Interest Free Loan from Employer taxable as Salary: ITAT

Ms. Neha. Saraf Vs ACIT (ITAT Mumbai)

In a recent decision made by ITAT, Mumbai in case of Neha Saraf vs. ACIT it has been decided that where an employee receives Interest Free loan from the employer it shall be taxable in the hands of the employee as salary as per the provisions of the section.

Brief facts of the case: 

In the Instant case, the Assessee has filed her return of income for Assessment Year 2011-12 on 26.09.11 declaring total income of Rs.34,90,510/- consisting of income from salary and income from other sources.

During the course of assessment, the AO noted that the Assessee was employed with M/s. TeejImpex Pvt. Ltd. and had obtained interest free unsecured loan from the said employer. Since the Assessee is drawing a salary from the employer on per month basis, in view of the provisions of section 17(iii)(c), the value of any benefit obtained by the employee by way of interest free unsecured loan is assessable as perquisite and chargeable to tax.

The AO further observed that it is also evident from the fact that the Assessee has obtained benefit by way of interest free unsecured loan which is chargeable to tax as perquisite under section 17(iii)(c) of the Income Tax Act, 1961 and accordingly determined value of perquisite by invoking rule 3(7)(i) of the Income Tax Rules, 1962 and estimated 15% interest on such loan and made additions of Rs. 43,80,165/-.

Appeal to the CIT(A) was moved, however, the addition made by the Ld. AO was also confirmed by the CIT(A) in his order. The same decision was upheld by the ITAT in their decision on 16th May 2018.