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TMI Blog2013 (9) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... order for the sake of convenience. 4. All the appeals are filed by Revenue against different assessees and had raised identical ground of appeal and we proceed to dispose off the present bunch of appeals by referring to the facts in ITA No.1192/Chd/2009. 5. The issue raised in the present appeal is in relation to the computation of perquisite value of residential accommodation provided to its employees by BBMB and non-deduction of tax at source out of such perquisite value and consequent demand raised under section 201(1) and interest charged under section 201(1A) of the Act. 6. The brief facts of the case are that BBMB had allotted residential accommodation to its employees, who in turn were employees of the respective States of India. The Assessing Officer received communication from CBDT to conduct enquiry in the case of BBMB. The Assessing Officer show caused the assessee/Person Responsible to deduct tax (i.e. in short PRs) to explain as to why the value of perquisite on account of rent free accommodation provided to its employees, as per Rule 3 of Income-tax Rules, were not taken into account while calculating the taxable income of BBMB employees. As per the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyees and there is no default on the part of any DDO of the BBMB in TDS deduction from the salary of its employees." 7. The Assessing Officer dismissed the plea of the assessee that BBMB though a statutory body was to be treated as joint department of more than one State. Since BBMB was a statutory body created by Gazette Notification of Ministry of Irrigation & Power dated 1-10-2007 by Government of India, the Assessing Officer held BBMB to be clear creation by law as statutory body assigned to carry out the functions as per the notification. The functions to be carried out by BBMB are enlisted under para 6 at page 5 of the assessment order. The Assessing Officer thus held that. It is held that BBMB is an independent statutory body and falls in the category of other than Govt. for the purpose of valuation of perquisite on account of rent free/concessional accommodation U/s 17(2) of I.T. Act 1962 read with rule 3 of I.T. Rules 1962. 8. The next plea of the assessee that the ownership of the property of BBMB remained in the hands of the partner States in the pre-fixed ratio was also rejected by the Assessing Officer as BBMB was held to be an entity independent of the partner Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re attended to by senior official/s of BBMB, who in turn explained that the facts were not presented in the right perspective before the Assessing Officer as the counsel appearing before the Assessing Officer did not understand the issue. However, the case position was elaborately explained before the CIT (Appeals) by way of written submissions dated 22-10-2009 accompanied by various gazette notifications, circulars, letters, judicial pronouncements and relevant extract from Punjab Reorganization Act, 1966. The CIT (Appeals) held that the observations of the Assessing Officer that BBMB was not a Government Organization but a statutory body, falling in the category of "other than Government Organization" was not based on legal analysis of the facts of the case. The CIT (Appeals) addressed various issues relating to aspect of the issue raised in the appeal and following questions were formulated : (1) Who constituted the BBMB ? (2) Whether there is any private partnership/funds raised from public ? (3) What is the constitution of BBMB ? (4) What is the source of funds/grants/assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CIT (Appeals). The learned D.R. for the Revenue pointed out that the assessee was a body or undertaking wherein admittedly all the employees were on deputation from the State Governments. The learned D.R. for the Revenue pointed out that BBMB had provided the accommodation to the employees and not the State Government. Reference was made to the observations of the Assessing Officer in paras 6 and 8 of the assessment order wherein the Assessing Officer had given a finding that BBMB was an independent statutory body. Reliance was placed on para 9 of the assessment order and it was pointed out by the learned D.R. for the Revenue that the provisions of Rule 3(1), Part-1 of Income-tax Rules were not applicable as the Government of India or State Government had not provided the accommodation. It was further pointed out that the licence fees were paid by the employees to BBMB and not to the State Government and BBMB was an independent statutory body and consequently the order of the Assessing Officer was to be upheld. 15. The learned A.R. for the assessee pointed out that the provisions of Rule 3(1) of the Income-tax Rules are to be applied where (a) the accommodation was provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 16 of the Act. The term 'salary', 'perquisite', 'profits in lieu of salary', are defined under section 17 of the Act which under sub-section (1) defines salary, under sub-section (2) defines perquisite and under sub-section (3) defines profits in lieu of salary to include various items. One of the perquisite to be included in the hands of the assessee is in relation to the accommodation provided by the employer to its employees. Sub-section (2) provides the computation of value of the accommodation provided by the employer to its employees in respect of the rent free accommodation provided or in relation to the value of any concession in the matter of rent, in respect of any accommodation, provided to the employees by the employer. Section 17 (2) reads as under: 17 (2) "perquisite" includes- (i) the value of rent-free accommodation provided to the assessee by his employer; (ii) the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer; &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the