MADHYA PRADESH POORVE KESHTRA VIDYUT VITRAN CO.LTD.,JABALPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2(1), JABALPUR

O R D E R

Per Sanjay Arora, AM:

Assessment year:2008-09 3 There is no interim order by the Hon’ble High Court admitting a question of law, or in exercise of its’ writ jurisdiction, on record to support the claim of the matter being subjudice. There is in fact no reference to any such order or injunction by the Hon’ble High Court in any pleading by the assessee at any stage, including the statement of facts forming part of the appeal memo (in Form 36). A perusal of the order by the Tribunal for AY 2006-07, as well as the assessees’ petition before the Hon’ble High Court following the Tribunal’s order for that year, though reveals that the employees of Madhya Pradesh State Electricity Board (MPSEB)(a Department of the State Government of Madhya Pradesh) had, through their Association, moved a writ petition before the Hon’ble jurisdictional High Court against MPSEB challenging rule 3 of the Income Tax Rules, 1962 (‘the Rules’ hereinafter), titled ‘Valuation of perquisites’ providing for valuation of benefit from supply of gas, electric energy or water, either free or at a concessional rate, by an employer to his employees for their household consumption. The Hon’ble High Court vide its’ order dated 19/7/2007 disposed the said matter, directing that all claims raised by the petitioner relating to perquisites be decided in light of the decision by the Apex Court in Arun Kumar & Ors. v. Union of India [2006] 286 ITR 89 (SC). The matter has thus been already disposed of by the Hon’ble Court and, in fact, in consonance with the law as clarified by the Apex Court. It was therefore obligatory on the part of the parties to have acted thereon. The assessee, a company ‘owned’ by the State Government, is an independent person, and not a part of the State. That is, was not a party to the lis, i.e., if the same be regarded as one. There is, as such, no such matter before the Hon’ble High Court in the assessee’s case and, rather, none which can be said to be sub-judice before it. The assessee is, in any case of the matter, bound by law, which is what the Hon’ble High Court has directed, and which is equally applicable to the assessee. Rather than taking shelter under Assessment year:2008-09 4 the plea of the matter being subjudice – which it is not, it, on the contrary, has the benefit of the decision by the higher courts, even otherwise binding. There is, in any case of the matter, it needs to be emphasized, no estopple against law. Now, if it regards the free/concessional electricity supplied to its’ employees as a perquisite in their hands, it ought to have deducted tax at source and, if not, paid FBT, thereon. It is not open for it to deny its’ liability both toward TDS (on the said benefit) as well as under FBT, and which is what it in effect does and, further, without any explanation; the plea of ‘subjudice’ being found incorrect even as, as afore-stated, there is no estopple against law. 3.2 We do not know for sure what the dispute before the Hon’ble High Court in the writ proceedings, since disposed of by it, was. As it appears, the same was as to if the said benefit is a perquisite or not, answered by the Hon’ble High Court with reference to the decision by the Apex Court in Arun Kumar (supra). We find no deviation from the clear position of law, i.e., of the same being a perquisite in respect of the employees specified under sub- clauses (a), (b) and (c) of s. 17(2)(iii). The next question is if tax has been paid by the concerned employees thereon? Clearly not, and neither is there any contention to this effect at any stage; the only plea raised being of the identity of the fact situation and of the law, i.e., as for AY 2006-07, and the non- deduction of tax at source, as for that year, being on account of the matter being subjudice which, as apparent from the Tribunal’s order for that year, it is not. The non-discharge of the tax liability on the said benefit by the employees, or on their behalf by the assessee, is understandable, as otherwise the question of levy of FBT thereon on the assessee does not arise (s. 115WB(3)).

