TMI Blog2011 (5) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... them and the requisites, etc. There was amendment to section 17(2) by Finance Act, 2007 with retrospective effect from 1.4.2002 and as such the assessee was made liable to deduct and pay higher tax on the perquisite provided in the form of residential accommodation to its employees. The assessee paid entire amount of tax computed on the value of perquisite in terms of amendment brought by the Finance Act, 2007. Thereafter, the Assessing Officer also levied interest u/s 201(1A) of the Act. It was held by the lower authorities that the payment of interest is a statutory liability and, therefore, the assessee is required to pay the same for late deposit of TDS. Now, the assessee is in appeal is before. 3. We have considered the rival contentions, carefully gone through the orders of the authorities below. The issue for payment of higher amount of TDS and interest thereon arises due to the fact that Finance Act, 2007 inserted Explanation to section 17(2) of the Act with retrospective effect from April, 2002. We find that the assessee had duly submitted the required return from time to time for all the years under consideration and there were no proceedings against the assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as already paid the short amount of TDS and, therefore, accepted its liability for such payment. We do not find any merit in the action of the learned Commissioner of Incometax (Appeals). We, therefore, restore Ground no. 2 to the file of the learned Commissioner of Incometax (Appeals) for deciding whether the assessee is liable for TDS u/s 192 on the perquisite for concession in rent towards accommodation provided to its employees. 4. Now coming to the issue decided by the learned Commissioner of Incometax (Appeals) with reference to his decision that the assessee was in default within the meaning of section 201(1A) of the Act for payment of interest on the delay in payment of TDS, we find that it is an undisputed fact that during the years under consideration as per the existing provisions prevailing at the time of deduction of TDS, the assessee has correctly deducted tax at source on the amount of salary and perquisite payable to its employees. Only due to the reason of change in law in 2007 with retrospective effect from 2002 wherein the provisions deeming difference between the actual sum charged and specified rate as concessional taxable as perquisite in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pective amendment in the provisions of section 17(2) Explanation 1 by the Finance Act, 2007 wherein retrospective effect was given to treat the concession given in respect of housing provided by the employer as perquisite. 6. The lower authorities have relied upon the decision of Hon ble Supreme Court in the case of Eli Lilly Company India Private Limited; 312 ITR 225 for holding that assessee was in default u/s 201(1A). We have carefully gone through this judgment of the Hon ble Supreme Court wherein it was held that interest u/s 201(1A) is compensatory in nature for withholding the tax which ought to have gone to the exchequer. It is not the case where due to retrospective amendment in law, employer was made liable to deduct tax with retrospective date. It was simply a case where tax already deducted by the employer was withheld and payment to Government exchequer was made belately, therefore, Hon ble Supreme Court held that interest u/s 201(1A) was compensatory measure for withholding the tax which ought to have gone to the exchequer. Thus, the facts of this case are quite distinguishable from the facts of the instant case before us wherein liability u/s 201(1A) was fastene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had not deducted tax at source, it was held that the assessee was an assessee-in-default under section 192, read with section 201(1), and also liable to interest under section 201(1A). On appeal, the Commissioner (Appeals) confirmed the findings of the Assessing Officer. On second appeal, the assessee contended that no finding was recorded either by the Assessing Officer or by the Commissioner (Appeals) on the issue whether there was concession in the matter of rent and, therefore, the question of perquisite under rule 3, read with section 17(2)(ii), would not arise; that by retrospective amendment, at best, an employee could be charged and not the employer to deduct tax on such perquisite, which was not there as per the law, as it stood at the relevant time; and that it would be impossible on the part of assessee to deduct tax from salary of employees in accordance with amended section 17(2) as the remedy available to the assessee to recover tax from its employees had lapsed. Both the assessees had provided accommodation to their employees located nearby the working places. Both had recovered rent in relation thereto on the same standard without any discrimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces as held by certain decisions that residential facility provided by the employer to the employee is not a perquisite within the meaning of income-tax laws. In such a case instead of concession, there would be compulsion. [Para 48] In the absence of deeming the difference as perquisite, it was open to the assessee to contend that there was, in fact, no concession in the matter of rent and that could only be on the yardstick