Ita/32/2012 Of Comnr.,Of Income Tax v. Nalco

2. 31.7.2019 Heard learned counsel for the petitioner. 2. In this appeal, the appellant has sought for adjudication of the substantial questions of law set out in this appeal, arising out of ITA No.46,47/CTK/2010 and 175/CTK/2011 for the assessment year 2007-08 by the learned Income Tax Appellate Tribunal, Cuttack Bench, Cuttack under Section 260A of the Income Tax Act, 1961 vide Annexure-3. 3. Learned Tribunal while adjudicating the appeal held as follows : “6. We have heard the rival submissions of both the parties and perused the material available to the Tribunal. Considering the facts and circumstances of the case, we are inclined to find favour in the contention of the learned Counsel for the assessee simply because he has relied on the Government Notification along with the area which is supported by the documented map of the HAL area. The Assessing Officer in his contention has held that the population is 17,000 and therefore, he has to choose a town which is within 40 KMs thereof. It was not a choice to be made by the employees of the assesee when the interpretation of law has been misconstrued to choose a remote area specially for mining when the assesses are required to set up near the mines for carrying out the work of the assessee by giving concessional accommodation in their own township. Perquisites as per Rule 3 indicated the reason for considering the remote area as located at least 40 KMs away from a town having a population not exceeding 20,000 based on latest polished All India Census. The word “town” has to be defined and understood on its literal sense which alienates the employees not to be taxed on the perquisite value for the residential accommodation provided by the assessee. The authorities below misdirected themselves to hold that a cluster of separate villages considered as NAC were mouzas which could not be given effect to a place being a town as inscribed in the Rules with floating population and the population of the township itself when another Government Undertaking is functioning in that area. It was the case when employees were not to be subjected to tax on the purported perquisite value of the accommodation provided to them as per the terms of the employment contract. The learned Counsel for the assesee before us indicated all the possible avenues available for taxation when the bone of contention is whether the employees were really taking advantage of working in the mining area could be said to be enjoying the benefits of having the accommodation in town nearest which can be considered for the purpose of confining to the remote area at least being 40 KMs (as the crow flies) away from the residence. The assessing authorities therefore held that it being only 17 KMs was not to consider whether the assessee had defaulted in computing the perquisite value when the salary paid to the employees was subjected to deduction by way of standard concessional rate in respect of different employees in accordance with the provisions of the employment contract. It was not the case of the Assessing Officer to choose a particular town which was to be beyond 40 KMs from the place where the employees resided. The NAC therefore clearly indicates that they are not functioning for the purpose of holding these areas as a town by itself. The term “town” in the Act is not the same as territory which demolishes the Assessing Officer’s considering the employees ought to be taxed on the perquisite value of the accommodation insofar as the mines and refinery division of NALCO is located as Damanjodi in Koraput District of Orissa. NALCO had more than 7000 employees out of which only 486 employees were working at mines site about 21 KMs away from Damanjodi residential area on hills frequented by wild animals and also by extremists like Maoists. NALCO has provided accommodation at Damanjodi to such employees working at Mining sites. Proviso to Rule 13(1) w.e.f. 1.10.2004 specifies that no perquisites shall be considered in respect of accommodation provided to an employee working at a mining site or an onshore oil exploration site or a project execution site or a dam site or a power generation site or an offshore site – (i) which, being a temporary nature and having plinth area not acceding 800 Sq.ft is located not less than 8 KMs away from the local limits of any municipality or a cantonment board; of (ii) which is located in a remote area. Remote area for the purposes of above proviso to the sub-rule means an area that is located at least 40 KMs away from a town having a population not exceeding 20,000 based on latest published All India Census. The question of concessional perquisites in respect of NALCO mining site employees is dependent on interpretation of “remote area” which in turn is based on interpretation of “Town”. The word “Town” is not defined in Income-tax Act, 1961. The word ‘town” in the absence of any definition in the Act has to be understood in the sense in which ordinarily people understand it that it is a place having the main attributes of the existence of houses in clear proximity, concentration of a large number of people in a comparatively small area and engagement of the bulk of the population in non-agricultural pursuits (see. Belait Sheikh v. State of West Bengal reported in AIR 1952 Cal 733755 (Bengal Municipal Act 5, 6). Town is an assemblage of buildings, public or private, larger than a village and having more complete and independent local Government. A village and a town are not identical. A village is ordinarily less than a town and more occupied by agriculturist; the size of the place or employment of the inhabitants is also an important fact to be considered which is Sunabeda case is a territory comprising of many villages for revenue purpose and HAL township under Central Defence Authorities. Directorate of Town Planning, Govt. of Orissa in page 31 of the Paper Book has stated Sunabeda town is having a vast area with 21 revenue mouzas. Actual development spread over seven villages sporadically. The rest of the villages are completely rural in character. The HAL Township is completely pucca in structural condition with double storied buildings, as the same is being managed by Central Defence Authorities. Therefore, in our considered view keeping in view the totality of the facts and circumstances, we are inclined to hold that the consideration of the Damanjodi not as remote area was contrary to the findings as acceptable to the authorities below earlier cannot now be questioned for invoking Setions 201(1) and 201(1A) which have been confirmed by the learned CIT(A) on the basis of his giving a finding that the discontinuance of deduction was based on a wrong footing as was being followed by the assessee for the earlier two financial years. Damanjodi is a remote area and has not to be considered for the purpose of computing the township nearest to it less than 40KMs away. It is not the case of the Assessing Officer to declare a particular place as town when the nature of accommodation provided by the assessee does not relate to the perquisite value enjoyed by its inhabitants in accordance with the normal residence in a town duly acknowledged as such by the Government authorities. For the reasons as dutta/sp stated above, we set aside the orders of the learned CIT(A) and cancel the demand so raised u/s. 201(1) and 201(1A) and allow the appeals of the assessee. 7. In the result, the appeals of the assessee are allowed.” 3. In view of the decision of the learned Income Tax Appellate Tribunal, Cuttack Bench, Cuttack, the authority (NALCO) which has raised objection on the TDS of the assessees, is bound to to consider the grievance of the petitioners in terms of the decision of the Tribunal as well as the decision of this Court. The appeal is disposed of accordingly. Urgent certified copy of this order be granted as per Rules. .…….......……………… ( K.S. Jhaveri ) Chief Justice …………………..……… (K.R. Mohapatra) Judge