2009 (1) TMI 445 - HC - Income Tax

Salary-Perquisites- The claim of the petitioners is that they are Central Government employees working on deemed deputation to BSNL, an undertaking under the control of the Government, and therefore, it must be treated as under the first category namely, it must be treated as a case where the accommodation was provided by the Central Government. Held that- dismissing the petition that was really relevant was to find out who provided the accommodation. The accommodation was provided by the BSNL. The petitioner were working as employees of BSNL. Hence the perquisite value would be similar to what was applicable to employers of all employees other than Central Government and State Governments.

Summary

Issues:
Challenge to clarification by Central Board of Direct Taxes regarding accommodation provided to Central Government employees on deemed deputation to BSNL under rule 3(1) of Income-tax Rules, 1962.

Analysis:
1. The petitioners, Central Government employees on deemed deputation to BSNL, challenge a clarification by the Central Board of Direct Taxes regarding the interpretation of rule 3(1) of the Income-tax Rules, 1962. The issue revolves around whether the accommodation provided to them falls under the category of accommodation provided by the Central Government or by BSNL, an undertaking under the Government's control. The petitioners argue that as they are Central Government employees working on deemed deputation to BSNL, the accommodation should be considered as provided by the Central Government. They cite the Table in the rules for valuation of residential accommodation to support their claim.

2. The respondents counter that BSNL, although fully owned by the Government of India, is the entity providing accommodation to its staff, irrespective of whether they are absorbed staff or on deemed deputation. They argue that an amendment in the Income-tax Act deems the concession in rent provided by the employer as taxable in the hands of employees. The respondents contend that the petitioners cannot avoid income tax liability on the accommodation provided by BSNL.

3. The court analyzes the ownership and provision of accommodation, emphasizing that the crucial factor is who provides the accommodation, not necessarily who owns the building. The judgment notes that the accommodation is provided by BSNL to the petitioners, who are currently working as BSNL employees. The court upholds the clarification by the Central Board of Direct Taxes, stating that the view aligns with the law. It dismisses the writ petitions, finding no merit in the petitioners' contentions.

In conclusion, the High Court of Kerala dismissed the writ petitions challenging the Central Board of Direct Taxes' clarification on the valuation of accommodation provided to Central Government employees on deemed deputation to BSNL. The court upheld the view that the accommodation is provided by BSNL, a public sector company owned by the Government of India, and deemed the income tax liability on rent concession as applicable to the employees.