Dear Sir,
I am working in a PSU in Bangalore. Based on the following judgement, Can I file a revised return of Income reducing the Perk value towards Self-leased accommodation and claim refund?
---
2010-TIOL-653-ITAT-MUM
( Also see analysis of the Orde r )
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'A' MUMBAI
ITA No.5879/Mum/2009
Assessment Year: 2003-04
Income Tax – Sections 17, 143(3), 147 - Whether if employees lease out their premises to
their employer against rent and occupy the same, they lose their HRA benefits - Whether
obligation falls on the employer to compute the value of perquisite for accommodation
after adjusting the lease amount paid and what is left over should be treated as HRA
benefit.
Assessees are employees of BPCL Corporation (Employer). Under a self-leasing scheme
they rented their house property to the employer and earned lease rent and also
received the maintenance charges incurred from the employer as reimbursement of
expenses. All the assessees did not show the lease rent as their income and filed ITR. AO
was of the view that the assessees have concealed their lease income. CIT (A) affirmed
the action of the AO. Appeal was filed to the ITAT wherein it was contended that the
lease rent was nothing but their HRA which they are entitled to.
After hearing the parties the ITAT held that
++ the leasing of flat by the employees to the corporation is a separate transaction. The
lease rent received by the employee is taxed separately. The employee do not lose the
benefit of the HRA merely because they have leased their premises to the corporation.
By the virtue of the Corporation permitting the employees to occupy their own premises
it has taken on lease, the HRA of the employees are withheld in lieu of the lease rent
payable to the employees for the accommodation provided by the corporation;
++ therefore, in computing the value of perquisite for accommodation provided by the
corporation, the HRA withheld should be treated as amount recovered by the employer
for providing accommodation and the perquisite value be calculated on the value over
and above the HRA recovered. In these circumstances, the AO is directed to reduce HRA
from the value of perquisite and rework the assessment in accordance with law and issue
the refund if due accordingly.
Assessees' appeals allowed.
ORDER
Per Bench
All these appeals preferred by the assessee are directed against the order passed by the ld. CIT(A)
for the Assessment Year 2003-04. Since the issue is common in all the appeals, these were heard
together and are being disposed of through this consolidated order.
2. The facts of the case are that M/s. BPCL introduced a Self Lease Scheme under which the
employees' owning house property were given an option of leasing it to the company and the lease
rent was given by BPCL to those employees who opted for this scheme.
3. In this scheme, the same individual i.e. employee opting for self lease is treated as the owner of
the flat as well as the tenant of the same flat at the same given time. The same individual when
considered as owner of the flat received lease rent for the flat leased out to the corporation and also
a share of maintenance charges, reimbursed by the corporation to him. When the same individual
was treated as a tenant i.e. the Corporation permitted him to occupy his own flat and treated this as
a perquisite called as accommodation at a concessional rate. Thus the individual paid taxes twice in
the form of tax on lease rent received by him as the owner as well as on concessional rent
perquisites received by the employee(tenant).
4. After verification of returns of BPCL employees, it was found by the Assessing Officer that in fairly
large numbers of cases by the Department that these employees had filed their returns of income as
per TDS/Salary certificates in Form No.16 and they had not disclosed the lease rent and
maintenance charges received during the relevant previous year. On the other hand, they had
claimed interest paid on loan taken for acquisition of house property (by treating it as a self occupied
property, and thereby claiming refund).
5. The Assessing Officer had called information from M/s.BPCL in respect of all such employees who
had availed of such self lease scheme.
6. The BPCL was asked to furnish the details of payments made in form of lease rent and
maintenance charges in respect of all those employees who are filing their salary returns of income
or having residential jurisdiction under Mumbai charge. The BPCL furnished the information called
for. After verification of the information received from BPCL and return of income of the assessee,
the Assessing Officer found that receipt of lease rent and maintenance charges had not been shown.
Therefore, after recording the reasons for reopening, notice u/s.148 of the I.T.Act was issued. The
assessee had filed return in response to notice issued under Sec. 148.
