2006 (5) TMI 506 - AT - Income Tax

Summary

Issues Involved:
1. Rectification of the CIT(A)'s original order under section 154.
2. Determination of the value of perquisite for rent-free accommodation.
3. Use of residential flat for office purposes and its impact on the value of perquisite.
4. Treatment of reimbursement for domestic servants as taxable perquisite.
5. Treatment of electricity bills and telephone expenses as perquisites.
6. Deduction under section 80-O for salary income received in convertible foreign exchange.
7. Charging of interest under sections 234B and 234C.
8. Charging of additional tax under section 143(1A).
9. Charging of interest under section 220(2).

Issue-wise Detailed Analysis:

1. Rectification of the CIT(A)'s original order under section 154:
The Departmental appeal questioned the rectification of the CIT(A)'s original order under section 154 based on the Bombay High Court's decision in the case of M.A.E. Paes. The Tribunal upheld the rectification, stating that a subsequent decision of the jurisdictional High Court gives rise to a mistake apparent from the record, which is rectifiable under section 154. The Tribunal cited various precedents to support this view, including the Supreme Court decision in S.A.L. Narayana Row, CIT v. Model Mills Nagpur Ltd. and the Punjab & Haryana High Court decision in CIT v. Smt. Aruna Luthra.

2. Determination of the value of perquisite for rent-free accommodation:
The Tribunal upheld the CIT(A)'s rectification order, directing the Assessing Officer to compute the value of the perquisite in respect of rent-free accommodation as per the Bombay High Court's decision in M.A.E. Paes. The High Court had held that the fair rental value for the purpose of determining the perquisite cannot exceed the standard rent under the Rent Control Act.

3. Use of residential flat for office purposes:
The assessee's claim that part of the residential flat was used for office purposes was rejected due to lack of evidence. The Tribunal confirmed the findings of the revenue authorities, noting that the leave and license agreement prohibited the use of the flat for any purpose other than residence.

4. Treatment of reimbursement for domestic servants as taxable perquisite:
The Tribunal upheld the revenue authorities' decision to treat the entire reimbursement for domestic servants as a taxable perquisite. The Board's Circular No. 122, which provides concessional treatment for gardeners, night watchmen, and sweepers provided by the employer, was deemed inapplicable as the servants were employed by the assessee.

5. Treatment of electricity bills and telephone expenses as perquisites:
The Tribunal confirmed the revenue authorities' decision to treat the entire amount of electricity bills as a perquisite, rejecting the claim of part use for office purposes. However, the Tribunal deleted the disallowance of one-half of the telephone expenses, accepting the assessee's claim that personal calls were made from a separate personal telephone.

6. Deduction under section 80-O for salary income received in convertible foreign exchange:
The Tribunal restored this issue to the Assessing Officer for fresh consideration. The Tribunal noted that the revenue authorities had not examined whether the salary received by the assessee was in consideration of technical or professional services rendered outside India. The Tribunal directed the Assessing Officer to examine the issue in accordance with the provisions of section 80-O and to record a finding on whether the assessee fulfills all the conditions of the section.

7. Charging of interest under sections 234B and 234C:
The Tribunal directed the Assessing Officer to recalculate the interest chargeable under sections 234B and 234C after excluding the salary income, following the ITAT Delhi Special Bench decision in the case of Motorola Inc. v. Dy. CIT.

8. Charging of additional tax under section 143(1A):
The Tribunal rejected this ground of appeal, noting that the additional tax was levied while processing the return of income under section 143(1) and was not part of the present assessment order. The Tribunal stated that an intimation under section 143(1) is independently appealable under section 246A.

9. Charging of interest under section 220(2):
The Tribunal directed the Assessing Officer to recalculate the interest under section 220(2) as per the first proviso to the section.

Conclusion:
The Departmental appeals were dismissed, and the assessee's appeals were partly allowed. The Tribunal upheld the rectification of the CIT(A)'s original order, confirmed the treatment of certain reimbursements and expenses as perquisites, and directed the Assessing Officer to reconsider the assessee's claim for deduction under section 80-O and to recalculate interest under sections 234B, 234C, and 220(2).