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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 ..... owner of the land originally allotted to the Bhakra Project and since BBMB was functioning under the direct control of the Central Government, wherein the employees of BBMB were to be treated as the employees of the Central or State Government, the ingredients of Sr.No.1 of Table-1 under Rule 3 of the Income-tax Rules stand fulfilled. The said provisions relates to the accommodation provided by the Central Government or any State Government to its employees or employees serving with any body or undertaking under the control of such Government on deputation. The employees employed with BBMB were the employees of the State Government, which in turn was functioning under the control of Central Government and consequently the perquisite value of the rent free accommodation provided to such employees was to be the licence fees determined by the State Government as reduced by the rent actually paid by the employees. 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 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs) 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 Officer, the perquisite value was required to be calculated @ 7.5% of the total salary income as per Rule 3 of Income-tax Rules. The reply of the assessee is incorporated at pages 2 to 5 of the order passed under section 201(1) r.w.s. 201(1A) of the Act. The plea of the assessee before the Assessing Officer was that BBMB was statutory body consisting of nine members as specified in section 79(2) of Punjab Reorganization Act, formulated to administer, maintain and operate the work on Bhakra project. The BBMB was claimed to be a joint department of the partner States and all the costs were met by the said partner States, in the pre-fixed proportions. It was further explained that BBMB was recovering licence fees from the employees as per CSR Rules of Punjab Government till 1-11-2005 and thereafter amount equal to licence fee was treated as perk in the hands of the employees of BBMB and TDS on account of the value of perk for rent free ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext 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 States as it was governed by statutory set of rules. In view thereof, it was held that BBMB, an independent statutory body, as does not fall in the category of Government for determination of perquisite value of rent free/concessional accommodation under section 17(2) of the Act and as per Rule 3 of Income-tax Rules and properties being owned by the BBMB, there was no merit in the stand of the assessee. The alternate plea of the assessee that the accommodation provided to the employees of BBMB were owned by the State Governments was rejected by the Assessing Officer vide para 11 holding that the BBMB was the actual owner of the properties and hence the alternate arguments made by the learned counsel for the assessee were not acceptable in view of the findings given in para 9 of the assessment order that BBMB was the owner of the properties and there was no question of taking on lease the said properties by BBMB. The Assessing Officer thus held as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any private partnership/funds raised from public ? (3) What is the constitution of BBMB ? (4) What is the source of funds/grants/assets of BBMB ? (5) Who is auditing the accounts of BBMB ? (6) Who is exercising control over the affairs of BBMB ? (7) Who is the owner of the residential property provided to the employees of the BBMB ? (8) What is the status of employees working in BBMB ? 11. The CIT (Appeals) vide para 12 held as under: "12. In my considered opinion, the answer to the all the above questions extracted from Punjab Reorganization Act, various Gazette Notifications, circulars and letters and submissions of the appellant categorically throw light in the direction that BBMB, for all intents and purposes, is a Government Organization. BBMB for all practical purposes is under the overall supervision and control of the Central Government through its representatives. The source of funds is from the partner States i.e. Punjab, Haryana and Rajasthan and its accounts are audited by the Comptroller Auditor General of India." 12. The case of the Assessing Officer that BBMB falls in the category of 'other organization' was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are to be applied where (a) the accommodation was provided by the Central or State Government and (b) where the employees were serving with any body or undertaking, under the control of such Central or State Government. It was further stated by the learned A.R. for the assessee that the employees of State Government were working for BBMB but were in fact the employees of State Government. The learned A.R. for the assessee filed written submissions in which it has been alleged that BBMB was under the control of Central Government and had to comply with such directions as may be given to it by them. Further the residential accommodation allotted to the employees of BBMB were owned by the Punjab Government and the said fact was clarified by the Ministry of Energy, Department of Power, Government of India, New Delhi vide letter dated 7-4-1977, in case related to sales tax. 16. The next plea of the learned A.R. for the assessee was that the employees working in BBMB were to be treated as serving in the interest of State of Punjab and no deputation licence was permissible to the said employees. Reliance was placed on the ratio laid down by the Hon'ble Punjab Haryana High Court in C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter of rent shall be deemed to have been provided if, (a) in a case where an unfurnished accommodation is provided by any employer other than the Central Government or any State Government and (i) the accommodation is owned by the employer, the value of the accommodation determined at the specified rate 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 being the actual amount of lease rental paid or payable by the employer or fifteen per cent of salary, whichever is lower, 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; (b) in a case where a furnished accommodation is provided by the Central Government or any State Government, the licence fee determined by the Central Government or any State Government in respect of the accommodation in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee (hereinafter referred to as employee) or to any member of his household by reason of his employment shall be determined in accordance with the following sub-rules, namely:- (1) The value of residential accommodation provided by the employer during the previous year shall be determined on the basis provided in the Table below (See page 1.36) : TABLE I Sl. No. Circumstances Where accommodation is unfurnished Where accommodation is furnished (1) (2) (3) (4) (1) 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 any body or undertaking under the control of such Government on deputation. License fee determined by the Central Government or any State Government in respect of accommodation in accordance with the rules framed by such Government as reduced by the rent actually paid by the employee. The value of perquisite as determined under column (3) and increased by 10% per annum of the cost of furniture (including television se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able for the previous year