7. It was also noticed by the AO that even in the return of income filed in response to notice u/s. 148
the assessee had not disclosed complete receipt of lease rent. It was considered for working out the
ALV of the House property for the year under consideration and assessed as part of total income
under the head 'Income from House Property. Maintenance charges was also received and no
expenditure incurred out of that is shown, therefore, the AO has treated the receipt as income from
other sources. The AO initiated penalty proceedings u/s. 271(1)(c) of the I.T. Act for concealing the
same. The total income of the assessee was assessed on the basis of salary certificate in form No.
16.
8. Before the Ld. CIT(A), the AR submitted as follows:
"While calculating the value of perquisite referred in point 3 of part A, the Corporation
failed to reduce the perquisite valuation by the amount of HRA foregone by the
employees. The corporation did not consider it as recovery of rent which they should
have done. This is based on the following facts:
a) The employee was initially (before joining the self lease scheme) receiving
HRA equivalent to 30% of the basic salary. This was taxed as income from
salary.
b) The employee on joining the self lease scheme had to forego H.R.A. but
instead received lease rent which was approximately 30% of the basic salary.
This was taxed as income from house property. At the same time, the same
employee for occupying his own flat, was subjected to tax on the
concessional rent perquisite as income from salary."
9. The Ld. CIT(A) held as follows:
"I have carefully considered the grounds of appeal and perused the assessment order.
The contention of the assessee that there was no justification for issue of notice u/s. 148
of the Act is not acceptable. The facts borne out from the record clearly indicate that the
assessee has not disclosed complete income from lease rent and maintenance charges
in the original return as well as in the return of income filed on 27.7.2007, therefore, the
AO has correctly assumed jurisdiction under the provisions of Sec. 147 of the I.T. Act. The
assessee has neither attended the assessment proceedings before the AO nor filed any
submissions in response to notices issued u/s. 143(2) and 142(1) subsequent to issuance
of notice u/s. 148 of the Act as per the provisions of the Act. The AO has taxed the lease
rent income as income from house property and maintenance charges as income from
other sources after allowing opportunity of being heard to the assessee, therefore, the
re-assessment was completed as per the provisions of I.T. Act. In the result, the action of
the AO in issuing of notice u/s. 148 and assessing the additional income at Rs. 1,43,898/-
being lease rent of Rs. 1,31,586/- after allowing deductions and maintenance charges of
Rs. 12,312/- under the head "Income from house property" and "Income from Other
sources" respectively is confirmed.
The other contention of the assessee that the mistake of assessee in filing original return
of income and not disclosing lease rent and maintenance charges was bonafide as it was
the responsibility of employer to deduct the tax on lease rent paid, is not acceptable. As
per law it is the responsibility of the assessee and not of the employer to disclosed the
correct income in the return of income to be filed to the Department. The further
contention of the assessee that his bonafides are established from the action of filing
return of income on the basis of form No.16 issued by M/s.BPCL is again not acceptable
as the facts about income from lease rent and maintenance charges were not reported
to its employer for deduction of tax in this regard. All the above facts and the facts
discussed by the Assessing Officer in order prove that the assessee has not disclosed
lease rent income and maintenance charges to the Department and therefore, the
Assessing Officer has correctly added such undisclosed income to the total income of the
assessee. The ground of appeal of the assessee is rejected.
In the result, appeal is dismissed."
10. Before us, the Ld. Counsel for the assessee Shri Karnik reiterated the submissions made before
the Ld. CIT(A).
11. The Ld. Departmental Representative relied on the order of the lower authorities.
12. We have heard the rival submissions and perused the materials on record. The leasing of flat by
the employee to the corporation is a separate transaction. The lease rent received by the employee
is taxed separately. The employee does not lose the benefit of the HRA merely because he has
leased his premises to the corporation. By the virtue of the Corporation permitting the employee to
occupy the premises it has taken on lease, the HRA of the employee is withheld in lieu of the lease
rent payable by the employee for the accommodation provided by the corporation. Therefore, in
computing the value of perquisite for accommodation provided by the corporation, the HRA withheld
should be treated as amount recovered by the employer for providing accommodation and the
perquisite value be calculated on the value over and above the HRA recovered. In these
circumstances, we direct the AO to reduce HRA from the value of perquisite and rework the
assessment in accordance with law and issue the refund due accordingly.
