Ita/277/2015 Of Indian Institute Of Science v. The Dy. Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 14 DAY OF JULY 20271 PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’/BLE MR. JUSTICE HEMANT CHANDANGOUDAR BETWEEN: ILT.A. NO.2/77 OF ZO1 INDIAN INSTITUTE OF SCIENCE.SCIENCE, INSTITUTE POST OFFICEBANGALORE-560012.REP. BY ITS REGISTRAR.MS. INDUMATI SRINIVASAN. (BY SMT. KAVITHA JHA, ADV., FORSRI. PRASHANTH KUMAR D, ADV.,) | — APPELLANT. AND* THE DY. COMMISSIONER OF INCOME TAXCIRCLE 16(2), BANGALORE. ~. RESPONDENT (BY SRI. K.V. ARAVIND, ADV.,) THIS I.T.A. IS FILED UNDER SEC. J6O0-A OF INCOME TAXACT 1961, ARISING OUT OF ORDER DATED 27.02.2015 PASSEDIN ITA NO.1589/BANG/2014 FOR THE ASSESSMENT YEAR 2010-11, PRAYING TO: (i) FORMULATE THE SUBSTANTIAL QUESTION OF LAW AS.STATED ABOVE IN FAVOUR OF THE APPELLANT BY ALLOWING THE.APPEAL|AND|SET|ASIDE.THE TRIBUNALORDER|IN|LITANO.1589/BANG/2014 DATED 27.02.2015 (ANNEXURE A) IN SO.FAR AS THE QUESTIONS OF LAW RAISED IN THIS APPEAL. (ii) ALLOW THE APPEAL AND REVERSE THE IMPUGNED.ORDER INSOFAR AS THE ISSUES RAISED IN THIS APPEAL ARECONCERNED. THIS I.7T.A. COMING ON FOR’ HEARING, THIS’ DAY, |ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as the Act for short)has been preferred by the assessee. The subject matter|of the appeal pertains to the Assessment year 2010-11.The appeal was admitted by a bench of this Court on thefollowing substantial questions of law:| “(a)Whether on the facts and|circumstances of tne case the Tribunelerred in law in holding that the appellant ts not an instrumentality and/or agency of tneGovernment and thus cannot be treated atpar with the Government employees under|Table 1 of Rule 3 of the Income Tax Rules,19672 (Db) Wnetner the rules applicable to theGovernment employees for the purpose of|computingvalue.ofperquisitesUnder Section 1/7(2) of the Act would be applicablein the case of the appellant?” (c) Whether the Tribunal erred jin notappreciating that the Assessing Officer wasobligated to establish that the Appellant has provided any concession to the Employees|in respect of the accommodation before|applying Rule 3 of the Income Tax Rules19622?" (dadWhnetner the appellant can betreated as an assessee In default withoutthe Assessing Officer establishing that the.appellant has extended any concession intheform.ofaccommodationTo Itsemployees? (e)Whether Rule 3 of the Income Tax.Rules, 1962 will only apply once a liability Iscreated under the charging provision -Section 1/7(2)(ii) of the Income Tax Act,19612 2.|Facts leading to filing of this appeal brieflystated are that tne assessee is a premier researcn institution engaged in imparting higher learning and|Carryingoutadvanced|researchIn|SCcCIeNnandtechnology. The assessee is recognized as a ‘Deemed|University’ under the provisions of University Grants.Commission Act, 1956 (hereinafter referred to as ‘theUGC Act’ for short). The service conditions of theemployees of the assessee are governed by the rules as are applicable to the Central Government employees.Accordingly, TDS Return in Form 24Q was filed by the.assessee under Section 192 of the Act read with Section|17(2) of the Act, for the period 01.04.2009 to.31.03.2010, which is applicable in respect of theemployees of the Central Government. The Assessing.Officer by order dated 26.04.2013 passed under Section.201(1) and 201(1A) read with Section 192 of the Act forthe Assessment Year 2010-11 and held that the’assessee had not correctly worked out the perquisitevalue of accommodation in accordance with amended|Rule 3 of tne Rules and the assessee is liable to be. treated as assessee in default under Section 201(1) ofthe Act for non deduction / short deduction. It was)further held that assessee is liable to pay interest underSection 201(1A) of the Act. treated as assessee in default under Section 201(1) ofthe Act for non deduction / short deduction. It was)further held that assessee is liable to pay interest underSection 201(1A) of the Act. 3The assessee thereupon filed an appealbefore the Commissioner of Income Tax (Appeals) who.by an order dated 22.07.2014 affirmed the orderspassedbytheASSeSSINg|Officer..The.aSS@C@SSCthereupon filed an appeal before the tribunal. Thetribunal, by an order dated 27.02.2015, inter alia, heldthat the employees of the assessee cannot be construedto be employees of the Central Government for thepurposes of computing perquisite value is governed by.SI.No.2 of Table 1 appended to Rule 3 of the Rules.Accordingly, the appeal was dismissed. In the aforesaid|factual background, this appeal has been filed. 