ACIT, Chandigarh v. M/s Chandigarh Industrial & Tourism Development Corporation Ltd., Chandigarh

ITA 170/CHANDI/2015 | 2008-2009
Pronouncement Date: 29-04-2015 | Result: Dismissed

Appeal Details

RSA Number 17021514 RSA 2015
Assessee PAN AAACC6783H
Bench Chandigarh
Appeal Number ITA 170/CHANDI/2015
Duration Of Justice 2 month(s) 16 day(s)
Appellant ACIT, Chandigarh
Respondent M/s Chandigarh Industrial & Tourism Development Corporation Ltd., Chandigarh
Appeal Type Income Tax Appeal
Pronouncement Date 29-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 29-04-2015
Assessment Year 2008-2009
Appeal Filed On 12-02-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMBER AND SHRI T.R.SOOD ACCOUNTANT MEMBER ITA NOS. 169 & 170/CHD/2015 (ASSESSMENT YEARS : 2007-08 & 2008- 09) THE A.C.I.T. VS. M/S CHANDIGARH INDUSTRIAL & TOURISM CIIRCLE 2(1) DEVELOPMENT CORPORATION LTD. CHANDIGARH. SCO 121-122 SECTOR 17-B CHANDIGARH. PAN: AAACC6783H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH DR RESPONDENT BY : SHRI TEJ MOHAN SINGH DATE OF HEARING : 27.04.2015 DATE OF PRONOUNCEMENT : 29.04.2015 O R D E R PER BHAVNESH SAINI J.M. : BOTH THE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CHANDIGARH DAT ED 12.11.2014 FOR ASSESSMENT YEAR 2007-08 CHALLENGING THE CANCELLATION OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT AND ORDER DATED 11.11.2014 FOR ASSESSMENT YEAR 2008-09 CHALLENGING THE CANCELLATI ON OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TA X ACT. 2 2. IT IS STATED THAT THE FACTS ARE SAME IN BOTH TH E APPEALS. THEREFORE FOR THE PURPOSE OF DISPOSAL O F BOTH THE APPEALS THE FACTS ARE TAKEN FROM ASSESSMENT YEAR 2 007-08. 3. BRIEFLY THE FACTS NOTED IN THE IMPUGNED ORDER ARE THAT THE ASSESSEE COMPANY HAD GIVEN GIFT OF RS.9000 /- EACH TO ITS EMPLOYEES ON THE OCCASION OF DIWALI. THE D CIT(TDS) HAS TREATED THE SAME AS PERQUISITE IN THE HANDS OF THE EMPLOYEES BUT THE DEMAND CREATED WAS DELETED BY THE LEARNED CIT (APPEALS) AND SUBSEQUENTLY BY I.T.A.T. CHANDIGARH BENCH. LATER ON THE FRINGE BENEFIT TA X WAS REOPENED UNDER SECTION 115WH OF THE INCOME TAX ACT AND THE ASSESSEE AGREED TO PAY FRINGE BENEFIT TAX ON TH E ENTIRE AMOUNT OF GIFTS TO THE EMPLOYEES. THE ASSESSING O FFICER ACCORDINGLY INCLUDED THE ENTIRE AMOUNT OF GIFT TO T HE TAXABLE FRINGE BENEFITS. THE PENALTY PROCEEDINGS FOR CONC EALMENT WERE ALSO INITIATED. THE ASSESSING OFFICER WAS NO T SATISFIED WITH THE REPLY OF THE ASSESSEE AND LEVIED PENALTY O N THE GROUND THAT THE DISCREPANCY WAS DETECTED DURING THE COURSE OF SURVEY UNDER SECTION 133A OF THE ACT. 4. THE LEARNED CIT (APPEALS) CONSIDERING THE