CENTRAL FOOD TECHNOLOGICAL RESEARCH INSTITUTE vs. THE INCOME-TAX OFFICER (TDS)

4 (c) If the answer to Question No.2 above is in affirmative still can the appellant-institute be held to be a defaulter to apply the provisions of Section 201(1) and 201(1A) of the Act of bonafide reason or belief in interpretation of Sl.No.1 of Table-1 of Rule 3 of the IT Rules, 1962 rws 17(2) of the IT Act, 1961? 2. Facts leading to filing of this appeal briefly stated are that the assessee is one of Constituent Unit Of Council Of Scientific And Industrial Research (hereinafter referred to as 'the CSIR' for short). The CSIR is a premier Industrial Research And Development Organization, which was constituted by resolution of the erstwhile Central Legislative Assembly in the year 1942 and is an Autonomous body registered under the Societies Registration Act, 1860 (hereinafter referred to as 'the 1860 Act' for short). The employees of the assessee are governed by the Government of India pay and allowance rules, conduct rules and other rules as is applicable to the Central Government employees. A

5 provision for reservation for post in services in the assessee's Society is made in accordance with the orders of Government of India. It is the case of the assessee that employees of assessee is entitled to pension on the same scale as the Central Government employees. The funds payable to the retired employees of the assessee are received from Ministry Of Science and Technology and the accounts of the assessee are audited by Comptroller and Auditor General of India. The employees of the assessee are allotted unfurnished quarters. The assessee raised a claim that valuation of perquisites under Rule 3 of the Income Tax Rules should be worked out considering the employees of the assessee to be in par with the government employees. The Assessing Officer by orders dated 16.04.2007 and 30.03.2012 passed orders under Section 201(1) and 201(1A) read with Section 192 of the Act for Assessment Years 2007-08 and 2011-12 and held that the assessee had not correctly worked out the perquisite

6 value of accommodation in accordance with amended Rule 3 of the Rules and the assessee is liable to be treated as assessee in default under Section 201(1) of the Act for non deduction / short deduction. It was further held that assessee is liable to pay interest under Section 201(1A) of the Act. 3. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals) who by an order dated 24.07.2013 affirmed the orders passed by the Assessing Officer. The assessee thereupon filed an appeal before the tribunal. The tribunal by an order dated 04.07.2013 inter alia held that statutory Corporation has a separate and independent existence and is a different entity from Union of State Government with regard to its property and funds. It was further held that the case of the assessee for the purposes of computing perquisite value is governed by Sl.No.2 of Table 1 appended to Rule 3 of the Rules. Accordingly, the appeal was dismissed. In the

7 aforesaid factual background, this appeal has been filed. 4. Learned counsel for the assessee submitted that though assessee is a autonomous body registered under the 1860 Act, it functions directly under the control of Ministry of Science and technology, Government of India and receives annual grant from the Government of India. It is also submitted that employees of the assessee are governed by the pay and allowance rules, conduct rules and other rules, which are applicable to Central Government employees. It is further submitted that the employees of the assessee are at par with the Central Government employees and are entitled to valuation of perquisites as provided under Sl.No.1 of Table of Rule 3. It is further submitted that the assessee had rightly valued the perquisites on account of rent free accommodation or concessional rent accommodation to its employees and there was no shortfall in payment of tax as required under Section 192 of the Act. It is submitted that the assessee could

8 not have been treated as assessee in default and therefore, provisions of Section 201(1) and 201(1A) of the Act could not have been invoked. Alternatively, it is submitted that the assessee could not have been treated as assessee in default on account of bonafide reason or belief in interpretation of Sl.No.1 of Table 1 of Rule 3 of the Rules read along with Section 17(2) of the Act. In support of aforesaid submissions, reliance has been placed on decisions Supreme Court in 'PRADEEP KUMAR BISWAS VS. INDIAN INSTITUTE OF CHEMICAL BIOLOGY', (2002) 5 SCC 111, 'R.D.SHETTY VS. INTERNATIONAL AIRPORT AUTHORITY', AIR 1979 SC 1628, 'P.V.RAJAGOPAL VS. UNION OF INDIA', (1998) 233 ITR 678 (AP) and 'CIT VS. MUNICIPAL CORPORATION, VISHAKAPATNAM', (2014) 365 ITR 254 (AP). 5. On the other hand, learned counsel for the revenue submits that Sl.No.1 of Table 1 appended to Rule 3(1) of the Rules apply when the accommodation

9 is provided by the Central Government or State Government. It is submitted that assessee is not a Central Government and therefore, is governed by Sl.No.2 of Table 1 appended to Rule 3(1) of the Rules. It is also submitted that the Supreme Court in 'ARUN KUMAR AND OTHERS VS. UNION OF INDIA', (2006) 286 ITR 89 (SC) has drawn a distinction between Central Government, State Government and employee of the other statutory Corporation / Undertaking. It is further submitted that Explanation 1 has been incorporated to Section 17(2) of the Act by Finance Act, 2007 with retrospective effect i.e., from 01.04.2002. Therefore, the question of grant of concession does not arise. It is also submitted that Section 201 of the Act covers the case of shortfall in payment of tax also and no question of law has been framed in this case with regard to applicability of Section 201 of the Act in case of shortfall of payment of tax.

10 6. We have considered the rival submissions made by learned counsel for the parties and have carefully perused the record. Before proceeding further, we may refer to the well settled principles of interpretation laid down in relation taxing statute. In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. [See: BANARASI DEBI VS. ITO, AIR 1964 SC 1742]. It is equally a well settled legal proposition that in all tax matters one has to interpret the taxation statute strictly. Simply because one class of legal entities is given a benefit which is specifically stated in the Act, does not mean that the benefit can be extended to legal entities not referred to in the Act as there is no equity in matters of taxation.

