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Case Law Details

Case Name : State Bank of India Vs DCIT (ITAT Hyderabad)
Appeal Number : Appeal No: ITA nos. 1722 to 1725/hyd/08
Date of Judgement/Order : 03/12/2009
Related Assessment Year :

CASE LAWS DETAILS

DECIDED BY: ITAT, BENCH `A’, HYDERABAD

IN THE CASE OF: State Bank of India Vs DCIT, APPEAL NO: ITA Nos. 1722 to 1725/Hyd/08, DECIDED ON December 3, 2009

RELEVANT PARAGRAPH

Per: G C Gupta:

These four appeals by the assessee for the assessment years 2004- 05 to 2007- 08 are directed against the common order of the CIT (A). Since an identical issue is involved in all these appeals preferred by the assessee, these are being disposed off with this consolidated order.

2. Identical grounds of appeal of the assessee in all these appeals are as under- The order of the learned Commissioner of Income tax dated 10/11/08 is contrary to law and facts.

2. The appellant contends that it has not committed any default in the matter of deduction of tax at source out of the salaries paid to its employees.

3. The appellant contends that there is no concessional rental perquisite u/s 17(2)(ii) of the Income-tax Act, 1961 and therefore the bank is not liable for deduction of tax at source in respect of any such alleged perquisite provided to its employees. The learned CIT(A) erred in upholding the order of the DCIT(TDS).

4. It is contended that the bank has shown no concession in the matter of providing leased accommodation to its employees and it has deducted standard rent from the salaries of employees to whom the accommodation has been provided by the appellant. Consequently, there is no concessional rent perquisite on which tax has to be deducted.

5. The appellant contends that it acted bona fide and honest and in accordance with the provisions of law in force in the relevant year. It has acted in accordance with the various High Courts’ decisions which categorically held that under similar circumstances, there is no rental perquisite on which tax has to be deducted at source.

6. It is contended that an act which is legal and valid cannot become illegal or invalid by any retrospective legislation. Explanation- 1 to sec.17(2)(ii) of the Income Tax Act, 1961 does not have the effect of making the appellant liable for any default when there was no default at all on its part as per the law then in force and applicable. The learned CIT(A) erred in not appreciating the same.

7. Without prejudice, it is contended that the quantification of perquisite value at Rs. 5,16,307 (for assessment year 2004- 05; Rs. 4,82,261 for assessment year 2005- 06; Rs. 17,48,490 for assessment year 2006- 07 and Rs. 18,48,929 for assessment year 2007- 08) quantification of short deduction of tax at source at Rs. 1,54,892 (for assessment year 2004- 05; Rs. 1,47,572 for assessment year 2005- 06; Rs. 5,35,038 for assessment year 2006- 07 and Rs. 5,65,772 for assessment year 2007- 08) and interest u/s. 201(1A) at Rs. 74,348 (for assessment year 2004- 05; Rs. 53,125 for 2005- 06; Rs. 1,28,407 for assessment year 2006- 07 and Rs. 67,892 for assessment year 2007- 08) is uncalled for.

8. Without prejudice it is further contended that the quantification of short fall in tax at the flat rate of 30% at Rs. 1,54,892 (for assessment year 2004- 05; Rs. 1,47,572 for assessment year 2005- 06; Rs. 5,35,038 for assessment year 2006- 07 and Rs. 5,65,772 for assessment year 2007- 08) is erroneous, arbitrary and untenable.”

3. The learned counsel for the assessee submitted that assessee is a public sector undertaking and it has received the COD approval and has filed copy thereof before us.

3. The learned counsel for the assessee submitted that the standard rent for all the employees of the assessee bank were fixed on all India basis and during the relevant period, there was no law to deduct tax at source on the perquisite value of the residential accommodation provided by the assessee to its employees, recovering lesser amount than the lease rent paid by the assessee. However, the statute was amended by the Finance Act, 2007 with retrospective effect from 1.4.2002 and since the Explanation was inserted with retrospective effect, it was impossible for the assessee to anticipate that the law would be amended in 2007 with retrospective effect from 1.4.2002 and the various decisions of the Honourable High Courts, including the decision of the jurisdictional High Court in the case of Steel Executives Association Vs. Rashtriya Ispat Nigam Ltd. (241 ITR 20) (AP) would be neutralised. He submitted that the issue whether the assessee, in view of the amendment in law with retrospective effect from 1.4.2002, would be held as `in default’ for non-deduction of tax at source on the perquisite value of the concessional rental accommodation provided by it to its employees, is covered in favour of the assessee by the decision of the Nagpur Bench of the Tribunal dated 20.06.2008 in a group of 56 cases of Canara Bank, Circle Office, Nagpur Vs. ITO Ward-8(3) Nagpur (ITA Nos. 366 to 370/Nag/2007 for assessment years 2002- 03 to 2006- 07 and others).

5. The Learned Departmental Representative, on the other hand relied on the orders of the assessing Officer and the CIT(A).

6. We have considered the rival submissions carefully. We find that Explanation 1 to S.17(2)(ii) was inserted by the Finance Act, 2007 with retrospective effect from 1.4.2002, whereby the value of the residential accommodation provided by the assessee-bank to its employees by recovering lesser amount of rent than the lease rent paid to the lessor of the premises, amounts to perquisite and the employer is made liable to deduct tax on the perquisite value thereof. However, we find that at the relevant time, when the TDS was to be effected by the assessee-bank, there was no such provision on the statute book and the law was amended at a later date in 2007, with retrospective effect from 1.4.2002. We find that the issue whether in the facts of the case, the assessee could be held to be in default for non-deduction of tax at source on the perquisite value of the residential accommodation provided at a lesser figure of rent than actually paid by the assessee to the lessor of the premises, in view of the amendment in law with retrospective effect from 1.4.2002, is covered in favour of the assessee with the decision of the Nagpur Bench of the Tribunal in the group cases of Canara Bank (supra), wherein the coordinate Bench of the Tribunal has passed an elaborate order and has considered the relevant case-laws and has followed the ratio of the decisions of the Honourable Apex Court in the cases of Amarchand (48 ITR 59) (SC) and Mother India (155 ITR 711) (at 718) and the decision of the Honourable Privy Counsel in the case of Delhi Cloth & General Mills Co. Ltd. (2 ITC 439) (at 443), and held that as far as the assessee employer is concerned, it is not hit by the retrospective insertion of Explanation (I) to S.17(2) thereof in the absence of any such extension of retrospective effect either in S.192 or S.201 of the Act. We, being in agreement with the decision of the coordinate Bench of the Tribunal cited supra, decide the issue in favour of the assessee and accordingly grounds of appeal of the assessee in these appeals are allowed.

7. In the result, all the four appeals of the assessee are allowed.

NF

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