4Learned counsel for the assessee submittedthat assessee is a Trust constituted under Charitable| Endowment Act, 1890. It is further submitted that the)assessee functions under the financial, administrativeand functional control of the Central Government. It Is/also argued that service conditions of the employees of the assessee are governed by the Rules, which are|applicable to the Central Government. It is submitted.that assessee is an instrumentality agency of the CentralGovernmentengagedInscientificresearch|and|imparting nigher education and therefore, the rates oftaxes, which are applicable for computation of perquisite value governed by SI.No.1 of Table 1 of Rule 3 of the|Rules. It is also urged that Rule 3 of the Rules is not'applicable to the case of the assessee as there is no.finding that the assessee nad provided any concession.DY Way of providing accommodation to its employees. Itis also submitted that similar Denefit was given to the|employees of the Indian Institute of Management and.the decision of the tribunal was accepted by therevenue. It ts furtner submitted tnat tnat assessee cannot be treated to be assessee in default in the!absence of any finding that assessee had extended any.concession in the form of accommodation to_ itsemployees. It is further submitted that Rule 3 of theRules applies only once a liability is created underSection 17(2)(ii) of the Act. In Support of aforesaidsubmissions, reliance has been placed on decisions in.R,D,.SHETTYVS,INTERNATIONALAIRPORTAUTHOIRTY OF INDIA AND OTHERS, AIR 1979 SC1628,"AJAY HASIYAVS,KHALTDMUJTEEBSEHRAVARDI', AIR 1981 SC 487, ‘PRADEEP KUMAR.VS. INDIAN INSTITUTE OF CHEMICAL BIOLOGY’,|(2002) 7 SCC 111, ‘ARUN KUMAR VS. UNION OFINDIA,(2006)286[TR89(SC),"STAR|TELEVISION NEWS LTD. VS. UNION OF INDIA,|(2009) 184 TAXMAN 400 (BOM.). 5.|On the other nand, learned counsel for therevenue submits tnat SI.No.1 of Table 1 appended toRule 3(1) of the Rules apply when the accommodation. is provided by the Central Government or StateGovernment. It Is Submitted that assessee is not asCentral Government and therefore, iS governed by'SI.No.2 of Table 1 appended to Rule 3(1) of the Rules. Itis also submitted that the Supreme Court in."'ARUNKUMAR AND OTHERS VS. UNION OF INDIA‘,(2006) 286 ITR 89 (SC)has drawn a distinction|between Central Government, State Government and)employee|oftheotherstatutoryCorporation/Undertaking. It is further submitted that Explanation 1 Nas been incorporated to Section 1/7(2) of the Act byFinance Act, 2007 with retrospective effect i.e., from.01.04.2002. Therefore, thequestion ofgrant|OF concession does not arise. It Is also submitted that§Section 201 of the Act covers the case of shortfall in|payment of tax also and no question of law has been.framed in this case with regard to applicability of Section201 of the Act in case of shortfall of payment of tax. © 6.|We have considered the rival submissions. 6.|We have considered the rival submissions. made by learned counsel for the parties and havecarefully perused the record. Before proceeding further,|we may refer to the well settled principles ofinterpretation laid down in relation taxing statute. In a|taxing Act one Nas to look merely at what is clearly said.There is no room for any intendment. There is no equityabout a tax. There is no presumption as to tax. Nothing|is to be read in, nothing is to be implied. One can only|look fairly at the language used.{/See: BANARASTDEBI VS. ITO, AIR 1964 SC 1742]. It is equally awell settled legal proposition that in all tax matters one|has to interpret the taxation statute strictly. Simply.because one class of legal entities is given a benefitwhich is specifically stated in the Act, does not mean.tnat the benefit can be extended to legal entities notreferred to in the Act as there is no equity in matters oftaxation. 7. The tssue, wnicn arises for consideration iswnetner the assessee, wnich is a Trust registered under. the Charitable Endowment Act, 1890 can be treated asCentral Government as provided in SI.No.1 of Table 1.appended to Rule 3(1) of the Rules. Before proceeding|further, it is apposite to take note of relevant extract ofSection 1/7(2) Explanation 1, Rule 3(1) read withrelevant extract of Table 1 appended to it, which readas under: 1/(2) “Perquisite” includes -— (1) the value of rent-free accommodationprovided to the assessee by his employer; (ii) the value of any concession in the|matter of rent respecting any accommodationprovided to the assessee by his employer. Explanation 1:- For the purposes of this|sub-clause, concession in the matter of rentShall be deemed to have been provided if - (a) IN a case where an unfurnishedaccommodation is provided by an employeeother than the Central Government or any.State Government and - (i) the accommodation Is owned|by the employer,, the vaiue of the|accommodation determined at the specified rate in respect of the periodduring which the said accommodationwas occupied by the assessee during|the previous year, exceeds the rent|recoverable from, or payable by, thedASS@CSSE€ (ii) the accommodation is taken.on lease or rent by the employer, thevalue of the accommodation being|the actual amount of lease rentalpaid or payable by the employer or fifteen per cent of salary, whichever|is lower, in respect of the period|during which the said accommodationwas occupied by the assessee during|the previous year, exceeds the rent|recoverable from, or payable by, the|dSSCSSCEC, (Db)In|aCaASCwhereadfurnishedaccommodation is provided by the CentralGovernment or any State Government, the.licencefeedeterminedby theCentralGovernment or any State Government in|respect of the accommodation in accordancewith the rules of such Government a@s increased by the value of furniture and.fixtures in respect of the period during whichthe said accommodation was occupied by theassessee during the previous year, exceeds|the aggregate of the rent recoverable from, or payable by, the assessee and any chargespaid or payable for the furniture and fixturesby the assessee; (Cc)In|aCaASCwhereadfurnishedaccommodation is provided by an employerother than the Central Government or any.State Government and -| (1)he accommodation is ownedby the employer, the value of the)accommodation is determined under|sub-clause(1)ofclause(a)|aS|increased by the value of the furniture|and fixtures in respect of the periodduring which the said accommodation|was occupied by the assessee during.the previous year exceeds the rent.recoverable from, or payable by the|dSSCSSAEC, (il)theaccommodationIS.takenOf)lease|Orrent.Dy the employer,thevalue|oftheaccommodationdeterminedUndersub-clause(il) Of|clause(1)aS|increased by the value of the furniture|and fixtures in respect of the periodduring which the said accommodation|was occupied by the assessee during.the previous year exceeds the rent.recoverable from, or payable by, the|dASS@CSSEE (1)he accommodation is ownedby the employer, the value of the)accommodation is determined under|sub-clause(1)ofclause(a)|aS|increased by the value of the furniture|and fixtures in respect of the periodduring which the said accommodation|was occupied by the assessee during.the previous year exceeds the rent.recoverable from, or payable by the|dSSCSSAEC, (il)theaccommodationIS.takenOf)lease|Orrent.Dy the employer,thevalue|oftheaccommodationdeterminedUndersub-clause(il) Of|clause(1)aS|increased by the value of the furniture|and fixtures in respect of the periodduring which the said accommodation|was occupied by the assessee during.the previous year exceeds the rent.recoverable from, or payable by, the|dASS@CSSEE (ad) in a case where the