2005 (12) TMI 68 - HC - Income Tax

Concessional accommodation facility provided by the employer to its employees perquisite - Whether, Tribunal was legally, justified in holding that no perquisite arose on account of concessional accommodation facility provided by the employer to its employees and the Assessing Officer was not justified in charging interest under section 201/201(1A)? - the question of concession must be determined with reference to the nature of the accommodation provided, the normal rent payable in respect of such accommodation by other employees similarly situated and the actual rent paid by the assessee-employee concerned - income-tax was not leviable on the notional perquisite value of the accommodation. - we confirm the order of the Income-tax Appellate Tribunal

Summary

Issues involved:
1. Whether concessional accommodation provided by the employer to its employees can be considered a perquisite?
2. Whether the Assessing Officer was justified in charging interest under section 201/201(1A) of the Income-tax Act for concessional accommodation provided by the employer to its employees?

Analysis:
The appeals were filed against the order passed by the Income-tax Appellate Tribunal confirming the findings of the Commissioner of Income-tax (Appeals) in favor of the assessee. The dispute arose when the assessing authority found that the assessee failed to add the perquisite value of rent-free accommodation and other amenities provided to its employees. The assessing authority held the assessee in default for non-deduction of tax at source on salary and perquisites. The main contention was whether the concessional accommodation provided to employees should be considered a perquisite under section 17 of the Income-tax Act.

The definition of "perquisite" under section 17(2) includes the value of any concession in the matter of rent respecting accommodation provided by the employer. The court analyzed whether the employees were paying standard rent fixed by the employer and if the rent paid was the normal rent for the accommodation. It was held that if employees were paying the same rent as others in similar positions, it did not constitute a concession in rent. The court referred to previous judgments to support this interpretation, emphasizing that no concession arises if the rent paid is not less than the standard rent.

The Revenue contended that the assessee enjoyed a perquisite under rule 3 because employees paid rent less than the leased amount. However, the court held that rule 3 pertains to the procedure for computing the value of perquisite chargeable to tax, and the substantive law under section 17(2) must first establish whether a concession exists. Relying on previous decisions, the court concluded that no perquisite arose from the concessional accommodation provided by the employer to its employees.

In alignment with the decisions of the Calcutta High Court and the Madhya Pradesh High Court, the court dismissed the appeals, confirming that no perquisite value could be added in the hands of the assessee for the concessional accommodation provided to employees. Both issues were decided in favor of the assessee, and the appeals were dismissed with no order as to costs.