IN THE ITAT INDORE BENCH
State Bank of Indore
Income-tax Officer, TDS-II Indore
IT Appeal Nos. 76 to 82 (Ind.) of 2012
[Assessment years 2002-03 to 2008-09]
OCTOBER 29, 2012
Joginder Singh , Judicial Member – These are the appeals by the assessee against consolidated order dated 25.11.2011 of the learned CIT(A), Indore, for the assessment years mentioned above. In these appeals, the assessee has taken the following common grounds :-
1. That the Ld. Commissioner of Income Tax (Appeals) erred both in law and on facts in holding the appeals filed by the assessee to be non maintainable being filed beyond statutory period and thereby declining the application for condonation of delay.
2 . That Ld. CIT (As) erred in law and on facts in holding the appeals to be non maintainable on account of delay and then thereafter proceeding to decide the appeal on merits also.
3. That Ld. CIT (As) erred in law and on facts in sustaining exparte order passed by the TDS Officer without appreciating the facts that the order passed by the Assessing Officer was illegal, void and without jurisdiction.
4. That the order of the Ld. CIT(As) is erroneous both in law and on facts as Ld. CIT (As) had failed to appreciate that the non deduction of tax at source was on account of the stay order of. the Hon’ble Jurisdictional High Court which was binding both on the Income Tax Department as well as the appellant and therefore, there can be no demand on the appellant u/s 201 & 201(IA) of the Income tax Act 1961.
5. That the order passed by the Ld. CIT(As) in sustaining the order dated 31.12.09 passed by the assessing Officer is erroneous both in law and on facts on account of total failure to consider the provisions of deduction of TDS specially section 192 under which TDS can be deducted only during the Financial Year and not at any time thereafter. Since during the Financial Years under consideration, the interim order of the Hon’ble High Court was in operation, therefore, the appellant could not deduct TDS and therefore could not be held liable u/s 201 & 201(IA) of the Income tax Act.
2. During hearing of these appeals, we have heard Shri Sumit Nema, learned counsel for the assessee, and Shri Darshan Singh, learned CIT DR. The crux of arguments on behalf of the assessee is that the learned CIT(A) was not justified in coming to a particular conclusion because as per the prevailing law (2001-2002) there was no concession in the matter of rent and the assessee bonafidely/correctly computed TDS on salaries of employees without taking the perquisite in the matter of accommodation and more so there was stay order in operation from the Hon’ble jurisdictional High Court during the relevant period. It was also pleaded that the Hon’ble Apex Court in the case of Arun Kumar decided the matter in favour of employees by holding that if there is no concession, there cannot be any perquisite, consequently, the assessee bonafidely computed TDS on salaries during the assessment years 20002-03 to 2007-08 as per the prevailing law, consequently, the assessee cannot be held to be assessee in default u/s 201 and 201(1A) of the Act. Reliance was placed on the decision in the case of Gwalior Rayon Silk Co. Ltd. v. CIT  140 ITR 832. A plea was also raised that retrospective amendment in section 17(2) of the Act made in 2007 cannot make the assessee liable to deduct TDS for the A.Ys. 2001 to 2007 as there was no TDS liability as per the prevailing law. Mr. Nema further contended that the retrospective amendment of 2012 in section 195 of the Act is being highlighted to buttress the submission of the assessee. The crux of the argument is that whenever TDS provision has to be given effect retrospectively, it is to be so made in the Act and in section 192 there was no retrospective amendment in 2007 when Section 17(2) was amended. The learned counsel placed reliance on the following judicial pronouncements :-
1. Western Coal Field [IT Appeal Nos. 93 to 108 of 2008, dated 1-10-2010]
2. Canara Bank v. ITO  121 ITD 1 (Nag.)
3. BSNL v. ITO [ITA No. 260/Ind/2010) dt.20.5.2011] (Indore ITAT)
4. ONGC v. ITO (TDS) [ITA No. 980/Mum/2004) dated 8.4.2011]
5. State Bank of India v. Dy. CIT  40 SOT 160 (Hyd.).
3. On the other hand, the learned CIT DR, Shri Darshan Singh, defended the impugned order but did not controvert the submissions of the assessee by bringing any positive material on record.
4. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is a scheduled bank having several employees on its roll. The assessee is carrying on the business of banking having its corporate office at Indore. The employees of the assessee bank formed a union in the name of “All India State Bank of Indore Officers’ Coordination Committee” (referred hereinafter as “AISBOC”). As per the Revenue, the assessee allowed perquisite to its employees which is part of their salary and the assessee being the person responsible for complying with the provisions of Chapter XVII of the Act and thus was liable to deduct tax at source as required u/s 192 of the Act. Further, as per the Revenue, the assessee did not comply with the requirement. The assessee was treated as assessee in default and the total amount payable u/s 201(1) and 201(1A) was calculated as mentioned at page 11 of the assessment order. The amounts were worked out at Rs. 1,43,24,012/-. The assessment order was carried in appeal before the CIT(A) wherein it was affirmed. The aggrieved assessee is in further appeal before the Tribunal.
5. If the impugned issue is analysed with the help of cases cited by the learned counsel for the assessee and the provisions of the Act, we find that rule 3 of the Income Tax Rules, 1962 was amended vide CBDT Notification No. 940(E) dated 25.9.2001 which prescribes about method of valuation of perquisite in the matter of rental accommodation provided to the employees by the employer. The validity of the said rule was challenged by AISBOC before the Hon’ble High Court of Madhya Pradesh by WP No. 762 of 2002 and vide interim order on 13.2.2002 the Hon’ble High Court directed that the salary to the members of AISBOC (employees) shall be paid without assessing the value of perquisites available to them for the purposes of TDS till further orders, consequently, the assessee bank did not deduct TDS on the perquisites to its employees. The final order was passed by the Hon’ble High Court on 10.7.2007 in WP No.762/2002 wherein it was directed that the value of rent free accommodation be determined after ascertainment of facts that there was concession in providing accommodation. While coming to this conclusion, the Hon’ble High Court also took note of the decision in the case of Arun Kumar v. Union of India  286 ITR 89 wherein validity of rule 3 was upheld. Thereafter, there was an amendment in the Act by the Finance Act, 2007 with retrospective effect from 1.4.2002 and an Explanation was inserted in Section 17(2) providing a deeming fiction that in all cases where rent was paid less than 10% of the salary then a concession shall be deemed to be provided.
5.1 After this retrospective amendment, notice was issued on 24.3.2009 u/s 201/201A for the assessment of TDS and interest thereon. Vide order dated 31.12.2009, the order levying tax u/s 201 and interest u/s 201(1A) for seven years was passed from F.Y. 2001-02 to 2007-08. It is pertinent to mention here that the Nagpur Bench of the Tribunal in the case of Canara Bank (supra) held that accommodation provided by the assessee employer to the employees wherein rent was charged from the employees on standard basis as per Govt. Norms and the Assessing Officer applied rule 3 by holding that different between 10% or 7.5% of salary reduced by rent paid by employee shall be deemed to be perquisite, consequently, TDS should have been deducted. Interest u/s 201(1A) was also held to be leviable. The Nagpur Bench held that prior to 2007, law as laid down in Arun Kumar’s case (supra), it was stated that section 17(2)(ii) did not create deeming fiction and the department had to establish that there was a concession. This cannot be stretched to section 192 of the Act, therefore, the assessee employer cannot be treated as the assessee in default with retrospective effect for not deducting TDS. It was further held that interest cannot be charged retrospectively. It is worth mention that this decision of the Nagpur Bench was affirmed by the Hon’ble Bombay High Court in ITA No. 93/2008 vide order dated Ist October, 2010. Identically, in the case of BSNL (supra) (A.Ys. 2002-03 to 2008-09) the Indore Bench of the Tribunal followed the aforesaid decision of Nagpur Bench in the case of BSNL (supra) and held that the assessee was not to be treated as assessee in default u/s 201(1A) of the Act. Identical decision was taken by Mumbai Bench of the Tribunal in ONGC (supra) by following the decision of the Nagpur Bench. Likewise the Hydrabad Bench of the Trinal in State Bank of India (supra) followed the decision of the Nagpur Bench. We find that the decisions in the case of Western Coal Field, (supra)/Canara Bank (supra) were disposed of by the Hon’ble High Court at Bombay (Nagpur Bench) (Income Tax Appeal Nos. 93 to 108/2008 and vide order dated Ist October, 2010 the Hon’ble High Court affirmed the decision of the Tribunal. The relevant portion from the aforesaid order is reproduced hereunder :-
“(9) On further appeal filed by the assessee, the Income Tax Appellate Tribunal by a common order dated 4.7.2008 upheld the contentions of the assessee and allowed the appeals. Challenging the aforesaid order, the present appeals are filed by the revenue.
(10) According to Shri Parchure, learned Counsel for the revenue, the determination of “concession in the matter of rent” is inbuilt in Rule 3 of the Income Tax Rules, 1962 as introduced with effect from 1/4/2001. Since validity of Rule 3 introduced with effect from 1/4/2001 has been upheld by the Apex Court in Arun Kumar’s case (supra) and the same has been fortified by the retrospective insertion of Explanation to Section 17(2)(ii) of the Act, the assessee was obliged to deduct tax at source and failure to do so made the assessee liable for’ consequences set out under Section 201 of the Act.
