Tax paid by the employer on behalf of the employee is perquisite and can not be included in salary for valuation of concessional accommodation / Rent- Free House Property etc.
Mr. Isao Sakai Vs. JCIT (ITAT Delhi)- On the comparison of definition of the word ‘salary’ before and after 01.04.2001, it is clear that for the purpose of determination of perquisite value of rent-free accommodation with effect from 01.04.2001, as provided in sub-clauses (d) & (e) of clause (vi), the term ‘salary’ will not include the value of perquisites as specified under section 17(2) of the Act or any payment or expenditure specifically excluded under proviso to sub-clause (iii) of clause (2) or proviso to clause (2) of section 17.
No doubt the Assessing Officer relying on the decision of Honourable Bombay High Court in the case of H.D. Dennis (supra) has held that the definition given in rule 3 is a co-extensive with the definition given in section 17 except there was an express exclusion therefrom of kinds of payments mentioned. This decision was rendered on 6.4.1981. However, sub-clause (d) of clause (vi) of the Explanation applicable with effect from 1 .4 .2001 specifically excludes the perquisites specified under section 17(2) of the Act to be included in the salary for the purpose of determination of perquisite value under rule 3 of the Income-tax Rules, 1962. Thus, prior to 1 .4.2001 as per the decision of Honourable Bombay High Court, the term “salary” included the perquisites under section 1 7(2)(iv) of the Act. The ratio of the decision rendered by Honourable Bombay High Court is still applicable to the extent it has been held that the definition given in rule 3 is co-extensive with the definition given in section 17 except so far as there is an express exclusion therefrom of the kinds of payments mentioned. Since sub-clause (d) of clause (vi) of Explanation to rule 3 specifically excludes perquisites specified in section 17(2) of the Act from salary for the purpose of computation of perquisites, in our considered opinion, in principle the salary will not include the tax paid by the employer for the purpose of determination of perquisite value of rent-free accommodation under rule 3 of the Income-tax Rules, 1962.
INCOME TAX APPELLATE TRIBUNAL, DELHI
ITA No. 1957 (Del)/2011, Assessment year: 2006- 07
Mr. Isao Sakai Vs. Joint Commissioner of Income tax
ITA No. 1958 (Del)/201 1 Assessment year: 2006- 07
Mr. Yuji Horikawa, Vs. Joint Commissioner of Income tax
ITA No. 1959 (Del)/201 1 Assessment year: 2006- 07
Mr. Yoshimi Kamano, Vs. Joint Commissioner of Income tax
ITA No. 1960 (Del)/201 1 Assessment year: 2006- 07
Mr. Telsuo Mitera, Vs. Joint Commissioner of Income tax
Date of pronouncement: 04.11.2011
ORDER
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