Bhavnesh Saini, Judicial Member - Both the appeals filed by the Revenue are directed against different orders of the learned CIT(A), Chandigarh dt. 12th Nov., 2014 for asst. yr. 2007-08, challenging the cancellation of penalty under s. 271(l)(c) of the IT Act and order dt. 11th Nov., 2014 for asst. yr. 2008-09, challenging the cancellation of penalty under s. 271(l)(c) of the IT Act.
2. It is stated that the facts are same in both the appeals. Therefore, for the purpose of disposal of both the appeals, the facts are taken from asst. yr. 2007-08.
3. Briefly, the facts noted in the impugned order are that the assessee company had given gift of Rs. 9,000 each to its employees on the occasion of Diwali. The Dy. CIT(TDS) has treated the same as perquisite in the hands of the employees but the demand created was deleted by the learned CIT(A) and subsequently by Tribunal, Chandigarh Bench. Later on, the fringe Benefit tax was reopened under s. 115WH of the IT Act and the assessee agreed to pay fringe benefit tax on the entire amount of gifts to the employees. The AO accordingly included the entire amount of gift to the taxable fringe benefits. The penalty proceedings for concealment were also initiated. The AO was not satisfied with the reply of the assessee and levied penalty on the ground that the discrepancy was detected during the course of survey under s. 133A of the Act.
4. The learned CIT(A) considering the explanation of the assessee and record noted that in 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 AO who has treated the amount given to the employees as fringe benefits. Thus it was found that there was difference of opinion as to whether the amount given 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 benefits. Since two views are possible, therefore, it was found that it was not a case of levy of penalty and accordingly penalties were cancelled and the appeals of the assessee were allowed.
5. We have heard the learned representatives of both the parties and perused the material available on record. The learned counsel for assessee filed copy of order of Tribunal, Chandigarh Bench in the case of the assessee dt. 21st Oct., 2011 in IT Appeal Nos. 1331 to 1333/Chd/2010 for asst. yrs. 2007-08 to 2009-10 in the matter of Asstt. CIT (TDS) v. Chandigarh Industrial & Tourism Corpn. Ltd. (assessee) in which the identical issue remained in consideration with regard to liability of the assessee to deduct TDS on perquisite under s. 201(1) of the Act or interest under s. 201(1A) of the Act. The findings 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 present 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 three hotels i.e. Hotel Shivalik View, Hotel Park View and Hotel Mount View along with head office at Chandigarh address. The profits of the assessee-corporation had increased significantly and in order to commensurate the said profits generated with the contribution of the employees, decision was taken to provide for Diwali gift @ Rs. 9,000 per employee. The said payment of Rs. 9,000 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 whether the same constitutes perquisite in hands of the employee and consequently tax was liable to be deducted at source out of such payment. Sec. 17(2) of the Act defines perquisite to include certain items as part of salary. As per cl. (vi) to s. 17(2) of the Act the value of any other fringe benefits and amenities excluding the fringe benefits chargeable to tax under Chapter XII-H, as may be prescribed, is to be included in the hands of the assessee as perquisite under 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 r. 3 of the IT Rules. Sub-r. (7) to r. 3 of IT Rules prescribes the fringe benefits or amenities to be included in view of the provisions of s. 17(2)(vi) of the Act. The said r. 3 has undergone repeated amendments. The assessee is in appeal in respect of asst. yrs. 2007-08 to 2009-10. During the relevant period r. 3(7) of IT Rules had limited operations in respect of the fringe benefits. As per cl. (i) the value of benefits of interest-free or concessional loans are to be determined , as per cl. (vii) value of benefits of certain movable assets was to be included land as per cl. (viii) value of benefits arising from transfer of any movable lasset belonging to the employer to the employee was to be included as fringe benefits or amenities provided by the employer or employee. Clauses (ii) to (vi) of r. 3(7) were omitted of the IT (Seventh Amendment) Rules, 2005 w.e.f. 1st April, 2005. Clause (iv) to r. 3(7) before its amendment provided the procedure for including the value of any gift or voucher or token in lieu of such gift in the hands of the assessee where the value of such gift exceeded Rs. 5,000. Further r. 3 has been amended by way of substitution by IT (Thirteenth Amendment) Rules, 2009 w.e.f. 1st April, 2009. Under r. 