The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) noted that the Indian Institute of Technology (IIT) does not fall under the status of the Central Government for invoking Rule 3 and Section 17(2) of the Income Tax Act, 1961.
The case involves an institution established under The Institutes of Technology Act, 1961, as an educational entity in Delhi. While it receives funding and operates under the administrative control of the Ministry of Education (formerly the Ministry of HRD), Government of India, it was argued that its employees’ taxation should align with that of Central/State Government employees.
Specifically, the issue arose regarding the taxation of accommodation provided to employees within the campus. The Assessing Officer (AO) determined that tax should be deducted at source on the perquisite value of this accommodation under Section 17(2)(ii) of the Income Tax Act.
Representing the assessee, Mr. Karanjot Singh Khurana argued that employees should be taxed similarly to government employees, emphasizing the similarity in salary structures. The contention was that the level of involvement of the Central Government in the institution’s functioning warranted parity in the computation of perquisites.
However, the tribunal, comprising M. Balaganesh (Accountant member) and Anubhav Sharma (Judicial member), viewed that “view that though Ld. CIT(A) has fallen in error in holding that assessee falls in status of Central Government for the purpose of Section 17(2) of the Act, the impugned order of Ld. CIT(A) still deserves to be upheld as Ld. AO has fallen in error by straightaway invoking Rule 3 for computing value of the perquisite and treat assessee in default in deducting tax at source on said value, without first recording a finding as to whether there is ‘concession’ and the case is covered by Section 17 (2) (ii) of the Act.”
As a result, the Revenue’s appeal was dismissed, affirming the CIT(A)’s decision.
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