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TMI Blog2008 (6) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... der on the following grounds : ( i )The learned CIT(A) has erred in law and on facts in deleting the demand of Rs. 5,11,546 under section 201(1) of the Income-tax Act, on account of short deduction of tax at source and interest thereon under section 201(1A) of the Income-tax Act, 1961, on providing free and/or at concessional rates, education and/or free transport facility to wards of its employees as per provisions of section 17(2) of the Income-tax Act, 1961 read with rule 3( e ) of the Income-tax Rules, 1962. The learned CIT(A) has erred by taking cognizance of the letter No. T-VI/Range-9/Misc./8990/2634, dated 22-11-1990 issued by the CIT Delhi-6, as the contents of the said letter are in conflict with rule 3( e ) of the Income-tax R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on perquisites for the above amenities as provided under section 17(2), 192, 201(1) of the Income-tax Act, 1961 and Rule 3( e ) of the Income-tax Rules, 1962. On the show-cause notice issued by the Assessing Officer, the assessee filed a written reply dated 8-9-1999. In the said reply, the assessee stated that they had obtained legal opinion from an advocate wherein they were advised that concession/free education provided to the wards of teaching staff are not covered within the purview of the perquisites as defined in the Income-tax Act, 1961 if the employer itself is an educational Institution. It was also stated in the legal opinion that, as per section 17(2) of the Income-tax Act, the word perquisite has inclusive meaning and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntony Public School Employees Association, that the Assessing Officer had erred in treating free/concessional education and transportation provided to the wards of employees as perquisite. The letter states as follows "please refer to your letter dated 22-5-1999 addressed to the Chairman, Central Board of Direct Taxes. In this connection, I am directed to inform you that if the employer has not directly incurred expenditure for the provision of the free additional facilities for the children of its employees, value of the benefits so far provided is to be treated as nil ". In order to verify the authenticity of this letter several opportunities was given to Assessing Officer, but in spite of lapse of two years the Assessing Officer was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit provided based on the actual fees, transport charges charged by the employer to other students in general. The learned DR refuted to the argument of the learned AR that since in this case the employer itself is an educational institution and the employer has not incurred any direct cost in giving such benefits it will not amount to be perquisites in the hands of the employee. First of all to arrive at a clear understanding of the provisions of law and the provisions of Income-tax Rules relating to perquisites, the relevant sections for the relevant assessment year are hereby reproduced: "Section 17(2)( iii ) - The value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence it is necessary for the employer to deduct tax at source from the employees salary paid by the employer. However the letter produced by the assessee i.e., the letter from CIT-6/Range 9/Misc-89-90/2634, dated 22-1-1990 issued from the office of CIT, Delhi-110006 to the Secretary, Frank Antony Public School Employees Association mentions about a clarification by the CBDT that if the employer has not directly incurred expenditure for the provision of the free educational facilities for the children of its employees, value of the benefits so provided is to be treated as nil . Though revenue could not produce the relevant file pertaining to the letter they have not challenged the authenticity of the letter. Moreover the clarification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at concessional rate to the employees whose income under the head Salaries (whether due from, or paid or allowed by, one or more employers), exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds [twenty four thousand rupees] shall be treated as perquisites. In this case it goes without saying that there is a cost to the employer while providing free transportation to the employee s wards. As per the provisions of the Act such cost incurred to the employer should be treated as perquisites in the hands of the employee and hence employer is bound to deduct tax at source for the value of such perquisites. Therefore the argument of the learned DR is acceptable to that extent. Therefore with r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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