High Court Of Andhra Pradesh
A.P. Circle Of All India Bharat Sanchar Nigam Ltd. Executives Association & Anr. vs. General Manager (Finance), Telecom & Ors.
Sections 17(2), 192, Rule 3(1)
Bilal Nazki & D. Appa Rao, JJ.
Writ Petn. No. 222 of 2006
18th March, 2006
Counsel Appeared
G. Pavan Kumar, for the Petitioners : Dr. P. Bhaskara Mohan & S.R. Ashok, for the Respondents
JUDGMENT
Bilal Nazki, J. :
This writ petition has been filed by A.P. Circle of All India Bharat Sanchar Nigam Ltd. Executives Association and A.P. Circle of BSNL Employees Union. In the writ affidavit filed by Pandu Ranga Rao, Vice President of A.P. Circle of the first petitioner-association it is contended that at the all-India level, the first petitioner has over 55,000 members and the A.P. Circle has in its rolls about 5,000 members. All the members of both the petitioners were the servants of the Government of India under the Ministry of Communications and Information Technology and by the creation of Bharat Sanchar Nigam Ltd. (BSNL for short) they became the employees of the BSNL from 1st Oct., 2000. They have members on all-India level as well as A.P. Circle. They seek a declaration by this writ petition that there was no liability on the first respondent to deduct tax at source in terms of s. 192 of the IT Act, 1961 (for short “the Act”) in the matter of rent respecting any accommodation provided by the second respondent to the members of the petitioner-associations. They also seek a writ of prohibition restraining the first respondent from enforcing the provisions of s. 192 of the Act against the petitioners with regard to a “non-existing perquisite” and also restraining respondents Nos. 3 and 4 from treating the first respondent as an assessee-in-default.
2. It is not disputed that the salaries of the members of the petitioner-associations are subject to tax in terms of s. 192 of the Act. 10 to 15 per cent of the members of the petitioner-associations have been allotted quarters originally as Government servants and presently they continue to hold as employees of the second respondent. These quarters are allotted as per pay scales and types of quarters as categorized by CPWD norms under the Ministry of Housing and Urban Development, Government of India. Some officials of the same rank are allotted the similar type of quarters and are charged the same licence fee. No concession is allowed to anyone. As per the rules and service conditions, standard rent or licence fee had been charged by the Department of Telecommunications before the absorption by the second respondent, as such there was no taxable perquisite in the matter of rent in respect of accommodation provided by the Government of India originally. It is further contended that for the same accommodation provided by the BSNL-second respondent, a clarification was issued through GM (pers-V) by letter No. 1-2/05-PAT (BSNL), dt. 9th June, 2005. In this clarification it was stated that if the accommodation is provided by the company whether owned or leased and the rate of recovery for this facility is less than 10 per cent of salary, the difference between 10 per cent of salary and actual amount recovered from the employee is a perquisite. The same communication also contained that after filing of the returns the employees can seek the refund from IT authorities and they can also take recourse to legal remedies available in the IT Act as well, if they feel aggrieved by the assessment. In response to this letter, the first respondent issued a note on 12th Dec., 2005, which reads as under : “As per the amendments effected by the Finance Bill, 2005, if a non- Government employee is provided with a rent-free or concessional accommodation then it is always chargeable to tax as a perquisite. For the financial year 2005-06, 20 per cent of salary in respect of the period during which the accommodation is occupied by the employee is to be taken as perquisite after deducting the licence fee paid by the employee. As such, the recovery of income-tax is being effected from the pay and allowances from the month of November, 2005 from the non-Government employees who are in occupation of staff quarters, after taking into account the valuation of accommodation provided by BSNL as perquisite.”
This note is now being followed by the Drawing and Disbursing Officers (DDOs) working throughout the State of Andhra Pradesh under the first respondent and consequently the tax is being deducted at source by treating the difference between 20 per cent of salary (or 10 per cent of salary, as the case may be) and the standard rent charged in respect of the quarters allotted by the second respondent to the members of the petitioner-associations. It is the case of the petitioners that what was not a perquisite as long as the members of the petitioner-associations remained Government servants, has become a perquisite in the eyes of the DDOs by virtue of the clarification letter and note. These clarifications, according to the petitioner-associations, are contradictory to the law declared by this Court in Steel Executives Association vs. Rashtriya Ispat Nigam Ltd. (2000) 160 CTR (AP) 38 : (2000) 241 ITR 20 (AP). Therefore, they seek quashing of the clarification letter and also the note and further seek a direction that the tax should not be deducted for the perquisite as is being done now.
3. Counters have been filed by the respondents. In the counter filed by the third respondent it is stated that the writ petition needs to be dismissed on the ground that the rules, as they existed when Steel Executives Association vs. Rashtriya Ispat Nigam Ltd. (supra) was decided, have been amended and according to the respondent, under s. 192 of the IT Act, a person responsible for paying any income chargeable under the head “Salaries” is bound to deduct income-tax at the time of payment of salary and in terms of s. 17 the salary includes perquisites and sub-s. (2) of s. 17 also defines perquisite as under : “(i) the value of rent-free accommodation provided to the assessee by his employer; (ii) the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer;………”
4. Rule 3 of the IT Rules has undergone a change after the judgment in Steel Executives Association vs. Rashtriya Ispat Nigam Ltd. (supra). There is no challenge to r. 3 of the IT Rules as amended, therefore, this Court would only go to the question whether in terms of r. 3 of the IT Rules, the impugned clarification and note could have been issued. In order to appreciate the law laid down by the judgment cited supra, it will be necessary to have a look at r.
3 as it existed at the time of the judgment supra. Rule 3 laid down :
“3. For the purpose of computing the income chargeable under the head ‘Salaries’, the value of the perquisites (not provided for by way of monetary payment to the assessee) mentioned below shall be determined in accordance with the following clauses, namely : (a) the value of rent-free residential accommodation shall be determined on the basis provided hereunder, namely :….” Sub-r. (a)(ii) of r. 3 mentions the names of employers who provided accommodation and it includes RBI, corporation established by a Central, State or Provincial Act, company, body or undertaking including a society and it further lays down : “(1) if the accommodation is unfurnished, 10 per cent of the salary due to such person or officer, as the case may be, in respect of the period during which the said accommodation was occupied by him during the previous year : Provided that where the assessee claims and the AO is satisfied that the sum arrived at on the aforesaid basis exceeds the fair rental value of the accommodation, the value of the perquisite to the assessee shall be limited to such fair rental value; (2) if the accommodation is furnished, an amount calculated in accordance with sub-cl. (ii)(1) plus 10 per cent per annum, of the original cost of the furniture (including television sets, radio sets, refrigerators, other household appliances and air-conditioning plant or equipment) or if such furniture is hired from a third party, the actual hire charges payable therefor;…….. (b) The value of residential accommodation provided at a concessional rent shall be determined as the sum by which the value computed in accordance with cl. (a), as if the accommodation were provided free of rent, exceeds the rent actually payable by the assessee for the period of his occupation during the relevant previous year.”
5. The amended r. 3 of the IT Rules reads as under :
“3. For the purpose of computing the income chargeable under the head ‘Salaries’, the value of perquisitesprovided by the employer directly or indirectly to the 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 : Sl. Circumstances No. (1) (2) (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. (2) Where the accommodation is provided by any other employer and— (a) where the accommodation is owned by the employer, or (b) where the accommodation is taken on lease or rent by the employer Where accommodation is unfurnished (3) Licence 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. (i) 20 per cent of salary in cities having population exceeding 4 lakhs as per 2001 census; (ii) 15 per cent of salary in other cities, in respect of the period during which the said accommodation was occupied by the employee during the previous year as reduced by the rent, if any, actually paid by the employee. Actual amount of lease rental paid or payable by the employer or 20 per cent of salary whichever is lower as reduced by the rent, if any, actually paid by the employee. Where accommodation is furnished (4) The value of perquisite determined under column (3) and increased by 10 per cent per annum of the cost of furniture (including television sets, radio sets, refrigerators, other household appliances, air-conditioning plant or equipment) or if such furniture is hired from a third party, the actual hire charges payable for the same as reduced by any charges paid or payable for the same by the employee during the previous year.
The value of perquisite as determined under column (3) and increased by 10 per cent per annum of the cost of furniture (including television sets, radio sets, refrigerators, other household appliances, air-conditioning plant or equipment or other similar appliances or gadgets) or if such furniture is hired from a third party, by the actual hire charges payable for the same as reduced by any charges paid or payable for the same by the employee during the previous year.
The value of perquisite as determined under column (3) and increased by 10 per cent per annum of the cost of furniture (including television sets, radio sets, refrigerators, other household appliances, air-conditioning plant or equipment or other similar appliances or gadgets) or if such furniture is hired from a third party, by the actual hire charges payable for the same as reduced by any charges paid or payable for the same by the employee during the previous year. (3) ……………… ……………… ………………”
6. From a perusal of the two sets of Rules, it becomes clear that the fair rent was a relevant factor in the earlier Rules, whereas the fair rent is not at all a factor in terms of the amended Rules. Rule 3(1)(i) applies to the accommodation provided by the Central Government or the State Government to the employees and r. 3(1)(ii) applies to persons whose accommodation is provided by any other employer and where the accommodation is owned by the employer, the value of the accommodation has to be taken as 20 per cent of salary in cities having population exceeding 4 lakhs as per the 2001 census and 15 per cent of salary in other cities. This rule applies to unfurnished accommodation and in the case of furnished accommodation, the rate of 20 per cent and 15 per cent shall be increased by another 10 per cent. Since there is no challenge to this rule, therefore, this Court cannot ask respondent Nos. 1 and 2 not to do what they are legally bound to do. For this reason alone, we do not find merit in this writ petition, which is accordingly dismissed. No costs.
[Citation : 283 ITR 388]
