2011 (7) TMI 569

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....d by the Income-tax Appellate Tribunal, Delhi Bench "H", New Delhi (hereinafter referred to as "the Tribunal") in ITA No. 2384/D/2006 and cross-objection No. 283 (Del.)/2006, relating to the assessment year 2003-04. 3. In appeal Nos. 662, 663 and 753 of 2008 filed by the revenue, the following substantial question of law has been raised:- "Whether on the facts and circumstances of the case, the Hon'ble ITAT has erred in providing a different method of calculating the perquisite when the perquisite value calculated by the assessee was not disputed by the Assessing Officer and when the only grievance of the assessee against the order of ITO was regarding reduction of Rs. 1,000 P.M. from the perquisite value claimed by the assessee?" 4. The substantial questions of law as claimed by the assessee in appeal Nos. 835, 836 and 837 are as under:-  (1)  Whether ITAT was justified in the eyes of law in disallowing the benefit to the assessee, which has been provided to him under Rule 3 (5) of Income-tax Rules, 1962?  (2)  Whether ITAT was correct in law in passing the impugned judgment, after misinterpreting the provisions of law provided under Rule 3(5) of Income-ta....

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..... 2,97,606 plus Rs. 95,980 as interest). Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) [in short "the CIT(A)"]. The CIT(A) vide order dated 26-4-2006 made the average monthly cost of education per student at Rs. 1553.23 by taking into account the total expenditure claimed by the assessee in P&L account at Rs. 6,33,90,432.30 and dividing it by number of students, i.e. 3401. The CIT(A) directed the Assessing Officer to adopt the said value for working out short deduction of tax and thereafter charge interest under section 201(1A) of the Act. Against the order of the CIT(A), the department filed an appeal whereas the assessee filed cross-objections. The Tribunal vide order dated 25-6-2007 held that proviso to Rule 3(5) of the Income-tax Rules, 1962 (in short the "1962 Rules") was not applicable. The Tribunal further held that while computing total cost both direct and indirect expenses have to be taken into account to work out the cost per child. As the cost computed by the CIT(A) was different from the cost or perquisite value declared by the assessee to the Assessing Officer, the liberty was given to the assessee to point out any err....

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....bsp;  4.  ITO v. Gujarat Narmada Valley Fertilizers Co. Ltd. [2001] 247 ITR 305/[2000] 113 Taxman 586 (Guj.). 10. We have given our thoughtful consideration to the respective submissions of learned counsel for the parties and do not find any merit in the contention of learned counsel for the assessee. 11. It would be expedient to refer to Rule 3(5) of the 1962 Rules which reads thus:- "5. The value of benefit to the employee resulting from the provision of free or concessional educational facilities for any member of his household shall be determined as the sum equal to the amount of expenditure incurred by the employer in that behalf or where the educational institution is itself maintained and owned by the employer or where free educational facilities for such member of employees' household are allowed in any other educational institution by reason of his being in employment of that employer, the value of the perquisite to the employee shall be determined with reference to the cost of such education in a similar institution in or near the locality. Where any amount is paid or recovered from the employee on that account, the value of benefit shall be reduced by the am....

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.... exceeds Rs. 1000per month then the amount of Rs. 1000 per month has to be reduced from the value of such perquisite. Thus, the value of the benefit of free education to the wards of the employees shall be quantified as the value of the perquisite in the hands of the employer without any reduction of Rs. 1000 per month per child. 15. The Assessing Officer while adjudicating the issue against the assessee had specifically held that the tuition fee in the case of the students of the assessee school was more than Rs. 1000 per month as the assessee had deducted tax at source from the salary of the employees including valuation of perquisite after reducing Rs. 12000per annum per child. Once the value of the perquisite exceeded Rs. 1000 per mensem, Rule 3(5) of 1962 Rules applied and proviso thereto had no applicability. 16. Adverting to the judgment of Delhi High Court in Delhi Public School's case (supra) on which strong reliance has been placed, in that the conclusion on facts was that the value of perquisite of free education to the employee was Rs. 902.27 per child per month which was less than Rs. 1000. The proviso to Rule 3(5) of 1962 Rules was, thus, fully applicable. The issue....