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Issues involved: Interpretation of rule 3 of the Income-tax Rules, 1962 for calculating the value of perquisite of a free car provided to employees and its impact on the assessment of the employer under section 40(c)(iii) of the Income-tax Act, 1961.
Judgment Summary: The High Court of Punjab and Haryana addressed the question of law regarding the calculation of the value of a perquisite with reference to rule 3 of the Income-tax Rules, 1962. The court ruled in favor of the assessee, citing the judgment of the High Court of Calcutta in CIT v. Britannia Industries Co. Ltd. The court emphasized the need for consistency in assessing the value of the perquisite for both employees and employers. It was held that the value of the perquisite of a free car provided to employees should be Rs. 150 per month per employee as per rule 3(c)(ii) for the purpose of assessment under section 40(c)(iii) in the hands of the employer. The court concluded that there should not be different standards for assessment between the employee and the employer, ensuring equity in what the payer gives and the receiver receives. Therefore, the court answered the reference in favor of the assessee, directing the Income-tax Officer to calculate the value of the perquisite in accordance with rule 3(c)(ii) and work out the disallowance under section 40(c)(iii) accordingly. No costs were awarded in this matter.
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