EXPLANATION OF THE ASSESSEE AND RECORD NOTED THAT I N THESE CASES GIFTS WERE INITIALLY TREATED AS PERQUISITE IN THE HANDS OF THE EMPLOYEES BUT THE VIEW OF THE DEPARTMENT DID NOT FIND FAVOUR WITH THE APPELLATE AUTHORITIES. THEREAFTER THE INFORMATION WAS PASSED BY TDS WING TO THE ASSESSING 3 OFFICER WHO HAS TREATED THE AMOUNT GIVEN TO THE EMP LOYEES AS FRINGE BENEFITS. THUS IT WAS FOUND THAT THERE WAS DIFFERENCE OF OPINION AS TO WHETHER THE AMOUNT GIVE N AS GIFT TO THE STAFF WAS TO BE TREATED AS PERQUISITE IN THE HANDS OF THE STAFF MEMBERS OR WAS TO BE TREATED AS FRINGE BE NEFITS. SINCE TWO VIEWS ARE POSSIBLE THEREFORE IT WAS FOU ND THAT IT WAS NOT A CASE OF LEVY OF PENALTY AND ACCORDINGLY P ENALTIES WERE CANCELLED AND THE APPEALS OF THE ASSESSEE WERE ALLOWED. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON R ECORD. THE LEARNED COUNSEL FOR ASSESSEE FILED COPY OF ORDE R OF I.T.A.T. CHANDIGARH BENCH IN THE CASE OF THE ASSE SSEE DATED 21.10.2011 IN ITA NOS.1331 TO 1333/CHD/2010 F OR ASSESSMENT YEARS 2007-08 TO 2009-10 IN THE MATTER O F ACIT (TDS-I) VS. M/S CHANDIGARH INDUSTRIAL & TOURISM COR P. LTD. (ASSESSEE) IN WHICH THE IDENTICAL ISSUE REMAINED IN CONSIDERATION WITH REGARD TO LIABILITY OF THE ASSES SEE TO DEDUCT TDS ON PERQUISITE UNDER SECTION 201(1) OF TH E ACT OR INTEREST UNDER SECTION 201(1A) OF THE ACT. THE FI NDINGS OF THE TRIBUNAL IN PARA 8 ARE REPRODUCED AS UNDER : 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESE NT APPEAL IS IN RESPECT OF THE INCLUSION OF PERQUISITE VALUE OF DIWALI GIFT GIVEN BY THE EMPLOYER TO ITS EMPLOYEE. THE ASSESSEE CORPORATION IS RUNNING THRE E HOTELS I.E. HOTEL SHIVALIK VIEW HOTEL PARK VIEW AN D HOTEL MOUNT VIEW ALONGWITH HEAD OFFICE AT CHANDIGARH ADDRESS. THE PROFITS OF THE ASSESSEE 4 CORPORATION HAD INCREASED SIGNIFICANTLY AND IN ORDE R TO COMMENSURATE THE SAID PROFITS GENERATED WITH THE CONTRIBUTION OF THE EMPLOYEES DECISION WAS TAKEN T O PROVIDE FOR DIWALI GIFT @ RS.9000/- PER EMPLOYEE. THE SAID PAYMENT OF RS.9000/- PER EMPLOYEE WAS IRRESPECTIVE OF THE RANK OF THE EMPLOYEE. THE EXPENDITURE WAS BOOKED BY THE ASSESSEE UNDER THE HEAD STAFF WELFARE AS THE SAME HAS NO CONNECTION WITH THE EMPLOYMENT AND WAS A VOLUNTARY PAYMENT BY THE ASSESSEE OUT OF PERSONAL GRATUITOUS REASONS . THE SAID PAYMENT WAS NOT LINKED WITH THE TERMS OF EMPLOYMENT OF THE EMPLOYEES OF THE ASSESSEE CORPORATION. THE ISSUE ARISING BEFORE US IS WHETHE R THE SAME CONSTITUTES PERQUISITE IN HANDS OF THE EMPLOYEE AND CONSEQUENTLY TAX WAS LIABLE TO BE DEDUCTED AT SOURCE OUT OF SUCH PAYMENT. SECTION 17(2) OF THE ACT DEFINES PERQUISITE TO INCLUDE CERT AIN ITEMS AS PART OF SALARY. AS PER CLAUSE (VI) TO SEC TION 17(2) OF THE ACT THE VALUE OF ANY OTHER FRINGE BENEFITS AND AMENITIES EXCLUDING THE FRINGE BENEFIT S CHARGEABLE TO TAX UNDER CHAPTER-XII-H AS MAY BE PRESCRIBED IS TO BE INCLUDED IN THE HANDS OF THE ASSESSEE AS PERQUISITE U/S 17(2) OF THE ACT. THE RULES IN CONNECTION WITH THE PERQUISITE VALUE OF WHICH IS INCLUDED AS PART OF SALARY ARE PRESCRIBED UNDER RULE 3 OF THE INCOME TAX RULES. SUB-RULE (7) TO RULE 3 OF INCOME TAX RULES PRESCRIBES THE FRINGE BENEFITS OR AMENITIES TO BE INCLUDED IN VIEW OF THE PROVISIONS OF SECTION 17(2)(VI) OF THE ACT. THE SA ID RULE 3 HAS UNDERGONE REPEATED AMENDMENTS. THE ASSESSEE IS IN APPEAL IN RESPECT OF ASSESSMENT YEAR S 2007-08 TO 2009-10. DURING THE RELEVANT PERIOD RUL E 3(7) OF INCOME TAX ACT RULES HAD LIMITED OPERATIONS IN RESPECT OF THE FRINGE BENEFITS. AS PER CLAUSE ( I) THE VALUE OF BENEFITS OF INTEREST FREE OR CONCESSIO NAL LOANS ARE TO BE DETERMINED AS PER CLAUSE (VII) VAL UE OF BENEFITS OF CERTAIN MOVABLE ASSETS WAS TO BE 5 INCLUDED AND AS PER CLAUSE (VIII) VALUE OF BENEFITS ARISING FROM TRANSFER OF ANY MOVABLE ASSET BELONGIN G TO THE EMPLOYER TO THE EMPLOYEE WAS TO BE INCLUDED AS FRINGE BENEFITS OR AMENITIES PROVIDED BY THE EMPLOYER OR EMPLOYEE. CLAUSE (II) TO (VI) OF RULE 3(7) WERE OMITTED OF THE I.T. (SEVENTH AMENDMENT) RULES 2005 W.E.F. 1.4.2005. CLAUSE (IV) TO RULE 3(7) BEFO RE ITS AMENDMENT PROVIDED THE PROCEDURE FOR INCLUDING THE VALUE OF ANY GIFT OR VOUCHER OR TOKEN IN LIEU O F SUCH GIFT IN THE HANDS OF THE ASSESSEE WHERE THE VALUE OF SUCH GIFT EXCEEDED RS.5000/-. FURTHER RUL E 3 HAS BEEN AMENDED BY WAY OF SUBSTITUTION BY I.T. (THIRTEENTH AMENDMENT) RULES 2009 W.R.E.F. 1.4.2009. UNDER RULE 3(7) THE BENEFITS OR AMENITI ES IN TERMS OF SECTION 17(2) (VII) OF THE ACT HAVE BEE N PROVIDED AND AS PER CLAUSE (IV) VALUE OF ANY GIFT O R VOUCHER OR TOKEN IN LIEU OF SUCH GIFT RECEIVED BY T HE EMPLOYEE OR THE MEMBER OF HIS HOUSEHOLD ON CEREMONIAL OCCASION OR OTHERWISE IS INCLUDIBLE AS A PERQUISITE IN THE HANDS OF THE EMPLOYEE. SECTION 17(2) OF THE ACT DEFINING PERQUISITE HAS ALSO UNDERGONE AMENDMENT UNDER WHICH SUB-CLAUSE (VI) (VII) AND (VIII) WERE SUBSTITUTED FOR SUB-CLAUSE (V I) BY THE FINANCE (NO.2) ACT 2009 W.E.F. 1.4.2010. SUB- CLAUSE (VIII) TO SECTION 17(2) INCLUDES THE VALUE O F ANY OTHER BENEFITS OR AMENITIES AS MAY BE PRESCRIBE D AS A PERQUISITE IN THE HANDS OF THE EMPLOYEE. READING THE TWO PROVISIONS OF THE ACT AND THE RULE IN CONJUNCTION WE FIND THAT UNDER RULE 17(2)(VI) O F THE ACT THE PROVISIONS IN EXISTENCE DURING THE ASSESSMENT YEARS 2007-08 TO 2009-10 THE