AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2011 (4) TMI 880
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....of verification of ARTDS, the Assessing Officer noted that valuation of perquisites u/s 17(2) was not done and no tax was deducted at source on the amount of value of perquisites provided to the employees. In order to bring perquisites to the TDS purview, a survey action was carried out during which it was observed that the assessee had not deducted tax at source in respect of perquisites provided to the employees. On being questioned by the Assessing Officer, it was submitted that in view of the Chennai and Mumbai High Court's stay order, valuation of perquisites provided to the employees were valued at Rs. Nil and hence, no tax was deducted at source. On going through the order, the Assessing Officer noted that the petition was filed against the notification issued by CBDT vide SO No.940(E) dated 25.9.2001 amending provisions of section 17(2) of the I T Act, 1961 and also Rule 3 of the I T Rules, 1962. The Hon'ble High Court has granted interim injunction restraining the petitioner i.e. ONGC from effecting any recovery from the salary of the members of the petitioners. Taking shelter of the Court's order, the assessee has not deducted tax at source on the perquisites. The Assessi....
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....new Rules. Further, copy of the order of the Hon'ble Madras High Court is dated 1.3.2002. Similarly, order of the Hon'ble Bombay High Court is dated 27.3.2002 granting injunction. He noted that the assessee in the instant case, being at Panvel, is covered by the decision of the Hon'ble Mumbai High Court dated 27.3.2002. Accounting period of the assessee is from 1.4.2001 to 31.3.2002. The Rule 3 was notified on 25.9.2001 and there was no injunction order of the Hon'ble Bombay High Court on that date and injunction of Bombay High Court is dated is 27.3.2002. Since the salary pertaining to FY 2001-02 were already disbursed before the operation of injunction order and since the assessee has not deducted TDS in spite of clear cut wording of Rule 3 of IT Rules, 1962, therefore, in the absence of any stay order or injunction by the Hon'ble Bombay High Court, the assessee was duty bound to deduct the TDS on the value of perquisite. Since the assessee has failed to deduct the TDS; therefore, the assessee is 'an assessee' in default' as per provisions of sec. 201(1) of the I T Act. He accordingly, upheld the order of the Assessing Officer in levying demand of Rs. 28,05,580 u/s 201(1) and int....
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....ployer in favour of an employee in the matter of rent respecting accommodation. Thus, whereas 'charging provision' is found in the Act of Parliament [s. 17(2)(ii)], 'machinery component' is in the subordinate legislation (r. 3). The latter will apply only after liability is created under the former. Unless the liability arises under s. 17(2)(ii) of the Act, r. 3 has no application and the method of valuation for calculating concessional benefits cannot be resorted to. 5.5 Referring to page 103 of the paper book, he submitted that the Hon'ble Bombay High Court vide writ petition no.925 of 2002 in the case of Petroleum Employees Union and others vs Union of India order dated 27.3.2002 had granted interim relief. Referring to page 105 of the paper book, he submitted that vide order dated 6.3.2002 the Hon'ble High Court had granted interim stay on the operation of the provisions of sec. 17(2)(vi) of the Act; therefore, there is no doubt about the bonafide of the assessee in not deducting tax at source on account of such perquisites. 5.6 Referring to the decision of the jurisdictional High Court in the case of CIT vs Nicholas Piramal India Ltd reported in 299 ITR 356 (Bo....
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....owance u/s 10(5). Nor is there any circular of the CBDT requiring the employer u/s 192 to collect and examine the evidence supporting the declaration submitted by the employee. Since in the instant case, the employer has acted on the basis of declaration given by the employees; therefore, there was no obligation on the part of the employer to deduct the tax at sources. 5.10 The ld counsel for the assessee filed a copy of the order of the Vishakhaptnam Bench of the Tribunal in the case of ONGC, Rajahmundry vs ITO vide ITA No. 703/Vsp/2004 order dated 31.10.2008 for Assessment Year 2003-04 and submitted that under identical circumstances the Tribunal had held that the assessee is not in default and cannot be treated as an assessee in default. 5.11 Referring to the decision of the Nagpur Bench of the jurisdictional High Court in the case of CIT (TDS) vs Western Coalfields Ltd vide ITA No.93 of 2008 (copy filed) he submitted that the Hon'ble High Court has analysed the decision of Hon'ble Supreme Court in the case of Arun Kumar (supra) and has held that even after the substitution of Rule 3 with effect from 1.4.2001, in the absence of any specific provision under the Ac....
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....bay High Court, the assessee was duty bound to deduct tax on the value of the perquisite. It is the submission of the ld counsel for the assessee that due to prevailing uncertainty, the assessee had obtained legal opinion and in a bonafide manner made a fair estimate of tax to be deducted and accordingly didn't deduct the tax at source on that portion of the allowance which according to it is exempt. His intention was not malafide and therefore, the assessee should not be treated as an assessee-in default. 8. We find merit in the above submission of the ld counsel for the assessee. Admittedly, the employees' union filed a writ petition before the jurisdictional High Court in the year 1996. There is also no dispute to the fact that there was amendment to the provisions of sec. 17(2)(vi) by Finance Act 2001; according to which new Rule 3 was introduced in the Income Tax Rules through notification no. SO No.940(E) dated 25.9.2001 w.e.f 1.4.2001. There is also no dispute to the fact that as per the new Rule 3, the perquisite was to be valued on the basis of actual cost to the employer. There is also no dispute to the fact that against insertion of the new rule 3, various employ....
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.... of perquisites/amenities is that interim stay was granted by Madras High Court and not by Andhra Pradesh High Court and therefore, the assessee ought to have deducted tax u/s 192 of the Act. Admittedly, the assessee-corporation was one of the Respondents before the Madras High Court and therefore, the interim stay granted by the Madras High Court is binding on the assessee- corporation wherever they have branch offices. Therefore, the lower authorities are not justified in saying that the interim stay is granted by the Madras High Court only and not by the A.P High Court. In our opinion, in view of the interim stay granted by the Madras High Court, assessee was not expected to deduct any tax during period of operation of the stay, i.e. from 8.3.2002 to 30.4.2003. So, during that period, assessee cannot be treated as an assessee-in default. 14. The next question arising for consideration is whether it is duty on the assessee to deduct tax u/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 carefully gone through the provisions of sec. 192 of the act. S. 192(1) makes it obligatory for any person responsibl....
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....gh Court. Therefore, the assessee has fairly and honestly estimated the income. It is not the case of the revenue that the estimation of the assessee is not fair or honest. When the assessee estimated the income fairly and honestly in compliance with the order of the Madras High Court, we cannot say that the assessee has committed a default in deducting tax. In our opinion, the assessee has estimated the income honestly and fairly and also complied with the interim order of the Madras High Court. So, the assessee cannot be treated as an assessee in default for the assessment year 2003-04. 16. Accordingly, we set aside the orders of the lower authorities and hold that the assessee is not in default for the assessment year under consideration. 10. We find Nagar Bench of jurisdictional High Court in the case of Western Coalfields Ld (supra) at paras 10 and 11 has observed as under: 10. According to Shri Parchure, ld counsel for the revenue, the determination of 'concession in the matter of rent' is inbuilt in Rule 3 of the Income Tax Rules, 1962 as introduced with effect from 1.4.2001. Since validity of Rule 3 introduced with effect from 1.4.2001 has been uphel....