3(7) the benefits or amenities in terms of s. 17(2)(vii) of the Act have been provided and as per cl. (iv) value of any gift or voucher or token in lieu of such gift received by the employee or the member of his household on ceremonial occasion or otherwise is includible as a perquisite in the hands of the employee. Sec. 17(2) of the Act defining perquisite has also undergone amendment under which sub-cls. (vi), (vii) and (viii) were substituted for sub-cl. (vi) by the Finance (No. 2) Act, 2009 w.e.f. 1st April, 2010. Sub-cl. (viii) to s. 17(2) includes the value of any other benefits or amenities as may be prescribed 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 r. 17(2)(vi) of the Act, the provisions in existence during the asst. yrs. 2007-08 to 2009-10, the value of such fringe benefits or amenities as prescribed under r. 3 is to be treated as perquisite in the hands of the assessee. The perquisites are defined under r. 3 and at the relevant time the gift or voucher was not one of the prescribed benefits or amenities under r. 3(7) of the Act. The said value of the perquisite on account of gift or voucher was prescribed under r. 3(7) of the IT Rules which was omitted by IT (Seventh Amendment) Rules, 2005 w.e.f. 1st April, 2005. The substitution of the said r. 3 is by retrospective effect from 1st April, 2009 by IT (Thirteenth Amendment) Rules, 2009. The captioned years in appeal before us are relating to asst. yrs. 2007-08 to 2009-10 and in the absence of any prescribed rules under r. 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. 9,000 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 r. 3(7)(iv)/(vi) (substituted) of IT Rules in view of the provisions being not on the statute at the relevant time. The assessee accordingly, is not liable to pay any tax under s. 201(1) or interest under s. 201(1 A) of the Act in the captioned assessment years. The AO is thus directed accordingly. The grounds of appeal raised by the Revenue are allowed."
6. Corrigendum is also filed on the proportion (sic-proposition) that ultimately the Departmental appeal is dismissed.
7. The learned counsel for assessee, therefore, submitted that since the issue travelled upto the stage of the Tribunal and it was also noted that the fringe benefit provisions have undergone repeated amendments and there was difference of opinion, therefore, penalty was correctly cancelled. He has also submitted that all the facts 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 income.
8. The learned Departmental Representative for the Revenue, however, stated that since the assessee agreed for assessment of the amount in question on the value of fringe benefits given to the employees, therefore, two views are not possible. Therefore, the learned CIT(A) was not justified in cancelling the penalty.
9. On consideration of the facts of the case in the light of the rival contentions and findings of the Tribunal in earlier proceedings vide order dt. 21st Oct., 2011 (supra), we do not find any merit in both the appeals of the Revenue. 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. Earlier the Revenue authorities have treated the amount in question as perquisite in the hands of the employees but the demand was deleted by the learned CIT(A) as well as the Tribunal dismissed the appeals of the Revenue. The AO reopened the assessments by giving notice under s. 115WH of the Act by serving the notice upon the assessee on 28th March, 2012 for asst. yr. 2007-08 and similarly assessments were reopened in another case. It is, therefore, clear that the Revenue authorities took the action against the assessee after passing of the order of the Tribunal on 21st Oct., 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 premises of the assessee under s. 133A of the Act and also gone through the repeated amendments in the income-tax provision for perquisite and fringe benefit. Therefore, even if the assessee agreed for addition at the assessment stage for treating the value of fringe benefits in the hands of the assessee would clearly justify the findings of the learned CIT(A) that two views were possible in the given facts of the case. Since all the facts were disclosed to the Revenue Department, and Revenue Department itself was not sure initially whether it is a case of fringe benefit, therefore, the learned CIT(A) was justified in holding that it is not a case of concealment of income or filing of inaccurate particulars of income within the meaning of s. 271(l)(c) of the Act. Considering the nature of the issue involved and relevant provisions of law which were taken differently by the Revenue authorities itself, the learned CIT(A) was justified in cancelling the penalty. We accordingly do not find any merit in both the appeals of the Revenue and the same are dismissed.
10. In the result, both the appeals of the Revenue are dismissed.