Case Law Details

Case Name : Pratim B. Mukerjea Vs. ACIT (ITAT Mumbai)
Appeal Number : ITA No. 2628/M/2005
Date of Judgement/Order : 17/02/2010
Related Assessment Year :


5. We have perused the records and considered the rival contentions carefully. The dispute is regarding determination of perquisite value on account of accommodation provided by the employer company. The employer company had taken the said accommodation on lease at monthly rent of Rs. 5,000/- after paying interest free deposit of Rs. 1.20 crores to tne landlord. The accommodation had been provided to the assessee at the same rent of Rs. 5,000/- per month and the assessee was also being charged an additional sum of Rs. 15,000/- per month for furniture and fixtures provided by the company in the said accommodation. The assessee while declaring the perquisite value of the accommodation took the view that far rental value of the accommodation could not exceed the standard rent. The assessee obtained the valuation report as per which the standard rent in respect of said accommodation was only Rs. 5,455/- per annum. Since the assessee was paying more than the standard rent to the employer, the perquisite value was computed as nil. The AO however rejected the computact- made by the assessee and took the view that notional interest on the interest free deposits given by the company to the landlord had also to be take”, into account in computing the value of perquisite. He computed the notional interest @ 12% which came to Rs. 14.40 lacs per annum. Under rule 3()(iu] m case the fair rental value of the accommodation exceeded 10% of the salary but did not exceed 20% of the salary, the perquisite value has to be taken as 10% of the salary. In this case annual salary received from two employers was Rs. 1,05,19,600/- . The AO therefore determined the perquisite value of the accommodation at 10% of the salary i.e. Rs. 10,51,960/- and after excluding the rent paid of Rs. 60,000/- the perquisite value in the hand of the assessee was computed at Rs. 9,90,960/- which was added to the total income.

6. The Learned AR for the assessee reiterated the submissions made before the lower authorities that the perquisite value of the accommodation has to be computed only on the basis of standard rent. Reliance has been placed on the judgement of Honourable High Court of Mumbai in case of M.A.E. Paes (230 ITR 60). We have perused the said judgements in which the Honourable High Court following the judgement of Honourable Supreme Court in case of Sheela Kaushik (131 ITR 435) and other judgements had taken the view that fair rental value of the accommodation cannot exceed the standard rent under the Rent Control Act applicable to the area. The reasoning is that since under Rent Control Act the rent cannot exceed the standard rent, the accommodation cannot fetch more than the standard rent. The said judgement will however will be applicable only when the accommodation is covered by the Rent Control Act In this case as is rightly pointed out by the CIT(A), the Maharashtra Rent Control Act 1999 which had come into effect from 31.03.2000 was applicable and as per the said Act premises let out or sub let to the bank or any public sector undertaking or any corporation established under any central or state Act or foreign mission, international agencies, multi national companies and private limited companies and public limited companies having paid up capital of Rs. l crore or more are exempt from the purview of the Rent Control Act. There is no dispute that accommodation had been taken on lease by a multinational company having said up capital of several crores and therefore the Rent Control Act is not applicable. In such situation the fair rental value of the accommodation cannot be limited to standard rent. The fair rental value of the accommodation will be the sum for which the accommodation can be let in the open market. In this case the employer in addition to the rent of Rs.5,000/- per month had also given interest free deposit of Rs.1.20 crores to the landlord. Thus in addition to the monthly rent the landlord had also received money equivalent of notional interest on the deposits. The notional interest has therefore to be taken into account in computing the fair rent while computing the perquisite value. This view is also supported by the judgement of Honourable High Court of Mumbai in case of Ashraf-ur-Rehman Ajmulla (209 ITR 341). The assessee has also disputed the rate of interest applied by the AO at 12%. However we agree with the CIT(A) that even if the rate of interest is taken at low, say, about 8%, the perquisite value of the accommodation would be almost same. It has also been argued that while computing the perquisite value the salary from only one employer should be considered. We are however unable to accept the argument. The computation of perquisite value as per the rule is based on the annual salary and not on the basis of salary from one employer. Therefore, in case the assessee has received salary from two employers the entire annual salary has to be considered. There is therefore no error in the computation of perquisite made by the authorities below on this account. We therefore confirm the order of CIT(A). The change of work is only congenital. The AO will recompute the interest.


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  1. s.k. mukherjee says:

    Dear Sir,
    With ref. to the case sighted on Perquisite Tax on company provided accomodation, kindly specify the tax rate applicable on the Perquisite Value. Is it to be taxed on AVERAGE RATE or on the GENERAL TAX RATE APPLICABLE for the individual? An urgent to reply to my e-mail shall be highly appreciated.
    Sanjoy Mukherjee

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