AND SINCE NO SPECIFIC DEFECT HAS BEEN POINTED OUT BY THE LD. D.R. AND WE FIND NO INFIRMITY THEREIN, WE CONFIRM THE SAME. 13. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12 TH NOVEMBER, 2014 JJ: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR