The Income Tax Appellate Tribunal (ITAT) Bangalore bench held that no Tax Deduction at source (TDS) shall be done in respect of the perquisite value of unfurnished accommodation provided by Employee Provident Fund Organisation (EPFO) to its employees.
Assessee, Employees Provident Fund Organisation, is an autonomous body and is a creation under the statute, “Employees Provident Fund Organisation and Miscellaneous Provisions Act, 1952.”
During the assessment proceedings, the AO noted that the assessee has provided its employees with unfurnished accommodation, and the assessee was required to deduct TDS on the perquisite value in respect of such accommodation provided to its employees. Thereafter AO issued notice to assessee and after considering the submissions of the assessee treated the assessee as “assessee in default” for non-deduction of TDS on perquisite value of unfurnished accommodation provided to its employees,
Aggrieved by the order, assessee filed an appeal before the Commissioner of Income Tax (Appeals), who upheld the decision of the Assessing Officer. Thereafter, the assessee filed a second appeal before the tribunal.
During the appeal proceedings before the bench B V Vidyulatha appeared on behalf of the assessee and submitted that the assessee was an organization consisting of Central Provident Fund Commissioners, Additional Central Provident Fund Commissioners and other officers including Inspector appointed by the Central Government.
Thus the counsel for assessee argued that It could not be equated to the facts in case of Central Food Technological Research Institute vs. ITO who is registered under the Societies Registration Act.
Further it was submitted that The assessee is classified as a state within the meaning of Article 12 because the State chooses the employees of the assessee and does so in a way that allows the State to create or abolish posts, as well as to regulate the terms under which such employees of the assessee will hold their posts.
Moreover, in relation to TDS counsel for assesee argued that the issue of TDS in any event does not arise in the present facts of assessee, as a house rent allowance is collected from its employees to whom unfurnished accommodation is provided.
Thus, it was contented that the assessee did not fall within the mischief of Section 17(2)(ii) as the accommodation given to the employees of the assessee are not on concessional basis.
According to this Assessee was not required to deduct TDS in respect of the perquisite value of unfurnished accommodation provided by the assessee to its employees.
On the contrary Veera Raghavan, Counsel for the revenue, supported the decision of the lower authorities.
During the proceedings the tribunal observed that the “Employees Provident Fund and Miscellaneous Provisions Act, 1952”, which is notified by the central government in the official gazette as per section 5A of the Act.
As per section 5AA of the Employees Provident Fund and Miscellaneous Provisions Act central government in official gazette constitutes the executive committee to assist the central board in performance of its functions.
Certain powers conferred under the Employees Provident Fund and Miscellaneous Provisions Act as per section 7A, 8B, 8F, 8G can be exercised only by the employees under the Central Government.
Thus the tribunal, after verifying the above provisions opinionated that powers cannot be compared to those used by workers of an organization that is subject to byelaws established under the Societies Registration Act.
Hence the tribunal finally agreed with the contentions of assessee representative that assessee falls under S.No.1 of the table under Rule 3 of the Income Tax Rules, 1962 and therefore no TDS has to be deducted by the assessee on the perquisite value of the unfurnished accommodation provided by assessee to its employees.
After considering the facts submitted by both parties, the two member bench of Chandra Poojari, (Accountant Member) and Beena Pillai, (Judicial Member) allowed the appeal filed by the assessee.
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