13. In the result, all the appeals filed by the assessees are allowed for statistical purposes.
(Order pronounced on this 27.8.2010)
I am working in a PSU in Bangalore. Based on the following judgement, Can I file a revised return of Income reducing the Perk value towards Self-leased accommodation and claim refund?
---
2010-TIOL-653-ITAT-MUM
( Also see analysis of the Orde r )
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'A' MUMBAI
ITA No.5879/Mum/2009
Assessment Year: 2003-04
Income Tax – Sections 17, 143(3), 147 - Whether if employees lease out their premises to
their employer against rent and occupy the same, they lose their HRA benefits - Whether
obligation falls on the employer to compute the value of perquisite for accommodation
after adjusting the lease amount paid and what is left over should be treated as HRA
benefit.
Assessees are employees of BPCL Corporation (Employer). Under a self-leasing scheme
they rented their house property to the employer and earned lease rent and also
received the maintenance charges incurred from the employer as reimbursement of
expenses. All the assessees did not show the lease rent as their income and filed ITR. AO
was of the view that the assessees have concealed their lease income. CIT (A) affirmed
the action of the AO. Appeal was filed to the ITAT wherein it was contended that the
lease rent was nothing but their HRA which they are entitled to.
After hearing the parties the ITAT held that
++ the leasing of flat by the employees to the corporation is a separate transaction. The
lease rent received by the employee is taxed separately. The employee do not lose the
benefit of the HRA merely because they have leased their premises to the corporation.
By the virtue of the Corporation permitting the employees to occupy their own premises
it has taken on lease, the HRA of the employees are withheld in lieu of the lease rent
payable to the employees for the accommodation provided by the corporation;
++ therefore, in computing the value of perquisite for accommodation provided by the
corporation, the HRA withheld should be treated as amount recovered by the employer
for providing accommodation and the perquisite value be calculated on the value over
and above the HRA recovered. In these circumstances, the AO is directed to reduce HRA
from the value of perquisite and rework the assessment in accordance with law and issue
the refund if due accordingly.
Assessees' appeals allowed.
ORDER
Per Bench
All these appeals preferred by the assessee are directed against the order passed by the ld. CIT(A)
for the Assessment Year 2003-04. Since the issue is common in all the appeals, these were heard
together and are being disposed of through this consolidated order.
2. The facts of the case are that M/s. BPCL introduced a Self Lease Scheme under which the
employees' owning house property were given an option of leasing it to the company and the lease
rent was given by BPCL to those employees who opted for this scheme.
3. In this scheme, the same individual i.e. employee opting for self lease is treated as the owner of
the flat as well as the tenant of the same flat at the same given time. The same individual when
considered as owner of the flat received lease rent for the flat leased out to the corporation and also
a share of maintenance charges, reimbursed by the corporation to him. When the same individual
was treated as a tenant i.e. the Corporation permitted him to occupy his own flat and treated this as
a perquisite called as accommodation at a concessional rate. Thus the individual paid taxes twice in
the form of tax on lease rent received by him as the owner as well as on concessional rent
perquisites received by the employee(tenant).
4. After verification of returns of BPCL employees, it was found by the Assessing Officer that in fairly
large numbers of cases by the Department that these employees had filed their returns of income as
per TDS/Salary certificates in Form No.16 and they had not disclosed the lease rent and
maintenance charges received during the relevant previous year. On the other hand, they had
claimed interest paid on loan taken for acquisition of house property (by treating it as a self occupied
property, and thereby claiming refund).
5. The Assessing Officer had called information from M/s.BPCL in respect of all such employees who
had availed of such self lease scheme.
6. The BPCL was asked to furnish the details of payments made in form of lease rent and
maintenance charges in respect of all those employees who are filing their salary returns of income
or having residential jurisdiction under Mumbai charge. The BPCL furnished the information called
for. After verification of the information received from BPCL and return of income of the assessee,
the Assessing Officer found that receipt of lease rent and maintenance charges had not been shown.
Therefore, after recording the reasons for reopening, notice u/s.148 of the I.T.Act was issued. The
assessee had filed return in response to notice issued under Sec. 148.
