TaxTMI 
TaxTMI 
2008 (7) TMI 475
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....bsence of any perquisite? (iii) Did the assessee fail to deduct tax under s. 192 of the Act? (iv) Would the assessee be an 'assessee-in-default' under s. 201 because of Explns. 1 to 4 in s. 17(2) of the Act inserted by Finance Act, 2007 with retrospective effect? (v) Could the assessee be held liable for interest under s. 201 (1A) of the Act? 3. In the cases of various appeals of Canara Bank the facts are that assessee is a public sector banking institution. Besides payment of salary it has provided been remunerating its employees according to scale laid down by the Central Government, residential accommodation was provided to officers with a view to enabling them to function efficiently. In respect of such accommodation certain rent was charged and recovered from the employees concerned as specified in the service regulations, which are approved by the Central Government and placed before the Parliament. The accommodation provided and the rent charged was similar to an officer belonging to a particular scale and at no point of time the officers were provided with rent free accommodation. 4. The brief facts in the cases of Western Coal Field are that assessee-compan....
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....ind of accommodation available in the town even if it happens to be nearby. The regular residences in a town have their own environment which cannot be compared with a tenement provided by the employer for locating the employees, because the employee has no choice in accepting that accommodation. The Department could not coerce the employer to deduct tax at source of an amount which was in dispute as perquisite by the employer. The accommodation in assessee's case was also similar.-(i) it being an industry which produces coal and supplies to a large number of customers which comprises mainly of Government Industries; (ii) the accommodations are constructed at sites/offices which are nearby work locations enabling the work force including executives to be near the site/office at any point of time to attend any emergencies; (iii) the sites being in operation for 24 hours in a day and nearly all days in a month (one day in a week for maintenance works and extra production shifts), hence, it is the need of the company to ensure that all employees are located at a place for the smooth functioning and to ensure necessary outputs. 7. It also relied upon the Calcutta High Court decisi....
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....y the employees. He, therefore held that now, there is no scope for determination of fair rental value, nor the yardstick of the rent determined in accordance with the rules framed by the Government, nor by taking recourse to standard rent. Applying the principle of harmonious construction, the undisputable position, according to him, is that the Act should be read together with the rules. One cannot read s. 17(2) alone without taking the corresponding r. 3 into consideration. He observed that this "value of any concession in the matter of rent" finds judicial support from the decision of the Calcutta High Court in the case of Coal Mines Officers' Association of India & Ors. vs. Union of India & Ors. (2004) 187 CTR (Cal) 348 : (2004) 266 ITR 429 (Cal). 10. Aggrieved by the order of the AO, assessee preferred first appeal to the CIT(A) who upheld order of the AO by following observations: "2.23 In view of the above decision it clearly emerges that the perquisites in the nature of 'concession of rent' shall be determined as per the newly inserted Explanation read with Expln. 4 in respect of asst. yr. 2006-07 and onwards. As far as the determination of perquisites in re....
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....or any State Government and the accommodation is owned by the employer. In the appellant's case, the value of the unfurnished accommodation determined at the 'specified rate' as per Expln. 4 relevant for asst. yr. 2006-07 and as per r. 3 for asst. yr. 2005-06 has been found to 'exceed' the rent/fee recovered from employees and it clearly constitutes 'concession in the matter of rent' to be hit by the provision of s. 17(2)(ii) of the Act. 2.25 I may also mention here that the contention of the appellant that before applying r. 3, the Revenue has to prove that there was a concession provided to the employees does not hold good after the retrospective amendment to the s. 17(2) by the Finance Act, 2007, As discussed in the preceding para, r. 3 of IT Rules as existing prior to 1st April, 2001, the value of concession was explicit and had to be worked out on basis of fair rental values. While the value of concession in the new r. 3 w.e.f. 1st April, 2001 has been intrinsically built in the rule itself and is automatic. In view of the Supreme Court decision in the case of Arun Kumar & Ors. vs. Union of India (2006) 205 CTR (SC) 193 : (2006) 286 ITR 89 (SC), E....
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....plicit in the r. 3 itself whereas in the new r. 3, the value of concession has been intrinsically built in the rule. It is suffice to state here that the Explanation introduced vide the Finance Act, 2007 is only meant to clarify what has inherently been in the r. 3. If it was not the case, then the Government would have introduced a new section or rule to lay down its guiding principle regarding treatment of said perquisite. An 'Explanation' is not meant to lay down any new guidelines and it, therefore, cannot partake of the character of a full fledged section or rule. I am therefore, of the view that as per the r. 3 as existing since 1st April, 2001, the appellant was required to carry out the valuation of perquisites relating to the accommodation, add the perquisite values to the respective salaries of the employees concerned and thereby deduct tax at source under s. 192. The appellant, however, failed to carry out the valuation of these perquisites and to add to the perquisites value to the respective salaries of the employees concerned; and thereby no tax was deducted at source under s. 192. As the appellant to deduct tax at source which was otherwise deductible, the ap....
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.... effect from the same date. The Court, therefore, gave direction to the respondents not to treat the interest subsidy as a perquisite while deducting the tax at source in respect of income under the head 'Salaries' under s. 192 of the IT Act. The ratio of the above case cited by the appellant is not applicable in the present case. It is a case where an amendment issued was subsequently deleted with effect from the date of its original application. It is worth reiterating here that in the present case the liability of tax was there from day one and the Explanation vide the Finance Act, 2007 is only meant to clarify what has inherently in the r. 3. 2.28 Finally I would like to take up the argument of the appellant that it cannot be treated in default since it was refrained to give' effect to r. 3 by the stay granted by the Hon'ble Calcutta High Court in the case of Coal Mines Officers' Association of India & Ors. vs. Union of India & Ors. However, it is noticed that the said stay stood nullified by the judgment of the decision Bench of the Calcutta High Court in the said case [(2004) 187 CTR (Cal) 348 : (2004) 266 ITR 429 (Cal)] wherein it upheld the constitutio....
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....foresaid perquisites as per relevant provisions of s. 192 of the Act. Considering the fact that the appellant had failed to deduct TDS on such perquisites in the form of 'concession of rent' the appellant is held to be in default for levy of interest as per provisions of s. 201 (1A) of the Act. The AO was therefore justified in determining the TDS liability under s. 201(1) and corresponding interest under s. 201(1A) in respect of asst. yr. 2005-06 in the cases of all the appellants and hence the orders passed by him are upheld. Similarly, the chargeability of additional tax under s. 201(1) and interest under s. 201(1A) in respect of all appellants for asst. yr. 2006-07 also stand confirmed. The claim of the appellants that the computation of the value of perquisites determined by the AO for the asst. yr. 2006-07 requires modification by applying the specified rate given in the Expln. 4 has been considered. The AO is directed to examine the claim of the appellant and recompute the value of perquisites after due verification of population in the specified areas concerning each appeal and application of the 'specified rate' as provided in Expln. 4 in respect of asst. y....
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....tes Ltd. (2000) 160 CTR (SC) 8 : (2000) 243 ITR 48 (SC) wherein it was observed that it might be true that, income by way of cash compensatory, support became taxable retrospectively w.e.f. 1st April, 1967, but it was by amendment of s. 28 by the Finance Act, 1990 which amendment could not have been known before the Finance Act came into force. Additional tax was levied as the assessee did not in his return show the income by way of cash compensatory support. After the assessee had filed his return of income, which was correct as per law on the date of filing of the return, it was thereafter that the cash compensatory support also came within the sway of s. 28. The Court held that additional tax has imprint of penalty and therefore, the Revenue cannot be heard saying that levy of additional tax is automatic under s. 143(1A). In the present case also liability to tax on concessional value of perquisite was because of retrospective amendment deeming it as perquisite. 14. Reference was also made to Star India (P) Ltd. vs. CCE (20G6) 201 CTR (SC) 63 : (2006) 280 ITR 321 (SC) which held that the liability to pay interest would arise only on default and was really in the nature of, a qu....
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....retrospective amendment in s. 17(2) of the Act brought into by Finance Act, 2007. 17. It is submitted that tax calculations for the said year have been completed and income-tax to be deducted was effected from the salary of the employees in that year itself and the said amendment has been brought into by Finance Act, 2007, assent of the President received on 11th May, 2007. Thus, the order of the AO under appeal was on the basis of unamended provision s. 17(2)(ii) of the Act and is to be examined with reference to old provisions read with the principles laid down by the Supreme Court in the case of Arun Kumar & Ors. and therefore r. 3 cannot be applied in cases where there is no concession in the matter of rent. Before applying r. 3, the Revenue has to prove that there, was a concession as such provided to the employees. The AO has not proved that the assessee had given concession to the employees by way of providing accommodation. 18. It is submitted that the assessee cannot be treated as "assessee-in-default" and no interest can be charged. The assessee as per the provisions of law as it stood prior to its amendment by the Finance Act, 2007 and as per the principles laid down b....
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....aw since the applicability of s. 17(2)(ii) of the Act in the present case was highly debatable. 22. It is submitted that assessee has been refrained to give effect to r. 3 by the Hon'ble Calcutta High Court as Coal Mines Officers' Association of India & Ors. has filed writ petition before the Division Bench of Calcutta High Court on the issue of whether providing accommodation to employees will be treated as perquisite in view of provision of s. 17(ii) of the Act. The Coal Mines Officers' Association of India & Ors. had made assessee as a respondent and also the Chief CIT, Nagpur as its respondent. The Division Bench in its interim order had stayed all the respondents to give effect to the r. 3 until further order of Division Bench. In view of this decision of the High Court. the assessee has been refrained from deducting any tax and if tax is deducted at source by the assessee by treating the difference between the actual rent received and specified percentage of salary, the same would tantamount to contempt of Court. 23. Learned counsel for the assessee in the case of Western Coalfields contended that neither the AO nor the CIT(A) in the order under appeal have cons....
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....ecided against assessee. Referring to the Supreme Court decision in Arun Kumar & Ors. he submitted that the constitutional validity of the r. 3 as amended by CBDT was upheld, and therefore, as per the said amended rule, there was concession in the matter of rent and a perquisite, and consequently, the assessee was under an obligation to deduct tax thereon. He also referred to the decision of Karnataka High Court in the case of CIT vs. Rajatha Jewellers (2006) 202 CTR (Kar) 97, to support his case. He further referred to amendment made by Finance Act, 2007 in s. 17(2) with retrospective effect, under which, according to him, perquisite is to be computed and assessee became liable to deduct tax at source under s. 192 and having failed to do so, the assessee was an assessee-in-default subjected to provisions of s. 201 (1) and also to charge of interest for the default under s. 201 (1A) of the Act. 25. Though the AO has proceeded to value perquisite as per the r. 3 r/w s. 17(2) as it stood at that time without the existence of the four Explanations added thereto by the Finance Act, 2007 with retrospective effect from 1st April, 2002 or 1st April, 2006, the learned Departmental Represe....
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....nce with the following clauses, namely: (a) The value of the rent free residential accommodation shall be determined on the basis provided hereunder, namely: (i) Where the accommodation is provided- (A) by Government to a person holding an office or post in connection with the affairs of the Union or of a State: (B) by body or undertaking under the control of Government to any officer of Government whose services have been lent to that body or undertaking (the accommodation itself having been allotted to it by the Government), an amount equal to (1) if the accommodation is unfurnished, the rent which has been or would have been determined as payable by such person or officer in accordance with the rules framed by Government for allotment of residence to its officers." (2) ......... (ii) where the accommodation is provided........ "(A) by the RBI, to any person employed by it: (B) by a corporation established by a Central, State or Provincial Act, or by a company in which all the shares held (whether singly or taken together) by the Government or RBI or a corporation owned by that bank, to any person employed by it: (BB) by a company not being a company referred ....
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....he accommodation (1) (2) (3) (4) (1) Where the accommodation is provided by Union or State Government to their employees either holding office or post in connection with the affairs of Union or State or serving with any body or undertaking under the control of such Government on deputation. Licence fee determined by Union or State Government in respect of accommodation in accordance with the rules framed by that Government as reduced by the rent actually paid by the employee. The value of perquisite as determined under column (3) and increased by 10 per cent. per annum of the cost of furniture (including television sets, radio sets, refrigerators, other household appliances, air conditioning plant or equipment) or if such furniture is hired from a third party, the actual hire charges payable for the same as reduced by any charges paid or payable for the same by the employee during the previous year. (2) (2) Where the accommodation is provided by any other employer and The value of perquisite as determined under column (3) and increased by 10 per cent. per annum of the cost of furniture (including television sets, radio sets, refrigerators, other household a....
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....cent of salary in cities having population exceeding four lakhs as per 1991 census and seven and one-half per cent of salary in other cities, in respect of the period during which the said accommodation was occupied by the assessee during the previous year, exceeds the rent recoverable from, or payable by, the assessee; (ii) the accommodation is taken on lease or rent by the employer, the value of the accommodation being the actual amount of lease rental paid or payable by the employer or ten per cent of salary, whichever is lower, in respect of the period during which the said accommodation was occupied by the assessee during the previous year, exceeds the rent recoverable from, or payable by, the assessee; (b) to (d) ................ Explanation 2 ................ Explanation 3: defines salary for this purpose and it excludes by cl. (d) the value of the perquisite specified in this clause." 32. Clause (a) of Expln. 1 was to read as substituted w.e.f. 1st April, 2006 as under: "(a) in a case where an unfurnished accommodation is provided by any employer other than the Central Government or any State Government, and- (i) the accommodation is owned by the employer, the ....
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....Bank of India (2006) 205 CTR (Uttaranchal) 340 : (2006) 285 ITR 321 (Uttaranchal), can usefully be referred to wherein it is held that when the employee has paid standard rent which had been fixed for all its employees and employees similarly situated and made payment of rent in the same manner and to the same extent, as others, the assessee cannot be said to have given concessions to its employees in the matter of rent. Uttaranchal High Court has followed, in this connection, decision of Calcutta High Court in the case of Indian Bank Officers' Association & Ors. vs. Indian Bank & Ors. and Madhya Pradesh High Court decision in Officers' Association, Bhilai Steel Plant vs. Union of India & Ors. wherein also it is held that if the rent of accommodation is fixed, irrespective of person who occupies it, the difference between 10 per cent of salary and the fixed rent paid cannot be said to be any perquisite, because it cannot be said that the officer was granted any concession in the matter of rent. 36. Calcutta High Court has similarly held in the case of Indian Bank Officers' Association & Ors. vs. Indian Bank & Ors. that the question of concession must be determined with....
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....e, the method that had been provided was the method for ascertaining the value of the rent free accommodation. The method of valuing the concession automatically followed. The present rule does not address exclusively to devise the method and basis of ascertaining the value of concession in the matter of rent; it also addresses to devise explicitly the method and basis of ascertaining the value of concession in the matter of rent. While, doing so however, it makes the value of concession explicit, which was implied in the previous rule. There is no scope for determination of fair rental value under new rule. The concept of fair rental value either on the basis of the normal rent or on the basis of the market rent available in the locality or on the basis of the municipal valuation has been done away with. 39. In the case of BHEL Executives/Officers Association & Ors. vs. Dy. CIT (2004) 191 CTR (Mad) 478 : (2004) 269 ITR 390 (Mad), Madras High Court held that the notional rent is taken as ten per cent of the salary less rent actually paid by the employees in cities with population of more than four lakhs and 7.5 per cent the salary less the rent actually paid by the employees in ci....
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....be arbitrary or unreasonable and fixation of rent on the basis of population of city cannot be interfered with in exercise of power of judicial review. The said argument, therefore, has no substance and cannot be upheld." 42. The Supreme Court, however, considered the applicability of s. 17(2) and held that it can apply only when there is a concession in the matter of rent by observing in paras 70, 71 and 72 as under: "In our opinion, the fundamental question of applicability of s. 17(2) of the Act still remains. It cannot be gainsaid that s. 17(2) would apply only if there is a 'perquisite'. Indisputably, the definition of 'perquisite' is inclusive in nature and takes within its sweep several matters enumerated in cls. (i) to (vii). Sec. 17(2)(ii) declares that the value of any 'concession' in the matter of rent respecting any accommodation provided to the employee by his employer would be a 'perquisite'. Nevertheless it must be a 'concession' in the matter of rent respecting any accommodation provided by the employer to his employee." "The word 'concession' has neither been defined in the Act nor in the rules. According to the ....
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.... held: (i) that s. 17(2)(ii) declares that the value of any "concession" in the matter of rent respecting any accommodation provided to the employee by his employer would be "perquisite"; (ii) that before s. 17(2)(ii) can be' invoked or pressed into service and before calculation of concession as per r. 3 is made, the authority exercising power must come to a positive conclusion that it is a concession. 'Concession' is thus a foundational, fundamental or jurisdictional fact; (iii) that once the authority has jurisdiction in the matter on existence of 'jurisdictional fact', it can decide the 'fact in issue' or 'adjudicatory fact'. A wrong decision on 'fact on issue' or on 'adjudicatory fact' would not make the decision of the authority without jurisdiction or vulnerable provided essential or fundamental fact as to existence of jurisdiction is present; (iv) that r. 3 (providing manner of computation i.e., adjudicatory fact) is intra vires valid and not inconsistent with the Act, still it is open to the assessee to contend that there is no 'concession' (which is the jurisdictional fact) in the matter of accommodation provided....
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....f the Act. Only thereafter may the authority proceed to calculate the liability of the assessee under the Rules. In our considered opinion, therefore, in spite of the legal position that r. 3 is intra vires, valid and is not inconsistent with the provisions of the parent Act under s. 17(2)(ii) of the Act, it is still open to the assessee to contend that there is no 'concession' in the matter of accommodation provided by the employer to the employee and hence the case did not fall within the mischief of s. 17(2)(ii) of the Act." "There is yet another aspect of the matter which is important and having a bearing on the question. We have extracted s. 17(2)(ii) in the earlier part of the judgment. It does not contain any 'deeming clause' that once it is established that an employee is paying rent less than 10 per cent of his salary in cities having population of four lakhs or 7.5 per cent in other cities, it should be deemed to be a 'concession' within the meaning of the Act and such employee must be deemed to receive a 'concession' in the form of 'perquisite' in the payment of rent. An employer may provide residential accommodation to his emplo....
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.... 48. Sec. 17(2)(ii) as it stood prior to amendment in 2007 did not contain any 'deeming clause' to deem rent paid less than 10 per cent or 7.5 per cent as a concession or that the employees is deemed to have received that concession. An employer may provide residential accommodation to/his employees for several reasons. It is also possible that for making available staff quarters/colonies/accommodations, State Governments or Central Government may provide land to public sector undertakings/companies/ corporations at a concessional rate imposing appropriate conditions including the amount of rent, if any, to be recovered by the employer and in such circumstances as held by certain decisions that residential facility provided by the employer to the employee was not a "perquisite" within the meaning of income-tax laws. In such a case instead of concession, there would be compulsion. 49. As also held by the Supreme Court, in the absence of deeming the difference as perquisite, it is open to the assessee to contend that there was in fact no concession in the matter of rent, and that can only be on the yardstick of the case laws relied upon by the assessee, namely, the decisions....
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....ect from 1st April, 2002, and therefore, according to learned Departmental Representative, it would apply to all cases under consideration and the cases relied upon are of no help to the assessee. A retrospective amendment, has to be given full effect and it is to be assumed that an amended, provision was in force right from the date with effect from which retrospective effect is given. This is even by the appellate authority where the retrospective amendment was introduced during pendency of appeal. 52. As held in Rajatha Jewellers by Karnataka High, Court, a retrospective amendment is to be given effect to as it were there in existence on the date with effect from which it is effect to. We, therefore have to hold that perquisite value is to be worked out on the basis of the amended provision of s. 17(2) of the Act and the decisions referred to by the assessee may not have any precedent value in determining the value at perquisite of an employee that is value being the difference in the specified rate and the rent charged by the employer. 53. However, in our opinion, a retrospective amendment could be valid for levy of tax on the employee, but we do not find any force in the con....
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....reads as under: "(1) Any person deducting any sum in accordance with the foregoing provisions of this chapter, s. 194E, s. 194EE, s. 194F, s. 194G, s. 194H (s. 194-I, s. 194J and s. 194K, s. 194, s. 195, s. 196A, s. 196B, s. 196C and s. 196D shall pay within the prescribed time, the sum so deducted to the credit of the Central Government or as the Board directs. (2) Any person being an employer, referred to in sub-s. (1A) of s. 192 shall pay, within the prescribed time, the tax to the credit of the Central Government or as the Board directs. (3) Any person deducting any sum on or after the 1st April, 2005 in accordance with the foregoing provisions of this chapter or, as the case may be, any person being an employer referred to in sub-s. (1A) of s. 192 shall, after paying the tax deducted to the credit of the Central Government within the prescribed time, prepare quarterly statements for the period ending on the 30th June, the 30th September, the 31st December and the 31st March in each financial year and deliver or cause to be delivered to the prescribed IT authorities or the person authorised by such authority such statement in such form and verified in such manner and sett....
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....f the Government, on the same day; (b) in the case of deduction by or on behalf of persons other than those mentioned in cl. (a),- (i) in respect of sums deducted in accordance with the provisions of s. 193, s. 194A, s. 194C, s. 194D, s. 194E, s. 194G, s. 194H, s. 194-I, s. 194J, s. 195, s. 196A, s. 196B, s. 196C and s. 196D- (1) where the income by way of interest on securities referred to in s. 193 or the income by way of interest referred to in s. 194A or the sum referred to in s. 194C or the income by way of insurance commission referred to in s. 194D or the payment to non-resident sportsmen or sports associations referred to in s. 194E or the Income by way of commission, remuneration or prize on sale of lottery tickets referred to in s. 194G or the income by way of commission or brokerage referred to in s. 194H or the income by way of rent referred to in s. 194-I or the income by way of fees for professional or technical services referred to in s. 194J or the interest or any other sum referred to in s. 195 or the income of a foreign company referred to in sub-s. (2) of s. 196A or the income from units referred to in s. 196B or the income from foreign currency bonds or sh....
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....H, s. 194-I, 194J, 194K, 195, 196A, 196B, 196C and 196D shall pay the amount of tax so deducted to the credit of the Central Government by remitting it within the time prescribed in sub-r. (1) into any branch of the RBI or of the SBI or of any authorised bank accompanied by an income-tax challan, provided that where the deduction is made by or on behalf of Government the amount shall be credited within the time and in the manner aforesaid without the production of a challan." 58. On a perusal of these provisions it would be clear that the liability to deduct tax is there on the daters) when the salary is actually paid or wholly or partly at any time, at the option of the employer, if it were on a value of the perquisite not in the form of a monetary payment. But both are within a week or so immediately after the financial year of payment or grant of perquisite. 59. Therefore, if there was no perquisite at the time when the tax was to be deducted at source there would be no liability to deduct tax. If a perquisite value is assumed by the retrospective amendment after the period during which it was to be deducted, how can a deduction be made on a back date? The retrospective amendm....
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....od on the date of filing of the return would determine the liability. The assessee cannot be treated as assessee-in-default retrospectively and interest under s. 201(1A) cannot also be charged on a liability which came into existence by a retrospective amendment. The Supreme Court in the case of CIT vs. Hindustan Electro Graphites Ltd. may be referred to holding: "No additional tax would have been leviable on the cash compensatory support if the Finance Act, 1990 had not so provided even though retrospectively, assessee could not have suffered additional tax but for the Finance Act, 1990. After he had filed his return of income which was correct as per law on the date of filing of the return, it was thereafter that the cash compensatory support also came within the way of s. 28. When additional tax has imprint of penalty Revenue cannot be heard saying that levy of additional tax is automatic under s. 143(1A) of the Act. If additional tax could be levied in such circumstances, it would be punishing the assessee for no fault of his. That cannot ever be t he legislative intent. It shocks the very conscious if in the circumstances s. 143(1A) could be invoked to levy the additional ta....
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....the assessee was concerned, it could not have deducted tax, because under s. 192, it is required to be deducted when there was payment of the salary or when the salary and perquisite became due during the relevant previous year. It could also have been not paid because the year has already ended, and it would be impossible to deduct tax retrospectively. 67. It may be stated that retrospective amendment was to deem the difference in specified rent and rent charged as perquisite and not to deduct tax at source under s. 192. If that be so, there was a reasonable cause not to deduct tax at source, at the particular point of time, and to ask the assessee to bear responsibility for such liability with retrospective effect, cannot be justified. At the time of such payment, as per the law existing at that time, the assessee was not required to deduct the tax for accommodation provided to its employees as there was no concession and r. 3 had no applicability as also affirmed by the Supreme Court in the case of Arun Kumar & Ors. Thus there was no default on the part of the assessee to deduct tax while making payment of salary. Merely because the law has been amended with retrospective effec....
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.... assessee cannot be treated as "assessee-in-default" retrospectively and interest under s. 201(1A) cannot be charged on a liability which came into existence by a retrospective amendment. The assessee has all along acted in a bona fide manner and in accordance with the law which existed as on the date on which TDS was to be deducted. Further merely for the reason that the law has been changed retrospectively, the assessee cannot be treated in default for no fault of its own and cannot be charged with interest which is penal in nature. The Andhra Pradesh High Court in P.V. Rajagopal & Ors. vs. Union of India held that the Department could not coerce the employer to deduct tax at source on an amount which was in dispute as a perquisite by the employer. Even where there is a difference of opinion due to which tax has not been deducted, s. 201/201 (1A) cannot be invoked; it would apply with greater force where there is no perquisite on the date of deduction of TDS. Thus, even on this count, the order under appeal is bad in law, since the applicability of s. 17(2)(ii) of the Act in the present case was highly debatable and accordingly, the order passed by the AO treating the assessee-in....
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.... in fact existed, must inevitably have flown from or accompanied it, i.e., one has to assume that the difference was perquisite. The statute says that you must imagine a certain state of affairs (difference as being perquisite); it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of the state of affairs, that the rent charged was the standard or market rent and that there was no concession in the matter of rent. 74. It is implicit from the tenor and phraseology implied in s. 17(2), Expln. 1 with retrospective effect in substance, a legal fiction is created by which the difference in rent has been treated as the concession in the matter of rent and hence perquisite. To construe this legal fiction it will be proper and necessary to assume all those facts on which alone the fiction can operate, so, necessarily, all the provisions in the Act in respect of a perquisite will apply. As a consequence, the specified rate would have to be assumed as real rent of the accommodation and the difference over rent charged, a concession in the matter of rent and consequently, a benefit granted which is assumed, by nec....