TMI Blog2011 (7) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... exceeded Rs. 1000 per mensem, Rule 3(5) of 1962 Rules applied and proviso thereto had no applicability - The Tribunal had remanded the matter to the AO for recomputation of cost/value of perquisite to an employee by providing an opportunity to the assessee to point out any difference in the valuation as made by the Assessing Officer and the CIT(A) - No error or perversity could be pointed out in the approach of the Tribunal - The appeals filed by the revenue and the assessee stand disposed of. - 662, 663, 753 AND 835 TO 837 OF 2008 (O&M) - - - Dated:- 11-7-2011 - ADARSH KUMAR GOEL, AJAY KUMAR MITTAL, JJ. Yogesh Putney for the Appellant. Parvesh Saini and Mukesh Verma for the Respondent. JUDGMENT Ajay Kumar Mittal, J. This order shall dispose of a bunch of six appeals bearing ITA Nos. 662, 663, 753 of 2008 filed by the revenue and ITA Nos. 835, 836 and 837 of 2008 filed by the person responsible for deduction of tax at source (hereinafter referred to as "the assessee") arising from the order of the Tribunal dated 25-6-2007 whereby the appeals of the revenue and the cross-objections filed by the assessee were dismissed. For brevity, the facts are being extr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for adjudication as narrated in the appeal are that the assessee is running a public school and was liable to deduct tax at source from salary and remuneration paid to its teaching staff. The person responsible (the assessee herein) is the director of the School who filed the return of salaries on 28-11-2003. At the time of checking of Form 12BA annexed along with Form No. 16 relating to various employees, it was found that the assessee had been providing free/concessional educational facilities to the wards of teachers and other staff members of the school. However, while calculating the amount of perquisite taxable in the hands of teachers/staff qua free/concessional educational facilities provided to their wards, the assessee had been allowing a deduction of Rs. 1000 per month per child from the total amount of educational facilities provided free of cost to them. The Assessing Officer held that the assessee had wrongly allowed a deduction of Rs. 1000 per month per child while calculating the amount of taxable perquisite and added an amount of Rs. 12,000 per annum per child to the value of perquisites on account of free educational facilities provided to the wards of the emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the judgment of the Apex Court in CIT v. Eli Lilly Co. (India) (P.) Ltd. [2009] 312 ITR 225/178 Taxman 505 in support of his submission. The method of valuation of the perquisite different from the one adopted by the Assessing Officer was also assailed. 8. On the other hand, learned counsel for the assessee submitted that in terms of proviso to rule 3(5) of the 1962 Rules, the value of the perquisite relating to free educational facility provided to the wards of the employees/staff of the school had to be on the basis of value of such facility in a comparable case and if it exceeded Rs. 1000 per month per child, then the amount of Rs. 1000 per month per child had to be reduced from the perquisite value and tax deducted at source on the remaining amount, if any. The cost of education for determining the value of free/concessional educational facility was also challenged. Strong reliance was placed on the judgment of the Delhi High Court in CIT (TDS) v. Delhi Public School [2009] 318 ITR 234/[2008] 167 Taxman 134. Special Leave Petition against the said decision was dismissed on 23-3-2009. 9. Support was also gathered from the following pronouncements:- 1. CIT v. Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to the cost of such education in a similar institution in or near the locality; (c) In case any amount is paid or recovered from the employees towards free or concessional educational facility, the value of benefit shall stand reduced by the amount so paid or recovered. 13. However, in view of the proviso to rule 3(5) of the 1962 Rules, such rule is not applicable where the educational institution itself is owned by the employer and free educational facilities are provided to the children of the employee or such facilities are provided in any institution by reason of employment of that employee if the cost of such free education or concessional educational facilities does not exceed Rs. 1000 per month per child. 14. In other words, on plain reading of sub-rule (5) of Rule 3 of the 1962 Rules, it emerges that where the value of the perquisite of free/concessional educational facility arises to an employee and the valuation thereof exceeds Rs. 1000 per month, then the entire amount is added and is liable to be taxed in the hands of the recipient. However, an exception has been carved out in the proviso attached to this sub-rule whereunder the sub-rule has no applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered independently without affecting the rights mentioned in either of the sub-sections. Further, interest under section 201(1A) is compensatory measure for withholding the tax which ought to have gone to the exchequer. The levy of interest is mandatory and the absence of liability for tax will not dilute the default. The liability of deducting tax at source is in the nature of a vicarious liability, which pre-supposes existence of primary liability. The said liability is a vicarious liability and the principal liability is of the person who is taxable. A bare reading of section 201(1) shows that interest under section 201(1A) read with section 201(1) can only be levied when a person is declared as an assessee-in-default. For computation of interest under section 201(1A), there are three elements. One is the quantum on which interest has to be levied. Second is the rate at which interest has to be charged. Third is the period for which interest has to be charged. The rate of interest is provided in the 1961 Act. The quantum on which interest has to be paid is indicated by section 201(1A) itself. Sub-section (1A) specifies "on the amount of such tax" which is mentioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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