2012 (11) TMI 887 - SC - Income Tax

Valuation of Perquisites - method of fixation of the value of perquisites under Section 17(2) - Rule 3 of the Income Tax Rules, 1962 - TDS u/s 192 - 10% of the salary of employees of the ONGC in cities having population exceeding four lakhs as per 1991 census was not included in the salary by the employees for the purpose of computing the tax that is deductible from the income of the employees for making payment to the Income Tax Department. - assessee in default. The interim order of the High Court passed on 20th February, 1996 in the writ petition, the ONGC was prevented to deduct the tax on 10% of the salary and to pay the same to the Central Government. In the interim order dated 20th February, 1996, the High Court had not held that the ONGC was not liable to deduct the tax under Section 192(1) of the Act. Thus, when the writ petition was dismissed on 15th March, 2010 by the High Court, the interim order passed by the High Court on 20th February, 1996 had to be vacated and the parties were required to be put back in the same position as they would have been before the interim order was passed by the High Court on 20th February, 1996 in accordance with provisions of Section 144 of the Code of Civil Procedure. Hence, during the period from 20th February, 1996 to 15th March, 2010, the ONGC cannot be deemed to be an assessee in default under the provisions of the Act. Consequently, the provisions of sub-section (1A) of Section 201 of the Act for payment of interest by an assessee in default under the provisions of the Act will not be applicable to the payments not made by the ONGC because of the interim order passed by the High Court which was in force from 20th February, 1996 to 15th March, 2010. The respondent shall grant to the ONGC time upto 28th February, 2013 to make the payment of the tax on 10% of the salary and interest calculated with effect from 16th November, 2010. - Decided in favor of assessee.

Summary

Issues:
1. Challenge to the method of valuation of perquisites under Section 17(2) of the Income Tax Act, 1961.
2. Liability of the Oil & Natural Gas Corporation Limited (ONGC) to deduct tax on perquisites.
3. Interpretation of provisions under Section 192(1), Section 200, and Section 201(1A) of the Income Tax Act.
4. Consideration of whether the ONGC was in default under the Act.
5. Rights of the employees of ONGC to claim deductions before the Assessing Officer.

1. Challenge to the method of valuation of perquisites under Section 17(2) of the Income Tax Act, 1961:
The case involved a challenge by the Association of Scientific & Technical Officers of ONGC against the amended Rule 3 of the Income Tax Rules, 1962, which altered the method of fixation of the value of 'perquisites' under Section 17(2) of the Income Tax Act. The High Court dismissed the writ petition challenging the method of valuation of perquisites, citing a previous judgment upholding the validity of the amended Rule 3.

2. Liability of the Oil & Natural Gas Corporation Limited (ONGC) to deduct tax on perquisites:
The issue revolved around whether ONGC was liable to deduct tax on the value of perquisites constituting part of the salary of its employees. The court considered the interim order preventing ONGC from deducting tax on 10% of the salary and concluded that during the period of the interim order, ONGC could not be deemed as an assessee in default under the Act.

3. Interpretation of provisions under Section 192(1), Section 200, and Section 201(1A) of the Income Tax Act:
The court analyzed the provisions of Section 192(1), Section 200, and Section 201(1A) of the Income Tax Act to determine the obligations and liabilities of ONGC regarding tax deduction on perquisites. It was held that ONGC's failure to comply with the High Court's directions post-dismissal of the writ petition rendered it liable to pay interest under Section 201(1A) of the Act.

4. Consideration of whether the ONGC was in default under the Act:
The court deliberated on whether ONGC was in default under the provisions of the Act due to its failure to deduct and pay tax on perquisites during the period of the interim order. It was established that ONGC would be deemed in default after the dismissal of the writ petition and the consequent vacation of the interim order.

5. Rights of the employees of ONGC to claim deductions before the Assessing Officer:
The judgment clarified that the employees of ONGC have the right to claim deductions before the Assessing Officer regarding the value of the accommodation provided to them as perquisites. The court emphasized that such claims must be made by the employees themselves during their assessment proceedings and not by the employer or any association representing them.

In conclusion, the court disposed of the special leave petitions, granting ONGC time to make the payment of tax on perquisites and interest within a specified timeline.