1993 (9) TMI 40 - HC - Income Tax

Summary

Issues involved:
The judgment involves the interpretation of provisions of the Income-tax Act, 1961 regarding the perquisite value of a flat occupied by an assessee through a company and the treatment of interest forgone by the assessee in respect of an advance made to the company.

Interpretation of Provisions - Perquisite Value of Flat:
The case pertained to the assessment years 1971-72 and 1972-73 where the assessee, a director and shareholder of a company, occupied a flat belonging to the company and paid a rent of Rs. 650 per month. The Income-tax Officer calculated the fair rent at Rs. 3,000 per month, resulting in a perquisite value of Rs. 25,000 for the flat. Upon appeal, the Appellate Assistant Commissioner considered the advance payment of Rs. 1,36,000 made by the assessee to the company as an interest-free deposit, leading to a deduction of Rs. 13,600 from the perquisite value. The Income-tax Appellate Tribunal upheld this decision, acknowledging the relevance of the advance payment in determining the perquisite value.

Treatment of Interest Forgone - Benefit Derived by Assessee:
The Tribunal's consideration of the interest forgone by the assessee in respect of the advance payment and the corresponding benefit obtained from the concessional rent led to the question of whether there was a quid pro quo and if the assessee derived any benefit or advantage. The Tribunal, supported by the Revenue's counsel, concluded that the interest forgone should be factored into the calculation of the perquisite value, resulting in a reduction of the assessed value of the flat. Consequently, the Tribunal's decision was in favor of the assessee, indicating that there was no additional benefit or advantage derived by the assessee.

Conclusion:
Given the Tribunal's correct consideration of the interest forgone by the assessee in determining the perquisite value of the flat, the court ruled in favor of the assessee on the second question raised. As a result, the first question became irrelevant for decision. The judgment highlighted the importance of relevant factors in assessing perquisite values and concluded that there would be no order as to costs in this case.