of the case laws relied upon by the assessee, and other attending circumstances. The revenue had to give a finding as to concession in the matter of rent in the absence of the deeming provision to treat the difference as perquisite in view the decision in Arun Kumar s case (supra). [Para 49] Again, there might be reasons for providing accommodation to employees looking to location, situation, area s exigency of employment and in such companies instead of concession, there is compulsion. WCL is in remote area and the proviso to rule 3 itself provides for such an exception when it states that nothing contained in this sub-rule would be applicable to any accommodation located in a remote area provided to an employee working at a mining site or at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct tax is there on the date(s) when the salary is actually paid wholly or partly at any time, at the option of the employer, if it was on a value of the perquisite not in the form of a monetary payment, but both are within a week or so immediately after the financial year of payment or grant of perquisite. [Para 58] Therefore, if there was no perquisite at the time when the tax was to be deducted at source, there would be no liability to deduct tax. If a perquisite value is assumed by the retrospective amendment after the period when it was to be deducted, how can a deduction be made on a back date? The retrospective amendment is for deeming valuation of perquisite and is not extended to deduction of tax at source thereon, which remains to be within the financial year of the income to which it relates to. [Para 59] As per the provision of section 200, the tax deduction at source is a mode of payment of tax on the income of the person, i.e., employees in this case. The credit of this deduction at source is given against the tax liability of the employee as provided in section 199. Therefore, when the time prescribed for deduction has expired, the employer cannot be aske ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etrospective effect, the assessee could not be held to be an assesseein- default retrospectively. It would now be impossible on the part of the assessee to deduct tax from the salary of the employees for that year in accordance with the amended section 17(2) for which salary had already been paid in that year. Remedy available to the assessee to recover the tax from its employees had lapsed and now it was impossible to deduct tax from the salaries of the employees as per the amended section 17(2). [Para 67] It is a well-settled law that law does not compel a man to do that which he cannot possibly perform. [Para 68] Even if the amendment had been brought into with retrospective effect, the assessee could not be treated as an assessee-in-default retrospectively and interest under section 201(1A) could not be charged on a liability which came into existence by a retrospective amendment. The assessee had all along acted in a bona fide manner and in accordance with the law which existed as on the date on which TDS was to be deducted. Further, merely for the reason that the law had been changed retrospectively, the assessee could not be treated to be in default for no fault ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain state of affairs (difference as being perquisite); it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of the state of affairs, that the rent charged was the standard or market rent and that there was no concession in the matter of rent. [Para 73] It is implicit from the tenor and phraseology implied in the Explanation 1 to section 17(2) with retrospective effect in substance, a legal fiction is created by which the difference in rent has been treated as the concession in the matter of rent and, hence, perquisite. To construe this legal fiction, it will be proper and necessary to assume all those facts on which alone the fiction can operate, so, necessarily, all the provisions in the Act in respect of a perquisite will apply. As a consequence, the specified rate would have to be assumed as real rent of the accommodation and the difference over rent charged, a concession in the matter of rent and, consequently, a benefit granted which is assumed, by necessary implication, a perquisite. [Para 74] The contention of the assessee, that the object of this deeming section was not to treat t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the amount of TDS which it was required to deduct as per the amended law which was brought in force with retrospective effect. In this regard, we will like to cite the verdict of the Hon ble Gujarat High Court in the case of S.R. Kausti; 276 ITR 175 wherein it was held as under :- A word of caution. The authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. This court, in an unreported decision in the case of Vinay Chandulal Satia Vs N.O. Parekh, CIT, Special Civil Application No.622 of 1981, rendered on August 20, 1981, has laid down the approach that the authorities must adopt in such matters in the following terms: The Supreme Court has observed in numerous decisions, including Ramlal Vs Rewa Coalfields Ltd., AIR 1962 SC 361; State of West Bengal V.Administrator, Howrah Municipality, AIR 1972 SC 749, and Babhutmal Raichand Oswal V Laxmibal R Tarte AIRR 1975 SC 1297, that the S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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