1983 (2) TMI 72 - AT - Income Tax

Summary

Issues:
Valuation of perquisites for rent-free accommodation under section 17 of the IT Act, 1961.

Analysis:
The appeal was filed by the assessee against the CIT's order regarding the valuation of perquisites for rent-free accommodation provided by the employer. The assessee valued the perquisite at Rs. 4,800, while the ITO valued it at Rs. 42,388 based on different calculations. The CIT(A) upheld the ITO's valuation, considering the market value of similar flats in the locality.

The representative for the assessee argued that the valuation should be based on Rule 3 of the IT Rules, specifically referring to sub-clause (iii) which determines the value of rent-free residential accommodation. He contended that the Municipal valuation or the standard rent under the Rent Control Act should be considered as the fair rental value. However, the standard rent applicable to the flat in question was not determined.

On the other hand, the department's representative supported the revenue authorities' orders, stating that the rent realized for similar accommodation in the locality was higher than estimated. The representative for the assessee argued that the rent realized was not legally realizable and represented "fancy rent" rather than the standard rent under the Rent Control Act.

The Tribunal analyzed the contentions of both parties and the relevant provisions. It interpreted Explanation 2 of Rule 3(A)(iii) to mean that the rent which a similar accommodation would realize in the same locality should be the standard rent under the Rent Control Act. The Tribunal disagreed with the assessee's contention that the valuation should be limited to the Municipal Rateable Value. As the standard rent under the Rent Control Act was not determined by the revenue authorities, the Tribunal remanded the matter to the ITO for fresh consideration in accordance with the law.

In conclusion, the appeal was treated as allowed for statistical purposes, and the matter was remanded to the ITO for a fresh decision based on the Tribunal's observations regarding the valuation of the rent-free accommodation perquisite.