TMI Blog2006 (5) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... to the above, the learned CIT(A) has failed to take into cognizance the decision of the Supreme Court in the case of Murlidhar Dalmia reported in 145 ITR (St.) 4 relied upon by the Assessing Officer in the assessment order under consideration. Further, the Madras High Court in the case of CIT v. K.S. Sundaram (239 ITR 851) on the relevant issue has held that Rule 3(a)(iii ) is mandatory. This decision has also been upheld by the Supreme Court reported in 251 ITR 781. 3. The relevant facts, stated briefly, are that the assessment was made by the Assessing Officer under section 143(3) on 28-3-1994. The assessee, during the year, was the Chief Representative of BHF Bank in India and he was provided rent-free accommodation at Rashmi , Gamodia Road, Mumbai, by the employer. The BHF Bank had taken the aforesaid premises at a monthly rent of ₹ 6,000 along with giving interest-free deposit of ₹ 80,00,000 to the landlord. While calculating the value of the perquisite in respect of the aforesaid rent-free accommodation, the Assessing Officer adopted the rent of ₹ 6,000 per month and increased it by notional interest at the rate of 15 per cent on the interest-free depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the law explained by the subsequent judgment of the jurisdictional High Court. It has been held in the case of Bhagirath Engineering Ltd. 227 ITR 504, Kerala that the effect of a subsequent decision of the Supreme Court is retrospective. In this case Tribunal has allowed investment allowance to assessee who was engaged in the business of construction. In view of the sub- sequent judgment of Supreme Court in CIT v. N.C. Buddhiraja Co. 204 ITR 412 the ITAT recalled its order insofar as it related to the ground of investment allowance and rectified the same. The Kerala High Court at page No. 508 of the report held that it did not see any error in the order passed by the Tribunal in rectifying the earlier order and withdrawing the investment allowance. At page 511 of the report the Court has further held that the law applicable to an issue is the one which the Supreme Court declares subsequently. In Poothondu Plantations (P.) Ltd. 134 CTR 593 Supreme Court have held that it is well-settle that if the Supreme Court has construed the meaning of a section then any decision to the contrary given by any authority must be held to be erroneous and such error must be treated as mistake ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned CIT(A) had also relied on the Hon ble Bombay High Court decision in the case of CIT v. Ashraf-ur-Rehman Azimullah [1994] 209 ITR 341 and he recorded a finding that for determining the fair rental value for the purpose of determining perquisite the interest element on the deposit should also be considered. After considering the entire facts and circumstances and the legal position, the learned CIT(A) confirmed the order of the Assessing Officer on this point. The learned Departmental Representative submitted that the learned CIT(A) had adopted a view after thoroughly analyzing the facts and after considering the various judicial pronouncements available at that point of time and he decided the issue, which is a highly debatable issue. It is argued that in these circumstances, a subsequent decision of the Hon ble Bombay High Court cannot give rise to any mistake apparent from record. The learned Departmental Representative also invited our attention to the Hon ble Bombay High Court decision in the case of CIT v. J.K. Investors (Bombay) Ltd. [2001] 248 ITR 723. In that case the High Court held that notional interest on deposit cannot form part of the actual rent as contemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was a tenant and his case was governed by the rent control law and that the rent control law did not permit increase of the rent and deleted the addition of ₹ 7,200. On further appeal, the Tribunal restored the addition holding that this was a case of concessional rent, and the assessee s case was governed by section 17(2)(a)( ii) of the Income-tax Act, 1961, that the rent law was not applicable and that the value of the perquisite had to be determined in accordance with section 17(2) and rule 3(b) of the Income-tax Rules, 1962. On a reference : Held, affirming the decision of the Tribunal (i) that the assessee was not a tenant but was a service occupier or a licensee; (ii) that the rent law did not apply to the case of the assessee and the Tribunal was justified in disregarding it; (iii) that the assessee was enjoying the accommodation at a concessional rent and the value of the residential accommo-dation was correctly determined by the Tribunal as the provisions of section 17(2) and rule 3 fully applied to the case of the assessee. Section 17(2) of the Income-tax Act, 1961, and rule 3 of the Income- tax Rules, 1962, do not require the ITO to have an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned counsel for the assessee invited our attention to the ratio of the case of M.A.E. Paes (supra), the relevant part of which is reproduced below from the head-note : On a perusal of rule 3(a)( iii) of the Income-tax Rules, 1962, in computing the value of the perquisite of rent-free residential accommodation provided by an employer to his employee, the fair rental value of the accommodation has always to be determined with reference to the standard rent payable under the Rent Control Act applicable to the area where the accommodation is situated. The fair rental value for the purpose of perquisite can in no case exceed the standard rent determinable on the principles laid down under the Rent Control Act. The assessing authority would have to arrive at its own figure of standard rent by applying the principles laid down under the Rent Control Act for determination of the standard rent and determine the fair rental value of the accommodation on the basis of such figure of standard rent. The expression rent which a similar accommodation would realize in the same locality appearing in Explanation 2 to rule 3(a)(iii ) of the Rules has to be construed only to mean the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expressly stated in the respondents application to the Income-tax Officer that the assessment order be rectified under section 35, the request in substance was that the tax should be declared to be unlawfully collected and on that account refunded, and that could only mean a request for rectification; and that the High Court was right in making its order. 