Assessment year:2008-09 5 3.3 TDS is a mode of payment of the tax liability of the payee-deductee by the payer-deductor by deducting the same at source. This liability gets fastened on the payer u/s. 4(2) read with the relevant provision of Chapter XVII of the Act, so that it becomes his statutory liability under law. It is on account of this that a failure in his statutory obligation to deduct tax (payable by the payee) and deposit it to the credit of the Central Government, renders the payer liable to be regarded as an assessee-in-default, i.e., even though the primary tax liability is on, or in respect of, the payee’s income. Deduction of tax at source, and its deposit with the Central Government, is only for and on behalf of the concerned payee, who would, upon this, be regarded as having discharged his tax liability (to that extent and qua the relevant income). That is, sec. 4 read with sec. 192 obliges an assessee-employer to, where a benefit to his employee is regarded as a perquisite u/s. 17(2), deduct and deposit the tax chargeable thereon to the credit of the Central Government in satisfaction of tax payable by the concerned employee/s. The non-deduction of tax at source by the assessee on the said benefit, coupled with the non-payment of tax by the concerned employees, who have rather ‘resisted’ tax deduction at source thereon, can, under the circumstances, only imply that the same has not been regarded as a perquisite and, in any case, a perquisite in respect of which tax is payable by the concerned employees. Even no demand, as apparent, has been raised on the assessee u/s. 201(1). 3.4 Continuing further, section 115WB defines ‘fringe benefit’ and ‘deemed fringe benefit’ under sub-sections (1) and (2) thereof. Sub-section (3) of s.115 WB(3) reads as: ‘For the purposes of sub-section (1), the privilege, service, facility or amenity does not include perquisites in respect of which tax is paid or payable by the employee or any benefit or amenity in the nature of free or subsidized transport or any such allowance provided by the employer to his employees for journeys by the employees from their residence to the place of work or such other place of work to the place of residence.’ Assessment year:2008-09 6 Clearly, therefore, only a perquisite in respect of which tax has been paid or is payable by the employees is excluded from the ambit of sec. 115 WB(1). This is as a benefit, for its exclusion under FBT u/s.115-WB(1), must therefore be a perquisite in respect of which tax has been paid or is payable by the employee/s. The employees in the instant case have, much less paid, contested the same being regarded as a perquisite and, thus, the tax liability thereon. There is no such contention by the assessee, i.e., of the tax on the said perquisite having been paid or admitted as payable by the employees, in which case, where so, it indirectly admits to a default qua non-deduction of tax at source by it inasmuch as there is no injunction by the Hon’ble Court even as there is no estopple against law (refer para 3.3). In sum, a benefit for its exclusion under FBT u/s.115 WB (1), must be a perquisite and, two, tax in respect of which has been paid or is payable by the assessee, i.e., on their behalf of the concerned employees. How could the assessee, we wonder, then contend that the employees’ benefit be regarded as a perquisite in respect of which tax is paid or is payable by the concerned employees? Does it, one may ask, admit to a default u/s. 201(1)/201(1A)? This is any such contention would fasten it with the tax liability u/s.192 r/w s. 4(2), for the deposit of which there is no time limit, i.e., for the relevant year. That is, it is an either/or situation for the assessee, who can’t have it both ways, excluding it from charge of FBT as well as tax deduction at source. It is this that led the Tribunal for AY 2006- 07 to state, to quote it verbatim, as under: (para 6) ‘We have carefully considered the issue. Since the amount of free electricity has not been considered as the income of the employees as a benefit or perquisite as part of their salary while deducting tax at source, the Assessing Officer was justified in considering it for FBT in the case of the assesse. The ld. CIT(A) has, therefore, rightly upheld the impugned addition made by the Assessing Officer. We, therefore, see no reason to interfere with his decision, which is upheld.’ and confirmed the act of the ld. CIT(A) in upholding the impugned addition.