or the actual charges paid or payable to such hotel, which is lower, for the period during which such accommodation is provided as reduced by the rent, if any, actually paid or payable by the employee: Provided that nothing contained in this sub-rule shall apply to any accommodation provided to an employee working at a mining site or an on-shore oil exploration site or a project execution site, or a dam site or a power generation site or an off-shore site - (i) which, being of a temporary nature and having plinth area not exceeding 800 square feet, is located not less than eight kilometres away from the local limits of any municipality or a cantonment board; or (ii) which is located in a remote area: Provided further that where on account of his transfer from one place to another, the employee is provided with accommodation at the new place of posting while retaining the accommodation at the other place, the value of perquisite shall be determined with reference to only one such accommodation which has the lower value with reference to the Table above for a period not exceeding 90 days and thereafter the value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax." 20. The present appeals before us are in relation to the demand raised under section 201(1) of the Act and charging of interest under section 201(1A) of the Act. Section 201(1A) reads as under: "201(1A) Without prejudice to the provisions of sub-section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid and such interest shall be paid before furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide the requisite funds to BBMB in the requisite ratio, in order to meet all the expenses including the salary and allowances of the staff of BBMB. 26. Under section 79 (6) of the Punjab Re-organization Act it is provided that the Bhakra Management Board (now Bhakra Beas Management Board) shall be under the control of Central Government and shall comply with such directions as may be issued to it from time to time by the Government. The relevant provisions of sub Section (6) to section 79 of the Punjab Re-organization Act are as under: "The Bhakra Management Board shall be under the control of the Central Government and shall comply with such directions, as may, from time to time, be given to it by that Government. The Bhakra Management Board may with the approval of the Central Government delegate such of its powers, functions and duties as it may deem fit to the Chairman of the said Board or to any officer subordinate to the Board. The Central Government may, for the purpose of enabling the Bhakra Management Board to function effectively, issue such directions to the Stale Governments of Haryana, Punjab and Rajasthan and the Administrator of the Union Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Personal Ledger Account. All the payments were being released by issuing the cheques for which the Cheque Books were issued to BBMB by Ministry of Power, Government of India. A monthly report of cheques issued was sent to the Controller of Accounts, Ministry of Power, Government of India. 29. As per the findings of the CIT (Appeals) the status of the partner States Government/State Electricity Board employees working in BBMB had been mentioned in Rule 10.21 of Punjab Civil Service Rules, Vol.I, Part-I and Clause (5) of the said Rules read as under: "The deputation of an employee to the Union Territory of Chandigarh or transfer of an employee to foreign service under the BBMB or Beas Construction Board shall be treated as service in the interest of State of Punjab and no deputation allowance shall be admissible," 30. The plea of the assessee before us in this regard was as under: 'Further the status of the employees working in BBMB has been defined under Punjab Civil Service Rules which clearly 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, circulars and letters and submissions of the appellant categorically throw light in the direction that BBMB, for all intents and purposes, is a Government organization. BBMB for all practical purposes is under the overall supervision and control of the Central Government through its representatives . The source of funds is from the partner States i.e. Punjab, Haryana and Rajasthan and its accounts are audited by tile Comptroller Auditor General of India." 32. We are in conformity with the findings of the CIT (Appeals) that BBMB was a Government Organization working under the overall supervision and control of the Central Government through its partner States. The source of the funds for establishing the project and for running BBMB, flowed from the partner States i.e. Punjab, Haryana, Himachal Pradesh and Rajasthan in pre-determined proportions, as per the different provisions of Punjab Reorganization Act. In view of 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 tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd in accordance with the Regulations notified by the Central Government in the official gazette dated 8-10-1994 draw their salary from the Personal Ledger Account maintained in the Public Account of Government of India. The licence fee on the rent free accommodation is in accordance with Rule 5.23 of the Punjab Civil Services Rules which has been added as perquisite in the salary of the employees and TDS has been deducted accordingly. 16. To sum up, for all intents and purposes, Bhakra Beas Management Board is a Government organization. I am in agreement with the submissions of the appellant that Licence Fee determined in accordance with Rule 5.23 of Punjab Civil Services Rules, Vol. I, Part I shall only be taken as taxable perquisite under Rule 3 (1) of the I.T. Rules. The appeals of the appellants are allowed." 35. The submissions of the assessee before us was that the case of the 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment of India, Ministry of Energy has clarified that Bhakra Beas Management Board is only authorized to administer, maintain and operate Bhakra Nangal Project in terms of Section 79 of the Punjab Re-organization Act, 1966. Ministry of Energy, Department of Power, Government of India, New Delhi vide letter No.2/22/76-DW(N) dated 7 April, 1977 has, in a case related to Sales Tax, clarified that "originally Government of Punjab was the owner of the property and at present the successor States are the owner of the said property and Bhakra Management Board has never been the owner of the property." 38. It thus appears that the land on which Bhakra Township was established was originally owned by Government of Punjab and then by the successor States. During the course of proceedings, the assessee had filed a communication from the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, the ingredients of Sr.No.1 of Table-1 under Rule 3 of the Income-tax Rules stand fulfilled. The said provisions relates to the accommodation provided by the Central Government or any State Government to its employees or employees serving with any body or undertaking under the control of such Government on deputation. The employees employed with BBMB were the employees of the State Government, which in turn was functioning under the control of Central Government and consequently the perquisite value of the rent free accommodation provided to such employees was to be the licence fees determined by the State Government as reduced by the rent actually paid by the employees. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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