10. For the same proposition, the learned counsel for the assessee also relied on the Punjab Haryana High Court (Full Bench) decision in the case of CIT v. Smt. Aruna Luthra [2001] 252 ITR 761. In this case, it was held that if the Assessing Officer allows a deduction and by a subsequent decision of the jurisdictional High Court it is held that such deduction is not allowable, the Assessing Officer s order can be rectified under section 154. 11. The learned counsel for the assessee submitted that even if on a particular issue there are contradictory decisions of different High Courts, the decision of the jurisdictional High Court is binding on the income-tax authorities and such decision gives rise to a mistake rectifiable under section 154, despite there being divergence of judicial opinion on that point between some Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct it. Section 154 appears to have been enacted to enable the authority to rectify the mistake. The legislative intent is not to allow it to continue. This purpose has to be promoted. The Legislature s will has to be carried out. By placing a narrow construction, the object of the legislation shall be defeated. Such a consequence should not be countenanced. 14. In the above case the Full Bench of the High Court has categorically held that a subsequent decision of the jurisdictional High Court or of the Supreme Court gives rise to a mistake apparent from record rectifiable under section 154. This view is substantiated by the Supreme Court decision in the case of Model Mills Nagpur Ltd. (supra). In some of the cases already referred to above, the High Courts have gone to the extent of holding that even if there is divergence of opinion between the High Courts, the decision of the jurisdictional High Court would give rise to a mistake apparent from record. In our view the legal position in this regard is established and, therefore, we, hold that a subsequent decision of the jurisdictional High Court gives rise to a mistake apparent from record. 15. The second point which is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m arrived at on the basis provided above exceeds the fair rental value of the accommodation, the value of the perquisite to the assessee shall be limited to such fair rental value; (B)where the accommodation is furnished, the value of rent-free residential accommodation shall be the aggregate of the following sums, namely: (1) the fair rental value of the accommodation arrived at in accordance with the provisions of sub-clause (iii)(A ) as if the accommodation were not furnished; and (2) the fair rent for the furniture (including television sets, radio sets, refrigerators, other household appliances and air conditioning plant or equipment) calculated a 15 per cent per annum of the original cost of such furniture is hired from a third party the actual hire charges payable therefore . . . . Explanation 2. For the purposes of sub-clause (iii), the fair rental value of accommodation which is not furnished shall be the rent which a similar accommodation would realize in the same locality or the municipal valuation in respect of the accommodation, whichever is higher. (b)The value of residential accommodation provided at a concessional rent shall be determined as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er limit of the rateable value of the premises. 18. Drawing support from the above mentioned three Supreme Court decisions, the Bombay High Court held that the fair rental value of the premises for the purposes of rule 3 cannot be more than the standard rent payable under Rent Control Act. Thus, the fair rental value referred to in the proviso to rule 3 cannot in any case exceed the standard rent. In our view the binding decision of the Bombay High Court in the case of M.A.E. Paes (supra) is clearly and squarely applicable to the facts of the present case. The cases cited by the learned Departmental Representative are distinguishable on facts. We, therefore, respectfully following the Bombay High Court decision in M.A.E. Paes case (supra) hold that the learned CIT(A) was justified in coming to the conclusion that there was a mistake apparent from record in the earlier order of the learned CIT(A). He has rightly rectified the mistake and has rightly directed the Assessing Officer to determine the value of the perquisite in the hands of the assessee following the principles laid down by the Bombay High Court in the above case. Accordingly, we uphold the order of the learned CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffice located at 107, Maker Chambers, Mumbai and therefore, it was clear that the residential accommodation was not used for office purposes. We find that the learned CIT(A) at para 33 of his order has recorded a finding that as per the Leave and Licence Agreement dated 20-7-1989, the flat cannot be used for any purpose except the assessee s residence. The learned CIT(A) therefore rejected the assessee s claim. No material has been placed before us to controvert the findings recorded by the revenue authorities. There is no evidence that part of the flat was used by the assessee for office purposes. Further, such office use is prohibited under the leave and licence agreement in respect of the flat. We, therefore, confirm the order of the learned CIT(A) on this issue. 23. Ground No. 5 pertains to rejection by the learned CIT(A) of the assessee s claim that part of the furniture was used for office purposes and therefore, the value of the perquisite in respect of such furniture should be proportionately reduced. This ground is only consequential to ground No. 4 and therefore, for the same reasons, we confirm the findings of the learned CIT(A) on this issue. 24. Ground No. 6 read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... men and sweepers have been provided by the employer. In the present case the assessee himself has employed domestic servants and the BHF Bank are reimbursing to the assessee a sum of ₹ 4,000 per month. In our view the Board s Circular is not applicable in the present case and the revenue authorities have rightly brought to the charge of tax perquisite of ₹ 48,000. On this issue the order of the learned CIT(A) is confirmed. 28. Ground No. 8 reads as under : On the facts and in the circumstances of the case, the learned CIT(A) was not justified in upholding the view of the Assessing Officer treating the entire amount of ₹ 15,827.75 on electricity bills for the flat as a perquisite in the hands of your appellant and in not directing him to exclude the proportionate amount for the portion of the flat being used for official purposes. 29. The issue is also consequential to our findings that no part of the flat was used for office purposes. Therefore, on this issue the order of the learned CIT(A) is confirmed. 30. Ground No. 9 reads as under : On the facts and in the circumstances of the case, the learned CIT(A) was not justified in holding that one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffice, was himself responsible for deduction of tax at source from his salary income and therefore, he is at fault if tax is not deducted from salary or is short deducted. In our view the assessee must succeed on this issue. The assessee may have a dual capacity as deductor of TDS and as an assessee liable for payment of advance-tax. If the assessee has committed any default in his capacity as deductor, the Assessing Officer is free to take any action permissible under the Income-tax Act for the default of non-deduction or short deduction. Insofar as the liability for payment of advance-tax is concerned, in our view, the issue is covered by the ITAT Delhi Special Bench decision. We find that in addition to salary income for the present assessment year the assessee has income from other sources amounting to ₹ 1,46,124. He also has some other incomes. The Assessing Officer is directed to recalculate interest chargeable under sections 234B and 234C, if any, after excluding the salary income. ITA No. 4399/M/97 : Assessment year 1993-94 35. Ground of appeal Nos. 1, 2 and 3 are the same as per assessment year 1991-92 and they pertain to the determination of value of perquisit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for their use outside India. It was also pointed out before us that the benefit of section 80-O has been extended to an individual who is resident in India with effect from the assessment year 1992-93. The Assessing Officer rejected the claim on the ground that the assessee was only an employee and was receiving salary which is not covered under section 80-O. 41. The learned CIT(A) concurred with the view of the Assessing Officer with the following short discussion at para 19 of his order: The Assessing Officer has discussed the reasons for doing so in detail in his assessment order. I have gone through them very carefully and I do not find any reasons for not concurring with him. This ground is also dismissed. Further, it is not the appellant who is rendering professional services in India in his personal capacity. It is only the employer bank who is rendering such services. 42. From the above, it appears that the assessee s claim was rejected on the basis that salary income earned by an employee from the employer would not qualify for deduction under section 80-O. 43. The learned counsel appearing on behalf of the assessee contended before us that the assessee s c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on salary income. It is pointed out that deduction is admissible on income by way of royalty, commission, fees or any similar payments received by the assessee, if all the conditions of section 80-O are fulfilled. It is argued that the salary income cannot be said to be in the nature of any similar payment as royalty, commission or fees. 45. We have given a careful consideration to the rival submissions and have gone through the facts as also the relevant provisions of law in this regard. Section 80-O as applicable to the assessment year under appeal, reads as under : Where the gross total income of an assessee, being an Indian Company or a person other than a company who is resident in India includes any income by way of royalty, commission, fees or any similar payment received by assessee from the Government of a foreign State or a foreign enterprise in consideration for the use outside India or any patent, invention, mode, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to such Government or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head-note : The true clue to the interpretation of the expression any similar payment in section 80-O lies not in the preceding three words but really in the second part of the section. The essence of the exemption lies, not in consigning the receipt to one of these pigeon-holes but in examining whether the receipt is a payment in consideration of one of the two situa- tions envisaged in the section. To illustrate : where the assessee is the owner of a patent or invention, he may generally permit another to make uses of the patent or the invention in consideration of a royalty payment. Or, again, where the assessee is in possession of technical know-how, he may be prepared to allow another to make use thereof in consideration of a fee to the assessee. He may also stipulate a consideration in the form of a commission based on the sales of the products the other party is able to manufacture with the aid of such invention or know-how. Again, an assessee may have achieved some speciality and he may agree to lend his services to some other person and stipulate a consideration therefore which may be variously described. The nature of the asset, right, information or services ..... X X X X Extracts X X X X X X X X Extracts X X X X
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