Assessment year:2008-09 7 3.5 We have considered the matter at length, admitted as covered by the order by the Tribunal for AY 2006-07, and with which we are principally in agreement, so as to explain the rationale of its’ rather cryptic order, with the matter being already before the Hon’ble High Court. Two, the Tribunal has for AY 2007-08, accepting the assessee’s plea, blocked the appeal which, stated to be under sec. 158A(1), is also without observing the prescribed procedure u/s. 158A(2). Further still, the question of law raised before the Hon’ble Court, which reads as under, does not, in our view, fully capture the controversy at hand; it, rather, questioning the wisdom in upholding the FBT on a perquisite on which tax is payable by the employees: ‘On the facts and the circumstances of the case, whether the Tribunal was justified in holding that the appellant is liable for FBT without examining section 115WB(3) of the Income Tax Act which clearly says that FBT will not be payable in respect of which tax is payable by the employees in view of section 17(2) of the Income Tax Act read with Rule 3(4) of the Income Tax Rules?’ The Tribunal for AY 2006-07 is fully conscious, as are we, that there is no estoppel against law, so that where tax is indeed payable by the employees on a perquisite, the same gets excluded under FBT. Again, without doubt, it is the correct legal position that is relevant, and not the view that the parties may take of their rights in the matter [see, inter alia, CIT v. C. Parakh & Co. (India) Ltd. [1956] 29 ITR 661 (SC); Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC)]. The tax payable on the perquisite to its’ employees, is, however, in view of s. 192 r/w s.4, by the assessee-employer, i.e., by and on behalf of the employees, and which it has not, and neither have the employees admittedly paid tax thereon. It is therefore not open for it to contend, as it does before the Hon’ble High Court, that the same is a perquisite on which tax is payable by the employees, saving it from being charged under FBT on the said benefit. That is, it cannot take refuge in its own default in pleading for a saving from Assessment year:2008-09 8 another liability, so that one becomes an excuse for the other. This is particularly considering that the law itself contemplates of a liability under either, so that there is no scope for escape from tax liability under both. The raising of such a plea is even otherwise not maintainable inasmuch as it is impermissible for one to, in seeking an exclusion or exemption, take advantage of one’s own default or wrong (see, inter alia, B.M. Malani v. CIT [2008] 306 ITR 196, 207 (SC)). In fact, any such contention, i.e., of the tax being payable on the said perquisite chargeable u/s. 17(2), even if made now (for the current year), retracting its’ earlier stand of being not liable to deduct tax at source, would, as aforesaid, render it liable u/s. 201(1)/201(1A); there being no estopple against law. The moot question, therefore, is if it is permissible for the assessee to contend of tax being payable on a perquisite by its’ employees, as it does before the Hon’ble High Court, while denying its’ liability to tax deduction at source, even as the tax remains unpaid by the employees. That is, take a contrarian stand. Again, could the assessee denying its’ liability to tax deduction at source on a perquisite, yet contend of the tax thereon being payable by the employees, saving it of the liability to FBT? That is, is the shelter of the plea of tax liability on a perquisite being of the employees available to an assessee, saving it of tax liability under both, i.e., s. 192 as well as under FBT? This is particularly in view of s. 4(2), creating a charge in respect of tax deductible at source, so that the obligation to pay tax, either by way of income-tax on a perquisite, or by way of FBT, being the tax on the income by way of the value of the benefit passed by an employer to his employee/s where not regarded as a perquisite on which tax is payable by him, is on the assessee-employer, the payer. This, in our view, represents the actual controversy arising in the instant case, i.e., could an assessee-employer deny its’ liability u/s. 4 r/w s. 192, as Assessment year:2008-09 9 well as u/s. 115WA(1), i.e., qua a benefit to the employees, by raising a plea that the tax on former is payable by the employees, so that the tax gets collected or paid under neither. This is as, without doubt, as afore-stated, admission of liability and/or discharge thereof, under one would preclude the other. It would, we admit, be a different matter; there being no estopple against law, if there was no obligation in law on the assessee to deduct and deposit the tax payable on the perquisite to its’ employees. The foregoing would also explain our non-acceptance of the assessees’ plea for blocking the appeal, even if regarded as made with reference to s.158A(1), which would though, as afore-noted, require us to observe the procedure u/s. 158A(2). We say so inasmuch as an application in Form 8 (dated 15/6/2016) is found to have been submitted, i.e., on record, so that it could well be and, rather, as it appears, that the ld. counsel omitted to refer thereto while making his arguments or presenting his case.