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TMI Blog2009 (7) TMI 914X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes." 2. The Assessing Officer noticed that while computing the perquisite value in respect of accommodation provided to the employees, the dearness allowance has not been considered as part of salary. He also noted that the CAO of the employer assessee stated that dearness allowance formed a part of salary for the calculation of retirement benefits like gratuity and leave encashment but not for the pension purposes so far, however, from the current financial year, the dearness allowance is also included in salary for calculation of pension. 3. Citing rule 3 of the Income-tax Rules, 1962 and definition of salary given therein the Assessing Officer observed that for valuation of perquisites, the dearness allowance will form part of salary if it is taken into computation of retirement benefits. He observed that since retirement benefits are not defined under the Income-tax Act, 1961 and are also not specifically mentioned as far as definition of salary is concerned for the purpose of rule 3 of the Income-tax Rules, 1962, it can safely be held that the words retirement benefits for the purpose of rule 3, would mean anyone or all the benefits given to an employee at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allotted ( i.e., recoverable) in respect of accommodation allotted to the employees by appellant-company/corporation, would be of no meaning, as the accommodation whatsoever allotted is provided to the employee from the Corporation and not the State Government. The case law relied on by counsel/AR is not of any help to the appellant as these relate to period prior to 1-4-2001 since when amendment rule 3 come into effect. 2. As to the inclusion of whole of DA for the purpose of salary he held that as per the order dated 20-5-2004, issued from the Financial Adviser (HQ), DHBVNL, dearness allowance equal to 50 per cent of the existing basic pay got merged with the basic pay with effect from 1-4-2004 and is to be counted for the purposes like payment of allowances, transfer grant, retirement benefits, contribution to GPF, license fee, various advances, etc. In other words, 50 per cent of the DA shall be one which shall enter into computation of superannuation and retirement of the employee concern. The abovesaid order takes effect from 1-4-2004 unless there were employees who were retiring on or before 31-3-2004, 50 per cent of DA so merged shall form part of salary, for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by CIT(A) after exhaustively perusing all concerned notifications and scheme of the Government discussed in the body of the appeal order and in view of such a factual finding, there is no basis for revenue to remain aggrieved merely on the basis of some statement given by some employee during the course of survey that Dearness Allowance is not taken into account for the purpose of pension, more so when in that very statement it was admitted by that very employee as recorded in the impugned orders that Dearness Allowance is taken into account for the purpose of gratuity. 8. In the statement of CFO reply to question No. 12, CFO has clearly mentioned that DA is not included for the purpose of pension and DP (dearness pay) is included for the purpose of pension only from 1-4-2004. It means that pension which is the most important retirement benefit does not include DA and that being so DA is not to be included in salary in terms of rule 3 also, for the purpose of calculation of the valuation of the perquisite. The term "retirement benefit" has not been defined under the Income-tax Act. It has to be taken then that in any case, there was a bona fide estimate on the part of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion has to be taken at 10 per cent of the salary in cities having population exceeding 4 lakhs as per 1991 census; and 7.5 per cent of salary in other cities vide category 2 of Table I below rule 3(1). The fact that the fixed rent has been allotted ( i.e., recoverable) in respect of accommodation allotted to the employees by assessee-company/corporation, has no bearing on the issue as the allotted accommodation is provided to the employee by the Corporation and not the State Government. 12. For the purpose of rule 3 of Income-tax Rules, 1962 governing the valuation of perquisites, the term salary includes the pay, allowance, bonus of commission payable monthly or otherwise or any monetary payment, by whatever name called from one or more employers, as the case may be, but does not include the following, namely ( a )Dearness allowance or dearness pay unless it enters into the computation of superannuation or retirement benefits of the employee concerned; ( b )Employer s contribution to the provident fund account of the employee; ( c )Allowances which are exempted from payment of tax; (d)The value of perquisites specified in clause (2) of section 17 of the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Haryana Bijli Vitran Nigam Ltd. (UHBVNL), Panchkula and Haryana Vidyut Parsaran Nigam Ltd. (HVPNL), are calculating perquisites for accommodation provided to their employees by including dearness allowance as part of salary does not conclude what the law is and by that it cannot be stated that the assessee is not following the provisions of rule 3 in the right spirit. 16. As per the office order dated 20-5-2004 of the Financial Adviser (HQ), DHBVNL, dearness allowance equal to 50 per cent of the existing basic pay got merged with the basic pay with effect from 1-4-2004. It is this 50 per cent alone that is counted from this date for the purposes of payment of allowances, transfer grant, retirement benefits, contribution to GPF, license fee, various advances etc. therefore it is this 50 per cent of the DA alone is to enter into computation of superannuation and retirement of the employee concerned with effect from 1-4-2004 for the purpose of Explanation ( vi ) to rule 3. The CIT(A), in our opinion, rightly held that it is with effect from 1-4-2004, 50 per cent of the DA so merged shall be taken as part of the salary for the purpose of working out perquisite under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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