7. It was also noticed by the AO that even in the return of income filed in response to notice u/s. 148
the assessee had not disclosed complete receipt of lease rent. It was considered for working out the
ALV of the House property for the year under consideration and assessed as part of total income
under the head 'Income from House Property. Maintenance charges was also received and no
expenditure incurred out of that is shown, therefore, the AO has treated the receipt as income from
other sources. The AO initiated penalty proceedings u/s. 271(1)(c) of the I.T. Act for concealing the
same. The total income of the assessee was assessed on the basis of salary certificate in form No.
16.
8. Before the Ld. CIT(A), the AR submitted as follows:
"While calculating the value of perquisite referred in point 3 of part A, the Corporation
failed to reduce the perquisite valuation by the amount of HRA foregone by the
employees. The corporation did not consider it as recovery of rent which they should
have done. This is based on the following facts:
a) The employee was initially (before joining the self lease scheme) receiving
HRA equivalent to 30% of the basic salary. This was taxed as income from
salary.
b) The employee on joining the self lease scheme had to forego H.R.A. but
instead received lease rent which was approximately 30% of the basic salary.
This was taxed as income from house property. At the same time, the same
employee for occupying his own flat, was subjected to tax on the
concessional rent perquisite as income from salary."
9. The Ld. CIT(A) held as follows:
"I have carefully considered the grounds of appeal and perused the assessment order.
The contention of the assessee that there was no justification for issue of notice u/s. 148
of the Act is not acceptable. The facts borne out from the record clearly indicate that the
assessee has not disclosed complete income from lease rent and maintenance charges
in the original return as well as in the return of income filed on 27.7.2007, therefore, the
AO has correctly assumed jurisdiction under the provisions of Sec. 147 of the I.T. Act. The
assessee has neither attended the assessment proceedings before the AO nor filed any
submissions in response to notices issued u/s. 143(2) and 142(1) subsequent to issuance
of notice u/s. 148 of the Act as per the provisions of the Act. The AO has taxed the lease
rent income as income from house property and maintenance charges as income from
other sources after allowing opportunity of being heard to the assessee, therefore, the
re-assessment was completed as per the provisions of I.T. Act. In the result, the action of
the AO in issuing of notice u/s. 148 and assessing the additional income at Rs. 1,43,898/-
being lease rent of Rs. 1,31,586/- after allowing deductions and maintenance charges of
Rs. 12,312/- under the head "Income from house property" and "Income from Other
sources" respectively is confirmed.
The other contention of the assessee that the mistake of assessee in filing original return
of income and not disclosing lease rent and maintenance charges was bonafide as it was
the responsibility of employer to deduct the tax on lease rent paid, is not acceptable. As
per law it is the responsibility of the assessee and not of the employer to disclosed the
correct income in the return of income to be filed to the Department. The further
contention of the assessee that his bonafides are established from the action of filing
return of income on the basis of form No.16 issued by M/s.BPCL is again not acceptable
as the facts about income from lease rent and maintenance charges were not reported
to its employer for deduction of tax in this regard. All the above facts and the facts
discussed by the Assessing Officer in order prove that the assessee has not disclosed
lease rent income and maintenance charges to the Department and therefore, the
Assessing Officer has correctly added such undisclosed income to the total income of the
assessee. The ground of appeal of the assessee is rejected.
In the result, appeal is dismissed."
10. Before us, the Ld. Counsel for the assessee Shri Karnik reiterated the submissions made before
the Ld. CIT(A).
11. The Ld. Departmental Representative relied on the order of the lower authorities.
12. We have heard the rival submissions and perused the materials on record. The leasing of flat by
the employee to the corporation is a separate transaction. The lease rent received by the employee
is taxed separately. The employee does not lose the benefit of the HRA merely because he has
leased his premises to the corporation. By the virtue of the Corporation permitting the employee to
occupy the premises it has taken on lease, the HRA of the employee is withheld in lieu of the lease
rent payable by the employee for the accommodation provided by the corporation. Therefore, in
computing the value of perquisite for accommodation provided by the corporation, the HRA withheld
should be treated as amount recovered by the employer for providing accommodation and the
perquisite value be calculated on the value over and above the HRA recovered. In these
circumstances, we direct the AO to reduce HRA from the value of perquisite and rework the
assessment in accordance with law and issue the refund due accordingly.
13. In the result, all the appeals filed by the assessees are allowed for statistical purposes.
(Order pronounced on this 27.8.2010)