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Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee under section 253 of the Income-tax Act (‘the Act’) is directed against the order of Ld. Commissioner of Income-tax (Appeals) [for short ‘the CIT(A)] –46, Mumbai dated 08.06.2016 for Assessment Year (AY) 2011-12. The assessee has raised the grounds of appeal in the following manner: “
1. Denial of exempted perquisite: (a) The Ld. CIT(A) erred in denying the exempted perquisite to the Appellant by not appreciating to the Provisions and Rules of Tax laws; therefore, the order impugned deserves to be quashed and the benefit of exemption be accorded to the Appellant. (b) Without prejudice to the above, the Ld. CIT(A) failed to ignore the Government Circular in the of the government employee, being the Appellant, which are clear on its intent and implication, therefore, denial of exempted perquisite is contrary to the law and the benefit be demanded to the Appellant.
(c) Without prejudice to above, the case laws relied upon by the CIT(A) is not applicable to the facts of the Applicant. 2. LEVY OF PENAL INTEREST Appellant, on merits, denies his liability to penal interest. 3. The appellant craves leave to add, amend or alter all or any of the above Grounds of appeal
.”
2. Brief facts of the case are that assessee is an individual and drawing his income from salary, filed his return of income for relevant AY on 18.03.2012 showing taxable income of Rs. 7,29,530/-. The assessment was completed on 07.03.2014 u/s 143(3) of the Act. The Assessing Officer (AO) while passing assessment order, disallowed the claim of exemption of perquisite for residential accommodation under Rule 3(1) of the Income-tax Rules, 1962 of Rs. 1,23,666/- . On appeal before the ld. CIT(A), the disallowance was sustained. Thus, further aggrieved by the order of ld. CIT(A), the assessee filed the present appeal before us.
3. We have heard the ld. Authorized Representative (AR) of assessee and the ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The Ld. AR of the assessee argued that assessee is employee of M/s Pawan Hans Helicopter Ltd., a Government owned Company. The employer of the assessee provided accommodation to the assessee. The assessee filed return of income and claimed the exemption of perquisite for housing accommodation as per Central Government employee. The AO while framing assessment not allowed the deduction of perquisite and as per Rule 3(1) added the perquisite in the income of assessee. The ld. CIT(A) confirmed the action of AO without appreciating the fact that assessee is an employee of Central Government. The Revenue has disallowed the perquisite for the first time though the assessee was claiming the same consistently. The ld AR for the assessee argued that the employer of the assessee recovered the license like Central Government employee. On the other hand the ld DR for the Revenue supported the order of authorities below. The ld DR further would submit that the in this case the is made for the first time the assessment order is passed under section 143(3). The assessee has not filed any such evidence that the return of income was processed on earlier occasions (for earlier AY’s) assessment under section 143(3). Even no assessment order for any earlier year is placed on record.
We have considered the rival contention of the parties and gone through the order of authorities below. Though the assessee has raised as many as three ground of appeal however, as per our considered opinion the only substantial ground of appeal is “ If the assessee is entitled to seek the deduction of perquisite under chapter VI-A”. The AO while framing the assessment, noticed that the assessee has return salary income of Rs. 8,56399/- against salary income of Rs.8,79,780/- (per Form No.16). The assessee claimed deduction under chapter VI-A of Rs. 1,26,870/- and offered taxable income at Rs. 7,29,530/-. The total salary income as per Form No.16 included perquisite of Rs. 1,23,666/- received on account of accommodation as per Form 12BA. However, the assessee while computing salary income treated only Rs. 37,606/- to gross salary income of Rs. 8,47,881/-. The AO pointed out the deficiency. The assessee vide his letter dated 01.04.2014 contended that perquisite are in respect of residential accommodation as per Rule 3(1) of Income-Tax Rules, 1962, and the assessee is Central Government employee and entitled for deduction. The employer has already deducted Rs.3516/- on account of license fee and hence Rs.1,23,666/- was claimed as exempted. The contention of the assessee was not accepted by AO and claim of the deduction under chapter VI-A was rejected. The AO while rejecting the claim of deduction held that the employer of the assessee has added the perquisite as taxable which is acceptable. The ld. CIT(A) while considering the contention of the assessee examined Rule 3 of Income tax Rules ( in para7.4). The ld CIT(A) further observed that the employer of assessee has adopted second category of classification prescribed in the table therein and virtually not accepted the assessee as Central Government employee which are placed in First category. The ld CIT (A) concluded that the employer has set off the license fee (reduced license fee recovered) and treated the balance as perquisite. The order of ld CIT(A) is reasonable provided the Public Sector employee like the present assessee, who is