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Issues involved: Interpretation of section 40(c)(iii) of the Income-tax Act, 1961 and rule 3(c)(ii) of the Income-tax Rules, 1962 regarding the valuation of perquisite of free car provided to employees.
Summary: The High Court of Calcutta addressed a reference related to the assessment year 1966-67 concerning the valuation of the perquisite of a free car provided to employees by a limited company. The Income Tax Officer (ITO) initially calculated the perquisite at 50% of the expenditure on running and maintenance of the car, leading to an excess under section 40(c)(iii). The Appellate Authority Commissioner (AAC) determined the perquisite value at Rs. 150 per month per employee, disagreeing with the ITO's method. The department appealed to the Tribunal, which found no evidence supporting the claim that cars were solely used by employees, leading to a decision that the perquisite value should be Rs. 150 per month per employee, in line with rule 3 of the Income-tax Rules, 1962. The revenue contended that the AAC and the Tribunal erred in rejecting the ITO's findings and argued against the application of rule 3(c)(ii). The Court highlighted the provisions of section 40(c)(iii) which limit certain expenditures resulting in benefits to employees. It was noted that there was no material supporting the claim that cars were exclusively used by employees, as the ITO himself estimated only half of the expenses as a perquisite. The Tribunal's decision to value the perquisite at Rs. 150 per month per employee was deemed appropriate for consistency between assessment of employees and employers. The Court rejected the revenue's arguments, emphasizing the need for uniformity in assessment standards for employees and employers. The decision was supported by the principle that what the payer gives should align with what the receiver receives. Referring to a previous case, the Court upheld the Tribunal's decision and ruled in favor of the assessee, affirming the valuation of the perquisite at Rs. 150 per month per employee. The revenue's application under section 256(1) of the Income-tax Act, 1961 was consequently rejected. Judge Sabyasachi Mukherjee concurred with the judgment.
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