AI Drafter 
TaxTMI 
TaxTMI 
2015 (2) TMI 1272
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.... not deducted tax at source on the salary paid to the employees. The main grievance is that while determining the income under the head 'salary', the assessee had valued perquisites in respect of residential accommodation provided to the employees by not treating the employees as falling within Sl.No.1 of clause (1) of Table 1 of Rule 3(1) of the I.T. Rules. 4. The assessee is a premier research institution engaged in imparting higher learning and carrying on advanced research of science and technology. The employees of the Assessee are allotted unfurnished quarters. The value of the perquisite in the form of providing accommodation to its employees had to be computed by the Assessee. After such valuation the Assessee has to include the value of perquisite in the income under the head salaries and deduct tax at source as employer. While determining the value of perquisites the Assessee applied Sl.No.1 of Table-1 of Rule 3 of the Income Tax Rules, 1962 (Rules). According to the Revenue Sl.No.1 of Table-1 of Rule 3 of the Rules is not applicable to the Assessee as they cannot be considered to be employees either holding office or post in connection with the affairs of the ....
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.... the employee. The value of perquisites as determined under column (3) and increased by 10% per annum of the cost of furniture (including television sets, refrigerators, other household appliances, airconditioning plant or equipment or other similar appliances or gadgets) or if such furniture is hired from a third party, by 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. The value of perquisite as determined under column (3) and increased by 10% per annum of the cost of furniture (including television sets, radio sets, refrigerators, other household appliances, airconditioning plant or equipment or other similar appliances or gadgets) or if such furniture is hired from a third party, by 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. (3) Where the accommodation is provided by the employer specified in serial number (1) or (2) in a hotel (except where the employee is provided such accommodation for a period not exceeding in aggregate fifteen days on his transfer from one place to anothe....
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....der the head salaries paid to its employees. The ITO(TDS) therefore initiated proceedings u/s.201(1) of the Act and treated the Assessee as Assessee in default u/s.201(1) of the Act in respect of tax short deducted at source and also levied interest thereon u/s.201(1A) of the Act. The CIT(A) confirmed the action of the ITO(TDS). Hence these appeals by the Assessee before the Tribunal. 6. According to the AO, the perquisite value of accommodation provided to employees working in autonomous bodies/undertakings under the control of State/Central Government and semi Government organizations, is required to be computed in accordance with the amended provisions of Rule-3 of IT Rules, 1962, consequent to amendment of Rule- 3 w.e.f. 01-04-2001. Circular issued by the Central Board of Direct Taxes, New Delhi vide No.13/2002 dated 23-12-2002 gives the background of the Amendment which is as follows: "Extraction from Circular No.l13/2002 dated 23-12-2002 The Rules for valuation of perquisite are as under: 1. Accommodation- Under the Old Rule-3 for purpose of valuation of the perquisite of unfurnished accommodation all employees were divided into three categories: (i) Cent....
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....to the extent already decided by the Tribunal in the aforesaid case cannot be accepted. 12. The ld. counsel for the assessee, however, submitted that in the appeal before the CIT(A), a specific ground was raised viz., ground No.2.4 wherein the assessee had specifically stated that the estimate of income under the head 'salaries' of employees by the assessee was bona fide and that under the provisions of section 192 of the Act which casts obligation on the assessee to deduct tax at source while making payment of salary to the employees, is only to make a bona fide estimate of the income under the head 'salaries'. 13. The ld. counsel for the assessee further pointed out that though Rule 3 of the Rules has been amended from 1.4.2001, the assessee has been entertaining a bona fide belief that it was Central Govt. and therefore perquisites will have to be valued in accordance with Sl.No.1 of the Table under Rule 3 of the I.T. Rules. It was also submitted by him that even in this appeal, the assessee believed that it was a Central Govt. as the entire control and rules & regulations applicable to the employees of Central Govt. being applicable to the assessee also, w....
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....year. The case of the AO is that LTC and Medical reimbursement should be paid at the time the expenditure is incurred or after the expenditure is incurred by way of reimbursement and not at an earlier point of time. If it is so paid, then, even though the payment would not form part of taxable salary of an employee, the employer has to deduct tax at source treating it as part of salary, is contrary to the provisions of Sec.192(3) of the Act and cannot be sustained. The reliance placed by the AO on the expression "actually incurred" found in Sec.10(5) of the Act and proviso (iv) to Sec.17(2) of the Act, in our view cannot be sustained. In any event, the interpretation of the word "actually paid" is not relevant while ascertaining the quantum of tax that has to be deducted at source u/s.192 of the Act. As far as the Assessee is concerned, his obligation is only to make an "estimate" of the income under the head "salaries" and such estimate has to be a bonafide estimate. 27. The primary liability of the payee to pay tax remains. Section 191 confirms this. In a situation of honest difference of opinion, it is not the deductor that is to be proceeded against but the payees of t....