VALUE OF SUCH FRINGE BENEFITS OR AMENITIES AS PRESCRIBED UNDER RULE 3 IS TO BE TREATED AS PERQUISITE IN THE HANDS OF THE ASSESSEE. THE PERQUISITES ARE DEFINED UNDER RULE 3 AND AT THE RELEVANT TIME THE GIFT OR VOUCHER WAS NOT ONE OF THE PRESCRIBED BENEFITS OR AMENITIES UNDER RULE 3 (7) OF THE ACT. THE S AID 6 VALUE OF THE PERQUISITE ON ACCOUNT OF GIFT OR VOUCH ER WAS PRESCRIBED UNDER RULE 3 (7) OF THE INCOME TAX RULES WHICH WAS OMITTED BY I.T.(SEVENTH AMENDMENT) RULES 2005 W.E.F. 1.4.2005. THE SUBSTITUTION OF T HE SAID RULE 3 IS BY RETROSPECTIVE EFFECT FROM 1.4.200 9 BY I.T. (THIRTEENTH AMENDMENT) RULES 2009. THE CAPTIONED YEARS IN APPEAL BEFORE US ARE RELATING TO ASSESSMENT YEARS 2007-08 TO 2009-10 AND IN THE ABSENCE OF ANY PRESCRIBED RULES UNDER RULE 3(7) OF THE ACT THE AMENITIES PROVIDED BY THE EMPLOYER I.E. THE ASSESSEE BEFORE US TO ITS EMPLOYEE BY WAY OF DIWALI GIFT IS NOT TO BE TREATED AS A PERQUISITE IN THE HANDS OF THE EMPLOYEES. CONSEQUENTLY THERE IS NO REQUIREMENT OF TAX DEDUCTION AT SOURCE OUT OF SUCH PAYMENTS TO THE EMPLOYEES. THE ASSESSEE THUS CANNOT BE HELD TO BE IN DEFAULT ON SUCH NON DEDUCTION OF TAX AT SOURCE OUT OF PAYMENT OF RS.9000/- PER EMPLOYEE ON ACCOUNT OF DIWALI GIFT. WE ARE NOT ADDRESSING THE ISSUE WHETHER THE SAID DIWALI GIFT FALL WITHIN THE AMBIT OF GIFT AS PER RU LE 3(7)(IV)/(VI) (SUBSTITUTED) OF I.T. RULES IN VIEW O F THE PROVISIONS BEING NOT ON THE STATUTE AT THE RELEVANT TIME. THE ASSESSEE ACCORDINGLY IS NOT LIABLE TO PA Y ANY TAX U/S 201(1) OR INTEREST U/S 201(1A) OF THE ACT IN THE CAPTIONED ASSESSMENT YEARS. THE ASSESSING OFFICER IS THUS DIRECTED ACCORDINGLY. TH E GROUNDS OF APPEAL RAISED BY THE REVENUE ARE ALLOWED. 6. CORRIGENDUM IS ALSO FILED ON THE PROPORTION THA T ULTIMATELY THE DEPARTMENTAL APPEAL IS DISMISSED. 7. THE LEARNED COUNSEL FOR ASSESSEE THEREFORE SUBMITTED THAT SINCE THE ISSUE TRAVELED UP TO THE S TAGE OF 7 THE TRIBUNAL AND IT WAS ALSO NOTED THAT THE FRINGE BENEFIT PROVISIONS HAVE UNDERGONE REPEATED AMENDMENTS AND T HERE WAS DIFFERENCE OF OPINION THEREFORE PENALTY WAS C ORRECTLY CANCELLED. HE HAS ALSO SUBMITTED THAT ALL THE FAC TS WITH REGARD TO GIVING OF THE GIFTS WERE DISCLOSED BEFORE THE AUTHORITIES BELOW. THEREFORE IT IS NOT A CASE OF CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTICULARS OF IN COME. 8. THE LEARNED D.R FOR THE REVENUE HOWEVER STATE D THAT SINCE THE ASSESSEE AGREED FOR ASSESSMENT OF TH E AMOUNT IN QUESTION ON THE VALUE OF FRINGE BENEFITS GIVEN T O THE EMPLOYEES THEREFORE TWO VIEWS ARE NOT POSSIBLE. THEREFORE THE LEARNED CIT (APPEALS) WAS NOT JUSTIF IED IN CANCELING THE PENALTY. 