accommodationis provided by the employer in a hotel (except|wherethedSSCSSCECISprovidedSsuUCaccommodation for a period not exceeding inaggregate fifteen days on his transfer from|one place to other), the value of the.accommodation determined at the rete oftwenty four per cent of salary paid or payablefor the previous year or the actual charges|paid or payable to such hotel, whichever islower, for the period during which’ suchaccommodation is provided, exceeds the rentrecoverablefrom,Or>payableby,|theaSS@CSSCEC 8. Thus, it is evident that the value of residentialaccommodation provided by the Central Government or. any State Government to the employees either holding|office or post in connection with affairs of the Union or ofsuch State or serving with any body or Undertaking|Under the control of such Government on such.deputation has to be determined in the manner providedin Column Nos.3 and 4 of SI.No.1 of Table 1 of Rule 3 of.the Rules. The assessee, which is a Trust under the.1890 Act, is controlled and financed by the Central|Government. Tne assessee is a Body or an undertakingcontrolled by the Central Government. governed by the|Rules governing the service conditions of the employees|of the Central Government. The assessee may be aninstrumentality of the State of for the purpose of Article12 of the Constitution of India. However, for tne}purposes of Rule 3, the requirement is that theaccommodation should be provided by the CentralGovernment or State Government to the employees.either holding office or post in connection with affairs ofUnion or of State or serving with any body or undertaking under the control of such government fromdeputation. The aforesaid expression is Unambiguous.and unclear and therefore, its meaning cannot be|expanded to include any body, undertaking under the|control of Central Government. Merely because)assessee iS a body or undertaking owned or controlled|by the Central Government, it cannot be elevated to thestatus of Central Government. Thus, the assesseecannot claim that valuation of perquisites in respect of.residential accommodation should be computed as incase of an accommodation provided by the CentralGovernment. Therefore, SI.No.1 of Table 1 of Rule 3 ofthe Rules does not apply to the assessee. Thesubstantial questions of law No.1 and No.2 are answeredagainst the assessee and in favour of the revenue. oiExplanation 1 has been incorporated inSection 17(2) of the Act by Finance Act, 2007 with effectfrom 01.04.2002. Thus, in view of Explanation 1 toSection 17(2) of the Act, which provides that concession in the matter of rent shall be deemed to have been.provided, the substantial question of law No.3 does notarise for consideration in this appeal. The liability is.created under Section 17(2)(ii) of the Act by a deemingprovision. Therefore, the provisions of Rule 3 of theRules shall apply to the case of the assessee.Accordingly, the substantial question of law No.3 is|answered. 10. So far as substantial question of law No.4 isconcerned, suffice it to say that the tribunal has alreadygranted the relief to the assessee in respect of proceedings under Section 201 and 201(1A) of the Act.The aforesaid part of the order has attained finality.Therefore, we need not answer the substantial question|of law No.4. in the matter of rent shall be deemed to have been.provided, the substantial question of law No.3 does notarise for consideration in this appeal. The liability is.created under Section 17(2)(ii) of the Act by a deemingprovision. Therefore, the provisions of Rule 3 of theRules shall apply to the case of the assessee.Accordingly, the substantial question of law No.3 is|answered. 10. So far as substantial question of law No.4 isconcerned, suffice it to say that the tribunal has alreadygranted the relief to the assessee in respect of proceedings under Section 201 and 201(1A) of the Act.The aforesaid part of the order has attained finality.Therefore, we need not answer the substantial question|of law No.4. �������������������������������������������������������� �������������������������