TMI Blog2008 (7) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Gujarat High Court. In the reassessment proceed-ings, the Assessing Officer treated the assessee as resident and completed the assessment. Aggrieved by this, the assessee carried the matter in appeal before the ld. CIT(A) wherein copy of the passport was furnished and a request was made to the ld. CIT(A) to accept the same under rule 46A of the Income-tax Rules. The assessee also submitted the details of his stay in past 10 years in India. The ld. CIT(A) called for the remand report from the Assessing Officer wherein the Assessing Officer submitted that in spite of opportunities given, the assessee failed to file these evidences initially, hence, the fresh evidences were not liable to be accepted. The ld. CIT(A), after analyzing the provisions of rule 46A and number of opportunities given to the assessee by Assessing Officer, did not admit the additional evidences and confirmed the action regarding residential status of the assessee. Still aggrieved, the assessee is in appeal before us. 5. The ld. Counsel appearing on behalf of the assessee contended that the assessee was working with a consultancy firm and in the course of discharge of professional duties he was, most of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence, the actual rent was taken as perquisite value. The ld. CIT(A) perused the above Circular No. 374 and held that in the said Circular, nowhere it was provided that the taxable value of the accommodation perquisite will be the fair rental value of accommodation, if the fair rental value of the accommodation was lower than, 10 per cent of the salary. The ld. CIT(A) held that clause (A) of rule 3( a )( iii ) provided that the fair rental value of rent-free unfurnished residential accommo-dation shall be the taxable value of accommodation was lower than 10 per cent of the salary. The ld. CIT(A) also drew support from the decision of the Hon ble Madras High Court in the case of CIT v. K.S. Sundaram [1991] 239 ITR 851 in holding that value of the perquisite could not be less than 10 per cent of the salary of the assessee. The ld. CIT(A), thereafter, referred to Explanation 2 to the rule 3( a )( iii ) and after taking into consideration actual rent paid by the assessee and interest-free deposit given by the assessee s employer to the landlord, held that if the notional interest was taken into consideration, the fair rental value would be more as against disguised rent paid b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt restored the matter back to the file of Tribunal and also observed that the Tribunal was also required to take into account all aspects of the matter including the Municipal valuation of the property in doing so. Thus, the Hon ble Court nowhere held that in all situations the minimum value of perquisite was 10 per cent of the salary as interpreted by the ld. CIT(A). The ld. Counsel also referred to Explanation 2 to rule 3( a )( iii ) which provided that the fair rental value was to be taken higher of the rent which a similar accommodation would realize in the same locality or the Municipal Valuation thereof and contended the word "fair" was not equivalent to prevailing market rent. In this regard, he referred to the decision of the Hon ble Bombay High Court in the case of M.A.E. Paes v. CIT [1998] 230 ITR 60 wherein the Hon ble Court held that for the purposes of valuation of perquisite in respect of rent-free unfurnished accommodation provided by the employer to the employee, fair rental value of the accommodation had to be determined by applying the standard rent payable under the Rent Control Act and such fair rental value could not be exceeded the standard rent. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rental value in respect of accommodation has, thus, been calculated appropriately because the fair rental value is less than 10 per cent of the salary. However, for stating that fair rental value is less than 10 per cent of the salary, no basis has been mentioned which aspect will be dealt by us later on. The ld. CIT(A), on the other hand, has held that in view of provision of rule 3( a )( iii ), the value of such rent-free accommodation is to be taken at 10 per cent of the salary and in doing so, the ld. CIT(A) has placed heavy reliance on the order of Hon ble Madras High Court in the case of K.S. Sundaram ( supra ). In appeal before us, the ld. Counsel has vehemently pleaded that the observations given by the Hon ble Madras High Court were to be read in the context of the dispute before the Hon ble Court and as the Court has not taken into consideration the 2nd proviso to rule 3( a )( iii ) and Explanation 2 to rule 3( a )( iii ) and remitted the matter back to the Tribunal to determine the fair rental value for the purpose of value of the perquisite in respect of the rent-free unfurnished accommodation. In this regard, we find that the dispute before the Hon ble Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer is satisfied that the sum arrived at on the basis provided above exceeds the fair rental value of the accommodation, the value of the perquisite to the assessee shall be limited to such fair rental value; Explanation 2. For the purposes of sub-clause ( iii ), the fair rental value of accommodation which is not furnished shall be the rent which a similar accommodation would realize in the same locality or the municipal valuation in respect of the accommodation, whichever is higher." From the perusal of the 2nd proviso, it appears that the proviso empowers the Assessing Officer to restrict the value of perquisite to the extent of fair rental value if the value of perquisite computed in the manner provided in rule 3( a )( iii ) exceeds the fair rental value of the accommodation. It is important to note that both provisos are in respect of main clause of rule 3( a )( iii ), hence, if the provisions of this rule are read as a whole, then, there is a substantial merit in the contention of the assessee. The accepted legal provision is that proviso used in any section carves out an exception to main provision, hence, if the Legislature wanted to fix the value of perquisite, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the employer to landlord, the assessee was also aggrieved by the findings of the ld. CIT(A) that Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 had been repealed and new legislation named and styled as Maharashtra Rent Control Act, 1999 had come into force, hence, the protection of Rent Control Act as provided in the earlier Act was not available to the employer in the present case. The ld. Counsel submitted a copy of Chapter 1 of Maharashtra Rent Control Act, 1999 wherein it was mentioned that this Act had come into force with effect from 31-3-2000 and also submitted relevant pages of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 to show that the said Act remained in operation up to and inclusive of the 31st day of March, 2000, hence, the findings given by the ld. CIT(A) were not correct and in view of this fact, the assessee s case was squarely covered by the decision of the Hon ble Bombay High Court in the case of M.A.E. Paes ( supra ). The learned counsel for the assessee and the learned D.R. thereafter, reiterated the respective submissions made in the earlier appeal. 17. We have considered the submissions made by both sides, mater ..... X X X X Extracts X X X X X X X X Extracts X X X X
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