9. ON CONSIDERATION OF THE FACTS OF THE CASE IN TH E LIGHT OF THE RIVAL CONTENTIONS AND FINDINGS OF THE TRIBUNAL IN EARLIER PROCEEDINGS VIDE ORDER DATED 21.10.2011 (S UPRA) WE DO NOT FIND ANY MERIT IN BOTH THE APPEALS OF THE RE VENUE. IT IS ADMITTED FACT THAT THE ASSESSEE HAS DECLARED ALL THE PARTICULARS OF GIVING OF GIFTS TO THE EMPLOYEES ON THE OCCASION OF DIWALI TO THE REVENUE AUTHORITIES. EA RLIER THE REVENUE AUTHORITIES HAVE TREATED THE AMOUNT IN QUES TION AS PERQUISITE IN THE HANDS OF THE EMPLOYEES BUT THE DE MAND WAS DELETED BY THE LEARNED CIT (APPEALS) AS WELL AS THE TRIBUNAL DISMISSED THE APPEALS OF THE REVENUE. TH E ASSESSING OFFICER REOPENED THE ASSESSMENTS BY GIVIN G NOTICE UNDER SECTION 115WH OF THE ACT BY SERVING THE NOTIC E UPON THE ASSESSEE ON 28.3.2012 FOR ASSESSMENT YEAR 2007- 08 AND 8 SIMILARLY ASSESSMENTS WERE REOPENED IN ANOTHER CASE . IT IS THEREFORE CLEAR THAT THE REVENUE AUTHORITIES T OOK THE ACTION AGAINST THE ASSESSEE AFTER PASSING OF THE OR DER OF THE TRIBUNAL ON 21.10.2011 PRIOR TO THAT THE REVENUE AUTHORITIES WERE TREATING THE AMOUNT IN QUESTION AS PERQUISITE IN THE HANDS OF THE EMPLOYEES BUT NEVER TOOK ACTION AGAINST THE ASSESSEE FOR TREATING THE AMOUNT AS FRINGE BENEFIT. THE TRIBUNAL HAS ALSO CONSIDERED THE FACTS OF THE CASE THAT SURVEY WAS ALSO CONDUCTED IN THE P REMISES OF THE ASSESSEE UNDER SECTION 133A OF THE ACT AND A LSO GONE THROUGH THE REPEATED AMENDMENTS IN THE INCOME TAX PROVISION FOR PERQUISITE AND FRINGE BENEFIT. THEREFORE EVE N IF THE ASSESSEE AGREED FOR ADDITION AT THE ASSESSME NT STAGE FOR TREATING THE VALUE OF FRINGE BENEFITS IN THE HA NDS OF THE ASSESSEE WOULD CLEARLY JUSTIFY THE FINDINGS OF THE LEARNED CIT (APPEALS) THAT TWO VIEWS WERE POSSIBLE IN THE G IVEN FACTS OF THE CASE. SINCE ALL THE FACTS WERE DISCLOSED TO THE REVENUE DEPARTMENT AND REVENUE DEPARTMENT ITSELF WA S NOT SURE INITIALLY WHETHER IT IS A CASE OF FRINGE BENEF IT THEREFORE THE LEARNED CIT (APPEALS) WAS JUSTIFIED IN HOLDING THAT IT IS NOT A CASE OF CONCEALMENT OF INCOME OR F ILING OF INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. CONSIDERING THE NAT URE OF THE ISSUE INVOLVED AND RELEVANT PROVISIONS OF LAW WHICH WERE TAKEN DIFFERENTLY BY THE REVENUE AUTHORITIES ITSELF THE LEARNED CIT (APPEALS) WAS JUSTIFIED IN CANCELING TH E PENALTY. 9 WE ACCORDINGLY DO NOT FIND ANY MERIT IN BOTH THE AP PEALS OF THE REVENUE AND THE SAME ARE DISMISSED. 10. IN THE RESULT BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF APRIL 2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29 TH APRIL 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR ITAT CHANDIGARH