D.K. Srivastava, A.M. -
(1.) THE appeal filed by the assessee is directed against the order passed by the learned Commissioner (Appeals) on 22-8-2007. THE appeal relates to assessment year 2004-05.
(2.) Ground No. 1 taken by the assessee has two sub-grounds which read asunder:
Ground No. 1.'(1) On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in confirming the order of the Income Tax Officer 26(2)(2) treating Rs. 9,60,000 being amount paid by the employer of the appellant towards maintenance of the premises taken by it on leave and licence and provided tothe appellant for his residential accommodation, as perquisite in the hands ofthe appellant.
2. The appellant prays that the amount paid by the employer of the appellant for maintenance of the premises taken on lease cannot be treated as 'perquisites' in the hands of the appellant and hence the addition made on this count ought to be deleted.
Facts of the case, in brief, are that the assessee, an individual, was employed as Vice-President with M/s. Hutchison Max Telecom (P) Ltd. during the previous year relevant to the assessment year under appeal. The assessing officer perused the Certificate of Deduction of Tax at Source in Form No. 16 and Form No. 12BA filed by the assessee along with his return of income and noticed that the assessee's employer had provided rent-free residential accommodation to the assessee in respect of which the assessee had taken perquisite value at Rs. 2,71,747 and consequently added the same to his salary. The assessing officer called for the details and noticed that the assessee's employer had entered into two agreements, both of which were dated 5-5-2003. By first agreement described as 'Leave and License Agreement' executed between the assessee's employer, namely, M/s. Hutchison Max Telecom (P) Ltd. and M/s. Sterling and Wilson Property Developers (P) Ltd., the assessee's employer had hired flat No. 1101 admeasuring 2150 sq. ft. at 11th floor in a building known as Sterling Sea Face at Dr. Annie Besant Road, Worli, Mumbai on monthly licence fee of Rs. 15,000 for use by the assessee as residential accommodation. In Clause 4 of the said 'Leave and license agreement', the licenser had confirmed that the said premises were in good condition and also undertaken to maintain the same in good condition at all times. Clause 9 of the said Agreement placed the licenser under the responsibility to carry out all major and structural repairs to the said premises including those to all walls, roofs, floors, drains and sewers, etc., and to carry out such repairs and bear and pay all costs, charges and expenses in respect thereof. Clause 8 of the said Agreement permitted the licensee, i.e., the assessee's employer to carry out all renovations repair and interior work in the said premises at his own costs. By second agreement described as 'Amenities Agreement' executed between the assessee's employer and M/s. Shapoorji Palloonji and Co. Ltd. (service provider); the assessee's employer provided certain amenities to the assessee through M/s. Shapoorji Palloonji & Co. Ltd. on monthly payment of Rs. 80,000 per month. It is stated in Clause 2 of the said Agreement that the service provider 'has carried out changes, additions and alterations in the said premises so as to make the same serviceable as per reasonable requirements of the users'. Clause 3 provides that the service provider shall render certain services periodically or otherwise in respect of the said premises, which included '(i) plastering, etc., (ii) painting of good quality (iii) keep the said premises in tenantable condition (iv) housekeeping (v) providing and maintaining granamite or equivalent flooring in the said premises (vi) maintaining the car parking space allotted to the user' apart from providing adequate security arrangement in respect of the said premises. Clause 5 of the said Agreement provides that the user shall not be entitled to reduce or decrease the amount of compensation fixed at Rs. 80,000 per month even if there is any deficiency in any of the services provided by the service provider to the user or if the user is not availing those facilities. As already stated earlier, both the agreements were simultaneously executed on 5-5-2003. While the first agreement was with the landlord of the premises in question, the second agreement was with the provider of certain services to the assessee.
(3.) WHILE making the assessment, the assessing officer applied Rule 3(1) of Income Tax Rules for the valuation of residential accommodation covered by the Leave and License Agreement and Rule 3(8) of the Income Tax Rules for valuation of the amenities provided by the employer to the assessee under the Amenities Agreement. As regards the valuation of the residential accommodation, the assessing officer noticed that the actual amount of rental payment was Rs. 15,000 per month or Rs. 1,80,000 annually while 10 per cent of the salary of the assessee was only Rs. 2,71,747 and, therefore, took the lower of the two and accordingly valued the residential accommodation taken on lease (rent) by the employer at Rs. 1,80,000. As regards the valuation of the amenities provided by the employer, the assessing officer invoked Rule 3(8) of the Income Tax Rules as applicable at the relevant point of time. Rule 3(8) provided that 'the value of any other benefit or amenity, service, right or privilege provided by the employer shall be determined on the basis of cost to the employer under an arm's length transaction as reduced by the employees' contribution if any...." According to the assessing officer 'Amenities Agreement' was intended as the nomenclature of the agreement itself revealed to provide certain amenities, service or benefit, right or privilege to the assessee for which the assessee had not made any payment and, therefore, the value of such perquisite, according to the assessing officer, was liable to be added to the salary of the assessee. Since the amenities agreement itself had quantified the value of the amenity at Rs. 80,000 per month, the assessing officer valued the amenities at Rs. 9,60,000 and accordingly added the same to the salary of the assessee.;