2023 (8) TMI 1414 - AT - Income Tax

TDS u/s 192 - assessee in default for non-deduction of TDS on perquisite value of unfurnished accommodation provided to its employees - HELD THAT - As perused the provisions of Employees Provident Fund and Miscellaneous Provisions Act, 1952 , which is notified by the central government in the official gazette as per section 5A of the Act. Further as per section 5AA, the Central Government by way of notification in the official gazette constitutes the executive committee to assist the central board in performance of its functions. As noted that the committee under the central board are the officials from Central and State Government and as per section 21 of the act, the power to make rules are vested with the Central Government in order to carry out the functions as per the provisions of the act. As noted that certain powers conferred under the act as per section 7A, 8B, 8F, 8G can be exercised only by the employees under the Central Government. Under these sections, the officers are authorised to issue recovery certificate in respect of the arrears of PF dues payable. The officers under these provisions are also vested with various rights to ensure recovery of dues including attachment and sale of movable or immovable property, arrest of employer and detention in prison or appointing a receiver to manage such movable or immovable property so attached. In our considered opinion, the above powers cannot be equated with the powers that are exercised by the employees of an organisation that are governed by the byelaws under the Societies Registration Act. At this juncture, it may not be out of place to refer to the decision of Hon ble Supreme Court in case of CHECKMATE SERVICES PVT LTD 2022 (10) TMI 617 - SUPREME COURT as observed that the contributions that needs to be deposited by an employer of an establishment are statutory payments. Further we note that section 1(3)(b) of the Act empowers the Central Government to apply the Act to all trading / commercial establishments whether such establishments are factories or not. We do not agree with the view taken by the authorities below that the present assessee is similar with Central Food Technological Research Institute vs. ITO (supra). We therefore agree with the submissions of the Ld.AR that present assessee falls under S.No.1 of the table under Rule 3 of the Income Tax Rules, 1962. We are of the view that assessee cannot be held to be an assessee in default for the reason that it is an organisation under a Statute enacted by the legislature. Further that as the assessee collects license fee in the form of House Rent Allowance from its employees against the unfurnished accommodation and therefore, the provisions of TDS will not apply under such circumstances. Assessee appeal allowed.

Summary

Issues Involved:
1. Classification of the residential accommodation provided by EPFO to its employees.
2. Applicability of TDS on the perquisite value of the accommodation under Section 17(2) of the Income Tax Act.

Summary:

1. Classification of the Residential Accommodation Provided by EPFO:

The core issue revolves around whether the residential accommodation provided by EPFO to its employees should be treated as rent-free accommodation or not. The assessee (EPFO) argued that the residential accommodation provided to its employees should be treated at par with Central Government accommodations for TDS purposes. They contended that the license fee for the accommodation is deducted at rates prescribed by the Government of India, and the staff quarters are given in lieu of "House Rent Allowance" (HRA), making it not an excess benefit or perquisite under Section 17(2) of the Income Tax Act.

The Tribunal noted that EPFO is an autonomous body created under the Employees Provident Fund Organisation and Miscellaneous Provisions Act, 1952, and functions under the control and administration of the Central Government. The Tribunal examined various provisions of the EPF Act, which indicate that EPFO operates under the direct control of the Central Government, including the appointment and regulation of its officers and staff.

2. Applicability of TDS on Perquisite Value:

The Assessing Officer (AO) had treated the EPFO as an "assessee in default" for not deducting TDS on the perquisite value of the unfurnished accommodation provided to its employees. The AO relied on a previous decision involving the Central Food Technological Research Institute, which was distinguished by the Tribunal as not applicable to EPFO due to differences in governance and statutory functions.

The Tribunal reviewed Rule 3 of the Income Tax Rules, 1962, which deals with the valuation of perquisites, and concluded that EPFO falls under Serial No. 1 of Table 1 of Rule 3, which pertains to accommodations provided by the Central Government or any State Government. The Tribunal highlighted that EPFO collects a license fee from its employees for the accommodation, similar to the Central Government's practice, and therefore, the provisions of TDS on perquisites do not apply.

Conclusion:

The Tribunal concluded that EPFO cannot be held as an "assessee in default" for not deducting TDS on the perquisite value of the unfurnished accommodation provided to its employees. The appeals filed by the assessee for all the assessment years under consideration were allowed, and the Tribunal ruled that the residential accommodation provided by EPFO should be treated at par with Central Government accommodations for TDS purposes.

Order Pronounced:

The order was pronounced in the open court on 09th August, 2023.