(11) We see no merit in the above contentions. The Apex Court in Arun Kumar’s case (supra) while upholding the validity of Rule 3 has held that in the absence of any “deeming fiction” in the Act, it is open to the assessee to contend that there is no concession in the matter of accommodation provided by the employer to the employees and the case is not covered by Section 17(2)(ii) of the Act. In other words, even after the substitution of Rule 3 with effect from 1/4/2001, in the absence of any specific provision under the Act, it was open to the assessee not to deduct tax at source relating to the accommodation given to the employees on the ground that no concession in rent has been given to the employees. This contention of the assessee has been in fact upheld by the Apex Court in the case of Arun Kumar (supra). To overcome the above decision, the law has been amended by Finance Act, 2007 with retrospective effect from 1/4/2002. The retrospective amendment merely takes away the above argument, which was available to the assessee. Once the salary is paid by the employer after deducting tax at source as per the law prevailing on the date of paying the salary, then any subsequent amendment in law brought about retrospectively cannot require the employer to deduct tax at source for the past period, because the salary for that period has already been paid. Consequently, the employer cannot be made liable for the consequences set out in Section 201 of the Act on account of the retrospective amendment to Section 17(2) of the Act.
(12) Moreover, as held by the Tribunal, the Legislature while retrospectively amending Section 17(2)(ii) of the Act has not chosen to amend Section 192 or Section 201 of the Act. Therefore, the employer assessee is not hit by the retrospective insertion of Explanation to Section 17(2) of the Act.
(13) We make it clear that we are not expressing any opinion as to validity of the retrospective amendment inserted by Finance Act, 2007. In the facts of the present case, the decision of the Tribunal that the assessee was not obliged to deduct tax at source and accordingly not liable to the consequences set out in section 201 of the Act does not suffer from any infirmity.”
6. If the totality of facts available on record and the assertion made by the learned respective counsel are kept in juxtaposition, we find that section 192 deals with the deduction of tax at source. It is computed on the estimated income of the assessee under the head “salary” and the liability is at the time of payment of salary, if there is a perquisite, there is responsibility to deduction tax of the employer u/s 192(1), 192(1A) and 192(1B) which reads as under :-
“192(1) Any person responsible for paying any income chargeable under the head “Salaries” shall at the time of payment, deduct income tax on the amount payable at the average rate of income tax computed on the basis of therates in force for the financial year in which the payment is made on the estimated income of the assessee under this head for that financial year.
(1A) without prejudice to the provisions contained in sub-section (1), the person responsible for paying any income in the nature of a perquisite which is not provided for by way of monetary payment, referred to in clauase (2) of section 17, may pay, at his option, tax on the whole or part of such income without making any deduction therefrom at the time when such tax was otherwise deductible under the provisions of sub-section (1).
(1B) For the purpose of paying tax under sub-section (1A), tax shall be determined at the average of income tax computed on the basis of the rates in force for the financial year, on the income chargeable under the head “Salaries” including the income referred to in sub-section (1A), and the tax so payable shall be construed as if it were, a tax deductible at source, from the income under the head “Salaries as per the provisions of sub-section (1), and shall be subject to the provisions of this chapter.”
Thus, section 192 deals with the deduction of tax at source. Perquisite is actually not a payment of salary but a benefit not in terms of money, there was no provision initially to deduct tax at source. It is provided by section 192(1B) by the Finance Act, 2002 with effect from Ist June, 2002 and as to computation of income of perquisite, the provision in section 192(1A), also by the same Act with effect from the same date. This tax, at the option of the assessee, can be paid on the whole or part of such income without making any deduction therefrom at the time when it was otherwise deductible u/s 192. A duty is also cast upon the person deducting tax u/s 200. Rule 3 of IT Rules, 1962 provides for the time and mode of payment to the Government account of tax deducted at source. As per the provisions of section 200, the tax deducted at source is a mode of payment of tax on the income of the person on whose income it is deducted i.e. employees in this case.
7. The decision in the case of Canara Bank (supra) supports our view which was later on affirmed by the Hon’ble Bombay High Court in the case of Western Coal Field, (supra) vide order dated 1.10.2010. In view of these facts, the issue raised by the assessee is squarely covered by the decision of the Bombay High Court in the case of Western Coal Field (supra). Respectfully following the same, the appeals of the assessee are allowed.
Finally, all the appeals of the assessee are allowed.