2024 (1) TMI 607 - AT - Income Tax

TDS u/s 192 - assessee in default u/s 201(1)/201(1A) - assessee failure to deduct TDS on the perquisite value of accommodation provided to the employees at the rate of 15 percent of salary - As per Ld. AO, the perquisite on accommodation provided to the employees of the Respondent was to be computed in accordance Section 17(2)(ii) - HELD THAT - We are of the considered opinion that Indian Institute of Science, case 2022 (10) TMI 242 - SC ORDER squarely applies upon the assessee and mere fact that assessee is a Institution which has come into existence by an Act of Parliament and the various clauses of the IIT Act and the IIT Statues, relied by the Ld. AR, which establish that there is some control of the Central Government, does not elevate the status of assessee of Central Government. Thus we are of considered view that Ld. CIT(A) has fallen in error to hold that assessee falls in category of Central Government. Rather Ld. CIT(A) has fallen in error in relying the Guwahati Bench order in case of IIT, (supra), as in that case the Tribunal had not directly dealt with the issue if IIT, falls in status of Central Government for the purpose of Rule 3 but had given benefit to that assessee for not being considered assessee in default u/s 201(1) of the Act, as there was a bonafide explanation with the department. The Delhi Bench in the case of Superintendent (DDO) versus ITO 2012 (8) TMI 644 - ITAT, DELHI has taken into consideration judgement of Hon ble Supreme Court of India in the case of Arun Kumar 2006 (9) TMI 115 - SUPREME COURT and held that without first establishing that assessee employer had provided accommodation to the employees at concessional rates, the assessing officer cannot straightaway invoke Rule 3 for computing value of the perquisite and treat assessee in default in deducting tax at source on said value. Therefore, we are of the considered view that though Ld. CIT(A) has fallen in error in holding that assessee falls in status of Central Government for the purpose of Section 17(2) of the Act, the impugned order of Ld. CIT(A) still deserves to be upheld as Ld. AO has fallen in error by straightaway invoking Rule 3 for computing value of the perquisite and treat assessee in default in deducting tax at source on said value, without first recording a finding as to whether there is 'concession' and the case is covered by Section 17 (2) (ii) of the Act. Decided against revenue.

Summary

Issues Involved:

1. Perquisite Value of Rent-Free Accommodation (RFA)
2. Status of IIT as Central Government Entity
3. Concession in Rent for Accommodation

Summary:

Issue 1: Perquisite Value of Rent-Free Accommodation (RFA)

The Revenue appealed against the order of the CIT(A) which held that there was no perquisite value for the rent-free accommodation provided to the employees of the assessee (an educational institution under the IIT Act). The Ld. AO had determined that the assessee was required to deduct tax at source on the perquisite value of the accommodation at 15% of the salary. The CIT(A) relied on the Tribunal's Guwahati Bench order in the case of IIT Guwahati, which held that there was no perquisite value for rent-free accommodation provided to employees.

Issue 2: Status of IIT as Central Government Entity

The Revenue contended that IIT Delhi, being an autonomous body, should not be treated on par with Central/State Government employees for the purpose of Rule 3. They relied on the Supreme Court judgment in Indian Institute of Science v. DCIT, which held that autonomous institutions cannot be treated as Central/State Government employees for the purpose of Rule 3. The Tribunal agreed with this view, stating that mere control and funding by the Central Government do not elevate the status of the assessee to that of the Central Government.

Issue 3: Concession in Rent for Accommodation

The assessee argued that the accommodation provided to its employees was not a benefit but a compulsion as per the IIT Statutes, and therefore, no concession was extended. The Tribunal noted that the Supreme Court in Arun Kumar v. Union of India held that Rule 3 applies only when there is a concession in rent. The CIT(A) did not address this aspect, but the Tribunal found the argument considerable. The Tribunal observed that the AO had erred by invoking Rule 3 without first establishing that there was a concession in rent.

Conclusion:

The Tribunal concluded that the CIT(A) erred in holding that the assessee falls in the status of the Central Government. However, the impugned order of the CIT(A) was upheld because the AO had failed to record a finding on whether there was a concession in rent before invoking Rule 3. Therefore, the appeal of the Revenue was dismissed.

Order Pronounced:

The order was pronounced in the open court on 11th January 2024.