2008 (4) TMI 526 - AT - Income Tax

Summary

Issues Involved:
1. Treatment of maintenance payments as perquisites.
2. Levy of interest under section 234B of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Treatment of Maintenance Payments as Perquisites:

The primary issue revolves around whether the payments made by the employer for the maintenance of the premises provided to the assessee as residential accommodation should be treated as perquisites in the hands of the assessee. The assessee was employed as Vice-President with M/s. Hutchison Max Telecom (P.) Ltd. and was provided rent-free residential accommodation. The employer entered into two agreements: a 'Leave and License Agreement' with M/s. Sterling and Wilson Property Developers (P.) Ltd. for the premises, and an 'Amenities Agreement' with M/s. Shapoorji Palloonji and Co. Ltd. for additional services.

The Assessing Officer applied rule 3(1) of the Income-tax Rules for valuing the residential accommodation and rule 3(8) for valuing the amenities. The residential accommodation was valued at Rs. 1,80,000, and the amenities provided were valued at Rs. 9,60,000, which was added to the salary of the assessee as perquisites.

The assessee contended that both agreements should be read together, and the payments made under the Amenities Agreement should be considered as part of the lease rental under rule 3(1). However, the CIT(A) rejected this submission, stating that maintenance of the premises was the landlord's responsibility under the Leave and License Agreement, and the amenities provided were separate and should be valued under rule 3(8).

Upon appeal, it was held that the payments made under the Amenities Agreement could not be treated as lease rental. The compensation paid to the service provider for amenities does not qualify as 'lease rental' and thus cannot be included in the valuation of residential accommodation under rule 3(1). The CIT(A) correctly invoked rule 3(8) for valuing the amenities provided, and the appeal on this ground was dismissed.

2. Levy of Interest under Section 234B:

The second issue pertains to the levy of interest under section 234B of the Income-tax Act. The assessee contested the levy of interest, but the learned Counsel for the assessee conceded that the levy of interest under section 234B is consequential and linked with the assessed tax. Consequently, this ground was dismissed.

Conclusion:

The appeal filed by the assessee was dismissed on both grounds. The payments made under the Amenities Agreement were rightly treated as perquisites and valued under rule 3(8) of the Income-tax Rules, and the levy of interest under section 234B was upheld as consequential.