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2014 (11) TMI 478
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....ciate the following:- (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 va....
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.... 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 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 depa....
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....tiplied 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:- 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 and parameters adopted to determine the perquisites is reproduced below:- 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 vest....
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.... per scheduled rate of LMV-10 to its employee, two options have been provided to its employees - 1st metered and 2nd 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 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 withou....
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....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....
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....leted." 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 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 R....
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....aning 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 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-indefault 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 a....