2004 (9) TMI 589 - AT - Income Tax

Summary

Issues Involved:
1. Addition of tax perquisite under section 17(2) of the Income-tax Act.
2. Addition of salary for 15 days.
3. Addition of value of free food/accommodation as perquisite.
4. Addition of perquisite in respect of interest paid by the employer for the deposit in respect of the house taken on lease.
5. Addition of value of rent-free accommodation.
6. Addition of various perquisites such as furnished rent-free accommodation, society outgoings, electricity bills, medical insurance premium, and provision of food & upkeep & maintenance of accommodation.

Issue-wise Detailed Analysis:

1. Addition of tax perquisite under section 17(2) of the Income-tax Act:
The first issue pertains to the confirmation by the CIT(A) of an addition of Rs. 15,38,713 as a perquisite on account of the employer paying income-tax on behalf of the assessee. The assessee, a foreign national employed by Hotel Leela Venture Ltd. (HLVL), contended that such tax perquisite is exempt under section 10(6)(viia) of the Income-tax Act, arguing that the exemption provisions override section 17(2). However, the Tribunal concluded that the assessee did not fulfill the conditions prescribed under section 10(6)(viia), specifically noting that there was no evidence to suggest the assessee was employed to supervise cookery activities. Consequently, the tax perquisite was rightly brought to the charge of tax under section 17(2).

2. Addition of salary for 15 days:
The second issue involves an addition of Rs. 39,250 being salary for 15 days. The addition was made on the ground that the Central Government approved the assessee's appointment from 15-4-1990, while the actual commencement was from 1-4-1990. The Tribunal found that the salary for the period 1-4-1990 to 15-4-1990 was already taxed in the assessment year 1993-94, and thus, the addition was not justified. The addition of Rs. 39,250 was deleted.

3. Addition of value of free food/accommodation as perquisite:
The third issue pertains to an addition of Rs. 1 lakh on the ground that the provision of free food/accommodation was a perquisite. The Tribunal acknowledged that the value of the perquisite must be brought to charge under section 17(2). However, the estimation of Rs. 1 lakh was deemed excessive, and the addition was reduced to Rs. 50,000.

4. Addition of perquisite in respect of interest paid by the employer for the deposit in respect of the house taken on lease:
The fourth issue, raised in the Departmental appeal, involved an addition of Rs. 37,500 on account of perquisite in respect of interest paid by the employer for the deposit for a house taken on lease. Both parties agreed that this issue was covered in the assessee's favor by the Supreme Court decision in the case of V.M. Salgaokar & Bros. (P.) Ltd. v. CIT. Hence, the addition of Rs. 37,500 was directed to be deleted.

5. Addition of value of rent-free accommodation:
The fifth issue, raised in the assessee's appeal for the assessment year 1992-93, involved an addition of Rs. 58,746 being the value of rent-free accommodation. Both parties agreed that this issue was covered in the assessee's favor by the Supreme Court decision in the case of V.M. Salgaokar & Bros. (P.) Ltd. Consequently, the addition of Rs. 58,746 was directed to be deleted.

6. Addition of various perquisites:
The sixth issue, raised in the assessee's appeal for the assessment year 1993-94, involved several perquisites:
- Value of furnished rent-free accommodation (Rs. 82,730)
- Payment to society outgoings (Rs. 6,960)
- Payment of electricity bills (Rs. 5,160)
- Medical insurance premium (Rs. 2,700)
- Provision of food & upkeep & maintenance of accommodation (Rs. 60,000)

For the value of furnished rent-free accommodation, the Tribunal directed the deletion of Rs. 82,730, consistent with previous decisions. The grounds related to society outgoings, electricity bills, and medical insurance premium were not pressed by the counsel, and the CIT(A)'s findings were confirmed. Regarding the provision of food & upkeep & maintenance of accommodation, the addition was reduced to Rs. 50,000, aligning with previous findings.

Conclusion:
In the result, all three assessee's appeals were partly allowed, and the departmental appeal was dismissed.