accommodation determined under sub-clause (i) of clause (a) as increased by the value of the furniture and fixtures in respect of the period during which the said accommodation was occupied by the assessee during the previous year, exceeds the rent recoverable from, or payable by, the assessee; (ii) the accommodation is taken on lease or rent by the employer, the value of the accommodation determined under sub-clause (ii) of clause (a) as increased by the value of the furniture and fixtures in respect of the period during which the said accommodation was occupied by the assessee during the previous year, exceeds the rent recoverable from, or payable by, the assessee; (d) in a case where the accommodation is provided by the employer in a hotel (except where the assessee is provided such accommodation for a period not exceeding in aggregate fifteen days on his transfer from one place to another), the value of the accommodation determined at the rate of twenty-four per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyer, or (i) 15% of salary in cities having population exceeding 25 lakhs as per 2001 census; (ii) 10% of salary in cities having population exceeding 10 lakhs but not exceeding 25 lakhs as per 2001 census; (iii) 7.5% of salary in other areas, in respect of the period during which the said accommodation was occupied by the employee during the previous year as reduced by the rent, if any, actually paid by the employee. The value of perquisites as determined under column (3) and increased by 10% per annum of the cost of furniture (including television sets, refrigerators, other household appliances, air-conditioning plant or equipment or other similar appliances or gadgets) or if such furniture is hired from a third party, by the actual hire charges payable for the same as reduced by any charges paid or payable for the same by the employee during the previous year. (b) where the accommodation is taken on lease or rent by the employer. Actual amount of lease rental paid or payable by the employer or 15% of salary whichever is lower as reduced by the rent, if any, actually paid by the employee. The value of perquisite as determined under column (3) and increased by 10% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; (i) the employer of such an employee shall be deemed to be that body or undertaking where the employee is serving on deputation; and (ii) the value of perquisite of such an accommodation shall be the amount calculated in accordance with Sl. No. (2)(a) of Table I, as if the accommodation is owned by the employer." 19. Under the provisions of section 192 of the Act it is the responsibility of the employer, who is paying salaries to its employees to deduct tax at source, on the amount of salary and other benefits payable, at average rates of income-tax, computed on the basis of the rates applicable to the financial year for which such salary is paid i.e. on the estimated income to be paid to the assessee under the head 'Salaries'. Sub-section (1) to section 192 of the Act relates to the salaries paid by the employer to the employees, sub-section (1)(a) of the Act refers to the income in the nature of perquisite which is not provided by way of monetary payment to be included in the hands of the assessee on which tax is to be deducted at source. Further provisions of section 192 refer to the liabilities of the employer vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by Revenue against various Drawing & Disbursing Officers of BBMB who were held to have failed in their duties of deduction of tax at source out of the perquisite value of rent free accommodation provided by BBMB to its employees. The Government of India with the approval of Parliament had constituted BBMB, which was a statutory body constituted under the provisions of Section 79(1) read with Section 80(6) of the Punjab Reorganization Act, 1966 for the administration, maintenance and operation of its work i.e. Bhakra Dam Project. 22. As per Section 79 (2) of the Punjab Re-organization Act, 1966, BBMB was to consist of the following:- (a) a whole-time Chairman and two whole-time members to be appointed by the Central Government; (b) a representative each of the Governments of the States of Punjab, Haryana and Rajasthan and Union territory of the Himachal Pradesh (now Himachal Pradesh) to be nominated by the respective Governments or administrator, as the case may be; (c) two representatives of the Central Government to be nominated by that Government. 23. The Government of India vide Notification dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rritory of Himachal Pradesh or any other authority, and the State Governments, Administrator or authority shall comply with such directions. The Bhakra Management Board may, with the previous approval of the Central Government and by notification in the official gazette, make regulations consistent -with this Act and the rules made thereunder, to provide for:- (a) regulating the time and place of meetings of the Board and the procedure to be followed for the transaction of business at such meetings; (b) delegation of powers and duties to the Chairman or any officer of the Board; (c) the appointment, and the regulation of the conditions of service, of the officers and other staff of the Board; (d) any other matter for which regulations are considered necessary by the Board," 27. Section 80 of the Punjab Reorganization Act further lays down the provision of funds by the partner States for the construction of Beas Project to be undertaken by the Central Government on behalf of the partner States. Section 80(1) reads as under:- "80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lays down that deputation of employees to BBMB or Beas Construction Board shall be treated as service in the interest of State of Punjab and no deputation allowance shall be admissible to these employees. This position regarding status of employees of BBMB has been upheld by the Hon'ble Punjab and Haryana High Court in CWP No.6768 of 1996 titled "Nirmal Singh and others v. State of Punjab and Others". This judgment of Hon'ble High Court has also been upheld by the Hon'ble Supreme Court of India vide order dated 6-11-1998. Further, the Hon'ble Supreme Court in the case of Jaswant Singh and Others v. Union of India reported in AIR 1980 SC 115 has held that employees deputed by the State Govt. for Beas Project (Original name of BBMB) would continue to get the status of Government employee and the employees recruited by Beas Construction Board will be treated as Central Government employees, Beas Construction Board BEING a limb of central Government. Since Beas Project had merged into Beas Management Board renaming as Bhakra Beas Management Board, the principle decided by Hon'ble Apex Court continued to be valid till date.' 31. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the special statutory status being given to BBMB, which is Central Government constituted and control Board, we hold that BBMB is Government and not 'other organization' as held by the Assessing Officer. 33. The employees working with BBMB were in turn transferred from the different partner States. The said employees so transferred to BBMB and working with BBMB continued to enjoy the status of Government or State employees as the case may be and hence were entitled to the benefit available to such Government or State employees. The status of the employees deputed by the State Government for the Beas Project thus continued to be the status of Government employees. Further the employees recruited by the Beas Construction Board were to be treated as Central Government employees as BCB was the limb of Central Government. The said was the ratio laid down by the Hon'ble Supreme Court in the case of Jaswant Singh v. Union of India reported in AIR 1980 SC 115. The Hon'ble Supreme Court was considering the question of the status of the employees deputed for Beas Project. In view of the above said facts and also the Beas Project having merged with Bhakra Management Board, which was rename ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee falls within Sr.No.1 of Table-1 under Rule 3(1) of the Income-tax Rules. The assessee claims not to fall within Sr.No.2 of Table-1 under Rule 3(1) of the Income-tax Rules, which applies where the accommodation is either owned by the employer or taken on rent or lease by the employer, which is not the case in respect of the rent free accommodation provided by BBMB to its employees and hence the said Rule was claimed to be not applicable to the facts of the case. However, the case of the Revenue is that the accommodation provided to the employees of BBMB was not owned by BBMB and hence the provisions of Sr.No.1 of Table-1 under Rule 3(1) of the Income-tax Rules were not applicable and the perquisite value @ 7.5% on salary in other cases as per Sr.No.2 of Table-1 under Rule 3(1) of the Income-tax Rules were to apply. 36. Coming to the provisions of Rule 3 of the Income-tax Rules, As per S.No 1 of table-1 under Rule 3(1) of Income-tax Act Rules 'Where the accommodation is provided by the Central Government or any State Government to the employees either holding office or post in connection with the affairs of the Union or of such State or serving with anybody or undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ministry of Power, Government of India dated 25-8-2009 addressed to the Commissioner of Income-tax, TDS Circle before the CIT (Appeals) in which it was clarified that the BBMB was not the owner of residential accommodation and it was actually being owned by the partner States Government. The extract of the clarification dated 25-8-2009 is as under: "1. I am directed to say that it appears necessary to clarify the status of Bhakra Beas Management Board for the purpose of deduction of Income-tax on account of residential accommodation provided to the officers and employees working in the Board, 2. BBMB was constituted by the Government of India as a statutory body under Section 79 (1) of the Punjab Re-organization Act, 1966 for the administration, maintenance and operation of Bhakra and Beas projects. The properties including the township are regarded as a work appurtenant to the projects. The Government of Punjab and the successor states are the owners of the properties. BBMB does not own the properties. 3. It is, therefore, clear from above that BBMB is not the owner of residential accommodation of BBMB o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Admittedly in the facts of the present case the licence value had been determined in accordance with Rule 5.23 of Punjab Civil Service Rules, Vol. I, Part-I and had been included as taxable perquisite under Rule 3(1) of the Income-tax Rules, in the case of the assessee. 40. We find no merit in the order of the Assessing Officer in applying the provisions of Sr.No.2 of table-1 under Rule 3 of Income-tax Rules, which is applicable where the accommodation is either owned by the employer or is taken on lease by the employer. The accommodation in the present case provided to the employees of BBMB was owned by the respective States and was not owned by BBMB and since the basic condition of ownership of the accommodation has not been specified in the present case, nor the premises had been taken on lease by the BBMB from the respective States, the provisions of Rule 3(1) of the Income-tax Rules as laid down under Sr.No.2 of Table-1 were not applicable. Upholding the order of the CIT (Appeals) we dismiss the ground of appeal raised by the Revenue. 41. In the result, all the appeals filed by the Revenue in ITA Nos.1192 to 1255/Chd/2009 are dismissed. Order pronounced in the open court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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