2002 (11) TMI 262 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the DCIT to re-open the matter concluded by JCIT.
2. Validity of the letter dated 24-12-1998 issued by JCIT.
3. Applicability of grossing up provisions u/s 195A.
4. Valuation of perquisite on account of rent-free accommodation.
5. Limitation period for passing orders u/s 201(1) and 201(1A).
6. Levy of interest u/s 201(1A).

Summary:

1. Jurisdiction of the DCIT to re-open the matter concluded by JCIT:
The Tribunal held that the JCIT, Range-23 had no jurisdiction to pass an order u/s 201. The DCIT, TDS Circle 23(1) had valid jurisdiction to pass an order u/s 201(1)/201(1A). The affidavits filed by the department before the Hon'ble High Court confirmed that no notification u/s 120(4)(b) was issued conferring jurisdiction on JCIT, Range-23 for passing an order u/s 201. Consequently, the contention that the DCIT could not re-open the concluded matter was rejected.

2. Validity of the letter dated 24-12-1998 issued by JCIT:
The Tribunal held that the letter dated 24-12-1998 issued by JCIT could not be considered as an order u/s 201(1) as the assessee was never declared to be in default, which is a condition precedent for passing such an order. The letter did not result in raising a demand of tax, and thus, could not be considered as an order u/s 201(1).

3. Applicability of grossing up provisions u/s 195A:
The Tribunal held that section 195A was applicable to the allowances paid outside India by the assessee to its expatriate staff. The existence of an arrangement to pay the tax of its expatriate employees within the meaning of section 195A was established. The Tribunal rejected the contention that grossing up should be done by taking the rate of tax in force in the financial year 1998-99. Grossing up had to be made in accordance with the rates in force for each financial year for which such allowances were paid.

4. Valuation of perquisite on account of rent-free accommodation:
The Tribunal upheld the stand of the revenue that the aspect of actual rent paid by the employer cannot be imported in Rule 3 in view of the Madras High Court judgment in K.S. Sundaram's case, which was affirmed by the Supreme Court. The value of rent-free accommodation should be determined as per Rule 3 of the Income-tax Rules, 1962.

5. Limitation period for passing orders u/s 201(1) and 201(1A):
The Tribunal held that the impugned orders u/s 201/201(1A) pertaining to financial years 1988-89 to 1994-95 were illegal, being time-barred since the orders were passed on 30-3-2000, which was beyond four years from the end of the financial years. Consequently, the orders for these years were quashed.

6. Levy of interest u/s 201(1A):
The Tribunal rejected the contention that the assessee was under a bona fide belief that allowances paid abroad to its employees were not taxable in India. The provisions of section 201(1A) are mandatory as held by the Delhi High Court in Prem Nath Motors (P) Ltd.'s case. The Tribunal directed the Assessing Officer to bifurcate the figure of Rs. 1,31,89,188 under the heads "tax" and "interest" correctly.

Conclusion:
Appeals for financial years 1988-89 to 1994-95 were allowed, while the other appeals were partly allowed.