SURENDRAN Vs. CENTRAL BOARD OF DIRECT TAXES

JUDGEMENT

(1.) In these writ petitions, what is under challenge is a clarification issued by the Central Board of Direct Taxes. The claim of the petitioners is that they are Central Government employees working on deemed deputation to BSNL. The question relates to the interpretation of Rule 3(1) of the Income Tax Rules, 1962. The provisions which are relevant are contained in Table I in relation of the value of residential accommodation provided in the Table. For the year effective up to 31-3-2005, the Table read as follows: <p>----------------------------------------------------------------------------------- Sl.No. Circumstances Where the where the accomodation is accommodation unfurnished is furnished ----------------------------------------------------------------------------------- (1) (2) (3) (4) ----------------------------------------------------------------------------------- 1. Where the accommodation License fee determined The value of perquisite as is provided by Union or State by Union or State Government determined under col.(3) and Government to their employees in respect of accomodation increased by 10% per annum either holding office or post in in accordance with the rules of me cost of furniture (incl- connection with the affairs of framed by that government uding television sets, radio sets Union or State or serving with as reduced by the rent actually refrigerators, other household anybody or undertaking under paid by the employee. appliances, air conditioning plant the control of such Government or equipment) or if such furniture on deputation. is hired from a third party, the actual hire charges payable for the same as reduced by any charges paid or payable for the same by the employee during the previous year. 2. Where the accommodation (i)10% of salary in cities The value of perquisite as is provided by any other having population exceeding determined under col. (3) and employerand 4 1acsasper 1991 census; increased by 10% per annum a) where the accommodation is (ii)7.5% of salary in other of the cost of furniture (including owned by the employer, or cities, in respect of the periodtelevision sets, radio sets, b) where the accommodation during which the said refrigerators, other household is taken on lease or rent by accommodation was occupied appliances, air conditioning plant the employer by the employee during the or equipment or other similar previous year as reduced by appliances or gadgets) or if such the rent, if any, actually paid furniture is hired from a third party by the employee. by the actual hire charges payable Actual amount of lease rental for the same as reduced by any paid or pay able by the employercharges paid or payable for the or 10% of salary whichever same by the employee during is lower as reduced by the rent,the previous year, if any, actually paid by the employee.

(2.) The Rule as it stands now also essentially runs on similar lines in regard to the classification. According to the petitioners, they are Central Government employees working on deemed deputation to BSNL. BSNL is an undertaking under the control of the Government. Therefore, it must be treated as they are under the first category, namely, it must be treated as a case where the accommodation is provided by the Central Government. In the writ petitions, they have also stated in Ground C as follows:

(3.) A counter affidavit is filed on behalf of respondents 2 and 3. In the counter affidavit, it is stated as follows: