Relief under the 89 of the Act is available qua a perquisite. Rule 21A and Form 10E do relate to the contribution in question – ITAT
ABCAUS Case Law Citation:
ABCAUS 2445 (2018) 07 ITAT
The instant appeal was filed by the assessee against the CIT(A)’s action of confirming disallowance of the relief u/s 89 of the Income Tax Act, 1961 (the Act) claimed by the assessee.
The case was selected for Scrutiny under CASS and the notices were issued u/s 143(2) of the Act. The assessee, from his employer had received arrears in lieu of employer’s contribution to the newly implemented Defined Contribution Scheme. The assessee claimed relief under section 89 of the Act in accordance with the amount mentioned as relief under that section in Form No. 16 issued by his employer.
The assessee explained that the employer’s contribution to an approved superannuation fund in respect of an employee, had become taxable as a ‘perquisite’ by the insertion of the provision under section 17(2)(vii) w.e.f. 01.04,2010, and since the larger part of the arrears received by him pertained to the years prior to 01.04.2010, the relief under section 89 of the Act was available to him.
However, the AO held that section 89 of the Act is applicable where an assessee is in receipt of a sum in the nature of salary, being paid in arrears, or in advance, or is in receipt, in any one financial year, of salary for more than 12 months or a payment which, under the provisions of clause-(3) of section-17, is profit in lieu of salary, or is in receipt of a sum in the nature of family pension as defined in the explanation to clause (iia) of section 57, being paid in arrears. According to the AO, the payments made by the employer were value of perquisites u/s 17(2) as per Form no. 12BA and the amount paid cannot qualify for relief u/s 89(1) therefore, relief claimed u/s 89(1) was disallowed and added to the income shown in the return of income.
The CIT(A) confirmed the disallowance under section 89.
The Tribunal observed that Section 17(1) defines ‘salary’ and ‘perquisite’ separately for the purposes of sections 15 and 16. Section 15 is the charging section qua income from salary, whereas section 16 deals with deduction there-from. Section 17(1)(iv) says that ‘salary’ includes, inter alia, perquisites. Relief u/s 89 is available in respect of salary and so, it is, by virtue of section 17(1) (iv), as a natural corollary thereof, available qua perquisites.
It was further observed that Rule 21A of the Income Tax Rules, 1962 (the Rules) pertains to, inter alia, salary with respect to which section 89 grants relief. Therefore, the said Rule does pertain to perquisite as well. Rule 21A(1)(a) states that where, inter alia, any portion of the assessee’s salary is received in arrears or in advance, the relief u/s 89 shall be in accordance with the provisions of Rule 21A(2). Hence, the Tribunal opined that relief u/s 89 also relates to the contribution under consideration.
Further, it was noted that section 192(2)(A) provides inter alia, that where an assessee, being a government employee in a company, is entitled to relief u/s 89(1), he must furnish particulars for the purposes of TDS, as prescribed. Rule 21AA provides the prescription, in the shape of form 10E. Under Form 10E, the particulars required to be furnished are those of income referred to in Rule 21A. Rule 21A, talks of, inter alia, income by way of salary. ‘Salary’, as per section 17(1)(iv), includes perquisites. The contribution in question was , admittedly, a perquisite. Thus the ITAT opined that the circle was complete. The Form 10E, ergo, does relate to the contribution under consideration.
The Tribunal observed that Rule 21A(1)(e) read with Rule 21A(6) may not help the assessee, but Rule 21A(1)(a) read with Rule 21A(2) does. Rule 21A(1)(e) read with Rule 21A(6) concerns cases where, inter alia, the payment is not in the nature of salary paid in arrears or in advance, whereas Rule 21A(1)(a) read with Rule 21A(2) pertains to cases, inter alia, where salary is received in arrears or in advance. According to the Tribunal the assessee’s case was covered under the latter category. So, Rule 21A(1)(e) read with Rule 21A(6) being not helpful to the assessee, was , in no manner, detrimental to the assessee’s claim.
The Tribunal clarified that as per the Circular issued by the employer, the contributions over and above the exemption limit prescribed under the Act were to be taxable in the hands of employees, as perquisite. However, Section 17(2)(vii) of the Act also treats such a sum as a perquisite. But as per section 17(1)(iv), perquisite is salary and receipt of salary paid in arrears or in advance is entitled to relief under section 89.
The Tribunal said that trite law is that delegated legislation cannot override the provisions of the Act. Moreover, the circular was not the one issued by the CBDT, but an internal circular of of the employer which was of no consequence over the provisions of the Act.
The Tribunal held that Relief under the 89 of the Act is available qua a perquisite, Rule 21A and Form 10E do relate to the contribution in question and Rule 21A(1)(a) read with Rule 21A(2) applied to the assessee’s claim. The AO was directed to forthwith allow the claim of the assessee u/s 89.
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