11 7. The issue, which arises for consideration is whether the assessee, which is registered as a Society under the 1860 Act and is one of the constituent units of CSIR can be treated as Central Government as provided in Sl.No.1 of Table 1 appended to Rule 3(1) of the Rules. Before proceeding further, it is apposite to take note of relevant extract of Section 17(2) Explanation 1, Rule 3(1) read with relevant extract of Table 1 appended to it, which read as under: 17(2) "Perquisite" includes - (i) the value of rent-free accommodation provided to the assessee by his employer; (ii) the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer. Explanation 1:- For the purposes of this sub-clause, concession in the matter of rent shall be deemed to have been provided if - (a) in a case where an unfurnished accommodation is provided by an employee other than the Central Government or any State Government and -

12 (i) the accommodation is owned by the employer,, the value of the accommodation determined at the specified rate in respect of the period during which the said accommodation was occupied by the assessee during the previous year, exceeds the rent recoverable from, or payable by, the assessee; (ii) the accommodation is taken on lease or rent by the employer, the value of the accommodation being the actual amount of lease rental paid or payable by the employer or fifteen per cent of salary, whichever is lower, in respect of the period during which the said accommodation was occupied by the assessee during the previous year, exceeds the rent recoverable from, or payable by, the assessee. (b) in a case where a furnished accommodation is provided by the Central Government or any State Government, the licence fee determined by the Central

13 Government or any State Government in respect of the accommodation in accordance with the rules of such Government as increased by the value of furniture and fixtures in respect of the period during which the said accommodation was occupied by the assessee during the previous year, exceeds the aggregate of the rent recoverable from, or payable by, the assessee and any charges paid or payable for the furniture and fixtures by the assessee; (c) in a case where a furnished accommodation is provided by an employer other than the Central Government or any State Government and - (i) the accommodation is owned by the employer, the value of the accommodation is determined under sub-clause (i) of clause (a) as increased by the value of the furniture and fixtures in respect of the period during which the said accommodation was occupied by the assessee during the previous year exceeds the rent recoverable from, or payable by the

14 assessee. (ii) the accommodation is taken on lease or rent by the employer, the value of the accommodation determined under sub-clause(ii) of clause (1) as increased by the value of the furniture and fixtures in respect of the period during which the said accommodation was occupied by the assessee during the previous year exceeds the rent recoverable from, or payable by, the assessee; (d) in a case where the accommodation is provided by the employer in a hotel (except where the assessee is provided such accommodation for a period not exceeding in aggregate fifteen days on his transfer from one place to other), the value of the accommodation determined at the rate of twenty four per cent of salary paid or payable for the previous year or the actual charges paid or payable to such hotel, whichever is lower, for the period during which such accommodation is provided, exceeds the rent

15 recoverable from, or payable by, the assessee. Sl. No. Circumstances Where accommodation is unfurnished Where accommodation is furnished 1. Where the accommodation is provided by the Central Government or any State Government to the employees either holding office or post in connection with the affairs of the Union or of such State or serving with any body or undertaking under the control of such Government on deputation. License fee determined by the Central Government or any State Government

in respect of accommodation in accordance with the rules framed by such Government as reduced by the rent actually paid by the employees The value of perquisite as determined under column 93) and increased by 10% per annum of the cost of furniture (including television sets, radio sets, refrigerators, other household appliances, air conditioning plant or equipment) or if such furniture is hired from a third party, 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.

16 8. Thus, it is evident that the value of residential accommodation provided by the Central Government or any State Government to the employees either holding office or post in connection with affairs of the Union or of such State or serving with any body or Undertaking under the control of such Government on such deputation has to be determined in the manner provided in Column Nos.3 and 4 of Sl.No.1 of Table 1 of Rule 3 of the Rules. The assessee, which is a Society under the 1860 Act, is controlled and financed by the Central Government. The assessee is a Society or an undertaking controlled by the Central Government. The employees of the assessee may be governed by the Rules governing the service conditions of the employees of the Central Government. However, for the purposes of Rule 3, the requirement is that the accommodation should be provided by the Central Government or State Government to the employees either holding office or post in connection with affairs of Union or of State or

17 serving with any body or undertaking under the control of such government from deputation. The aforesaid expression is unambiguous and unclear and therefore, its meaning cannot be expanded to include any body, undertaking under the control of Central Government. Merely because assessee is a body or undertaking owned or controlled by the Central Government, it cannot be elevated to the status of Central Government. Thus, the assessee cannot claim that valuation of perquisites in respect of residential accommodation should be computed as in case of an accommodation provided by the Central Government. Therefore, Sl.No.1 of Table 1 of Rule 3 of the Rules does not apply to the assessee. The substantial questions of law No.1 and No.2 are answered against the assessee and in favour of the revenue.

18 9. Now we may advert to the substantial question of law No.3 involved in the appeal. It is pertinent to mention here that the tribunal in case of another assessee viz., Indian Institute of Bangalore in I.T.A.No.661/2016 and in I.T.A.No.277/2015 has held that assessee had made a bonafide estimate of the employees salary by valuing the perquisite in the form of residential accommodation provided to the employees by valuing the same as if they are the employees of the Central Government has been accepted and the proceedings under Section 201 and 201(1A) of the Act have been quashed. Therefore, there appears to be no justification for taking a contrary view in case of the assessee and therefore, the third substantial question of law is answered in the negative and in favour of the assessee. In view of preceding analysis, the order of the Income Tax Appellate Tribunal dated 04.07.2014 insofar as it pertains to initiation of proceedings under Section

19 201 and 201(1A) is concerned is hereby quashed. In the result, appeal is disposed of. Sd/- JUDGE Sd/- JUDGE ss