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2014 (11) TMI 478 - AT - Income TaxTDS on salary u/s 192 Supply of electricity covered u/s 17(2)(iii) as perquisite or not - rebate in supply of electricity - Held that - Assessee-company is a Government Public Limited Company and subsidiary of holding company, U.P. Power Corporation Limited and also engaged in distribution of power to its consumers like government, Semi-Government and private bodies - the rates for supply of electricity including departmental employees are fixed and decided by the UPERC and such rates are binding on all the consumers as well as distribution companies - As per LMV-10, the UPERC has fixed the rates of charges for metered and un-metered supply to the departmental employees and pensioners - the rates of charges for supply of electricity to departmental employees and pensioners are lesser than the ordinary consumers. Where the assessee-company has no control in granting rebate to its employees in consumption of electricity, the rebate given to the employees cannot be called to be perquisite in the hands of the employees and the assessee-company cannot be held responsible for deduction of TDS on the perquisite availed by the employees - In Commissioner of Income-Tax And Another Versus Chief Officer, State Bank of India 2005 (12) TMI 68 - UTTARANCHAL High Court it has been held that no perquisite value could be added in the hands of the assessee - no interest would be charged u/s 201/201(1A) of the Act from the assessee on account of lesser deduction of tax - whatever rates of electricity charges are fixed, they were fixed by the UPERC and the assessee has no control thereon - The reasons for charging lesser rate of electricity were also explained - the assessee cannot be held to be in default for non-deduction of TDS on the value of perquisites as alleged to be availed by the employees on account of lesser rate of electricity charges thus, the order of the CIT(A) is upheld - Decided against revenue.
Issues Involved:
1. Short deduction of tax on supply of electricity as perquisite under section 17(2)(iii) of the Income-tax Act, 1961. 2. Liability of the deductor (KESCO) to deduct tax on the value of perquisites provided to its employees under section 192 read with Rule 26A(2)(q). 3. Whether the supply of electricity at reduced rates to employees constitutes a taxable perquisite. 4. Applicability of judicial pronouncements to the case. Issue-wise Detailed Analysis: 1. Short deduction of tax on supply of electricity as perquisite under section 17(2)(iii) of the Income-tax Act, 1961: The Revenue argued that the supply of unmetered electricity by KESCO to its employees under Special Tariff LMV-10 should be considered a taxable perquisite under section 17(2)(iii) of the Income-tax Act, 1961. The Assessing Officer (AO) calculated the notional value of perquisites based on the LMV-10 and IDF rate as per LMV-1, estimating the perk value and raising a notional liability of TDS under section 192. 2. Liability of the deductor (KESCO) to deduct tax on the value of perquisites provided to its employees under section 192 read with Rule 26A(2)(q): The AO issued a notice under section 201(1A) read with section 192/17(2)(iii), stating that the value of perquisites should have been included for tax deduction at source (TDS) by KESCO. The AO noted that neither the value of perks was considered for TDS by the employer, nor did the employees include the perk value in their income returns. 3. Whether the supply of electricity at reduced rates to employees constitutes a taxable perquisite: The CIT(A) deleted the addition made by the AO, holding that the supply of electricity at reduced rates to employees does not constitute a taxable perquisite. The CIT(A) noted that the rates for supply of electricity to employees were fixed by the UPERC and were binding on all consumers, including departmental employees. The CIT(A) also observed that the employees had no control over the rates, and the company incurred minimal expenditure in supplying electricity and recovering charges, which justified the lower rates. 4. Applicability of judicial pronouncements to the case: The CIT(A) relied on various judicial pronouncements to support the contention that the supply of electricity at reduced rates to employees cannot be considered a perquisite. The CIT(A) referred to the following cases: - CIT vs. L.W. Russell (1964) 53 ITR 91: Held that employees must have a vested right to perquisites, and contingent benefits do not qualify as perquisites. - CIT vs. Reliance Industries Limited (2008) 175 Taxman 367: Held that free meal coupons provided to employees should not be treated as perquisites. - CIT vs. Infosys Technology Ltd. (2007) 159 Taxman 440: Similar view as above. - CIT vs. Chief Officer, Zonal Office, State Bank of India (2006) 155 Taxman 477: Held that no perquisite value could be added in the hands of the employees for leased accommodation provided by the employer. - Bharat Heavy Electrical Ltd. vs. CIT (121 TAXMANN 702): Held that interest subsidy provided to employees is not a perquisite. Conclusion: The Tribunal upheld the CIT(A)'s decision, confirming that the supply of electricity at reduced rates to employees does not constitute a taxable perquisite under section 17(2)(iii) of the Income-tax Act, 1961. The Tribunal noted that the rates were fixed by UPERC, and the company had no control over them. The Tribunal also relied on various judicial pronouncements supporting the view that such benefits do not qualify as perquisites. Consequently, the appeals of the Revenue were dismissed.
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