2010 (4) TMI 55 - HC - Income Tax

Perquisites Interest free securities o behalf of employee - The assessee was the Managing Director of M/s Sony Music Entertainment (India) Ltd and had been provided with accommodation at Rockdale, Napeansea Road, Mumbai. The said accommodation was owned by B.P. (India) Ltd and had been taken by the company on lease for the purpose of residence of the assessee. - In terms of the lease, the rent of Rs 50,000/- per month along with interest free security deposit of Rs 3.10 crore and additional guarantee of Rs 5.50 crore was provided by the company on behalf of the employee. held that - it was not a case that money had been given by the employer interest free before the flat had been taken on lease and that the interest free security deposit had been given by the employer company for taking the flat belonging to the assessee on lease and, therefore, it could not be treated as interest free loan. ITAT is correct in upholding in favor of assessee

Summary

Issues:
1. Dispute over addition of interest-free security deposit as perquisite in the hands of the assessee.

Analysis:
The appeal by the Revenue challenges the ITAT's order regarding the assessment year 2001-02. The main issue is the deletion of the addition of Rs 27,28,000/- made by the Assessing Officer as perquisite in the hands of the assessee due to an interest-free security deposit provided by the employer. The assessee, a Managing Director, was provided accommodation by the employer with specific financial arrangements. The Assessing Officer treated the security deposit as an interest-free loan, resulting in the addition. However, the Commissioner of Income Tax (Appeals) deleted this addition after the assessee's explanation.

The Tribunal examined the circumstances and concluded that the security deposit was not akin to an interest-free loan but was provided by the employer for leasing the flat from the assessee. The Tribunal noted that the terms of the lease remained consistent, and the assessee did not gain any additional advantage. The Tribunal upheld the Commissioner's decision to delete the addition, finding no fault in it. The authorities below had arrived at concurrent findings of fact, leading the High Court to dismiss the appeal, stating that no substantial question of law arose for consideration.

In summary, the judgment revolves around the treatment of an interest-free security deposit as a perquisite in the hands of the assessee. The courts examined the nature of the deposit, the lease agreement's terms, and the absence of any additional benefits to the assessee. Ultimately, the High Court upheld the decision to delete the addition, emphasizing the absence of any legal grounds for interference.