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TMI Blog2012 (6) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.2001: - "3. Valuation of perquisites.-For the purpose of computing the income chargeable under the head ―Salaries‖, the value of perquisites provided by the employer directly or indirectly to the assessee (hereinafter referred to as employee) or to any member of his household by reason of his employment shall be determined in accordance with the following sub-rules, namely:- xxx xxx xxx (6) The value of any benefit or amenity resulting from the provision by an employer, who is not liable to pay fringe benefit tax under Chapter XII-H of the Income-tax Act and is engaged in the carriage of passengers or goods to any employee or to any member of his household for personal or private journey free of cost or at concessional fare, in any conveyance owned, leased or made available by any other arrangement by such employer for the purpose of transport of passengers or goods shall be taken to be the value at which such benefit or amenity is offered by such employer to the public as reduced by the amount, if any, paid by or recovered from the employee for such benefit or amenity : Provided that nothing contained in this sub-rule shall apply to the employees of an airline or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he term „salary‟ for the purpose of Rule 3 would not include the value of perquisites specified in Section 17(2) of the Act. 5. The short question, therefore, is whether the tax component paid by the employer towards and as income tax, when an employee is entitled to tax free salary, is a perquisite within the meaning of Section 17(2) of the Act. 6. The term "salary" has been defined in Section 17 of the Act so as to include wages, any annuity pension, gratuity, fee commission, perquisites or profits in lieu of or in addition to any salary or wages etc. Clause (iv) of Section 17(1) reads as under: - "17. For the purposes of sections 15 and 16 and of this section,- (1) "salary" includes - (i) wages; (ii) any annuity or pension; (iii) any gratuity; (iv) any fees , commissions, perquisites or profits in lieu of or in addition to any salary or wages; (v) any advance of salary; (va) any payment received by an employee in respect of any period of leave not availed of by him; (vi) the annual accretion to the balance at the credit of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under rule 6 of Part A of the Fourth S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , one or more employers) exclusive of the value of all perquisites not provided for by way of monetary payment, does not exceed one lakh rupees. (emphasis supplied) 8. A reading of Sub-clause (i) to (vii) would indicate that the term perquisites has been defined in an inclusive and expansive manner in the sub-clauses. Sub-clause (iv), which has been underlined, states that any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee, i.e., the employee, is treated and regarded as a perquisite. 9. The term "Perquisites" was explained in Arun Kumar and Ors. Vs. Union of India (UOI) and Ors. (2007) 1 SCC 732 to mean: - 18. It is thus clear that the definition of the term 'perquisite' covers various items mentioned therein. It is also clear that the definition is inclusive in nature and not exhaustive. 19. According to Bouvier's Law Dictionary, the expression 'perquisite' in a most limited sense means "something gained by a place or office beyond the regular salary or fee". 20. Oxford English Dictionary defines 'perquisite' as "any casual emolument, fee or profit attached to an office or position in addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from "salary" for the purpose of ascertaining the perquisite value of rent free accommodation in view of the specific language of Rule 3, Explanation Clause (vi)(d). Explanation to Rule 3 clause (vi), no doubt includes monitory benefit under the term "salary" for the purpose of Rule 3 but by specific stipulation excludes the value of perquisites specified in Section 17(2) of the Act. What is included and has been treated as perquisites under Section 17(2) of the Act cannot be added and treated as monetary benefit because of specific exclusion. 13. Payment of income tax by the employer on behalf of an employee, is payment of an obligation payable by the employee. It will be covered by Section 17(2)(iv). An employee who has taxable income as an assessee is liable to pay tax. His income is chargeable to tax. It is the obligation of the employee as an assessee to pay income tax. In the present case, it is this obligation which is being discharged and paid by the employer. Therefore, it would fall within the ambit of Section 17(2)(iv). This has been the accepted legal position. The Delhi High court in Frank Beaton v. Commissioner of Income Tax [1985] 156 ITR 16, has observed that payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an employee-assessee, if paid by the employer on behalf of the assessee, is to be included in the perquisites amounting to salary rendering it liable to tax by being included in income. In the view taken hereinabove, we are fortified by two English decisions i.e, North British Railway Co. v. Scott [1922] 8 TC 332 (HL) and Hartland v. Diggines [1926] 10 TC 247 (HL). Both these decisions have been followed by two High Courts in India, i.e., the Bombay High Court in CIT v. H. D. Dennis [1982] 135 ITR 1 and the Madras High Court in CIT v. I. G. Mackintosh [1975] 99 ITR 419. Both the High Courts have held that the income-tax paid by the employer on behalf of the employee is a part of the salary of the assessee and the word salaries'' would in its natural import comprehend within it tax paid on behalf of the employee. 15. In the said cases, the question raised was regarding payment of tax free salary and whether the tax component paid by the employer, which was a perquisite, should be grossed up and included for computation of income tax payable. Being a perquisite, it was held that the tax paid should be added for the purpose of computation of income under the head "salary". 16. In K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment was made upon the assessee directly. The question is whether the said tax component paid by Ballarpur can be included within the income of the assessee. The first contention of the learned Counsel for the assessee is that the amount paid by Ballarpur by way of tax cannot be treated as 'income' of assessee at all. His second contention is that the assessee did not receive the said amount and, therefore, it cannot constitute his income. Indeed, the learned Counsel sought to argue that Ballarpur was under no obligation to pay the said tax amount relating to the salary amount received by the assessee. We find it difficult to agree with the learned Counsel. 7. The definition of 'income' in clause (24) of Section 2 of the Act is an inclusive definition. It adds several artificial categories to the concept of income but on that account the expression 'income' does not loss its natural connotation. Indeed, it is repeatedly said that it is difficult to define the expression 'income' in precise terms. Anything which can properly be described as income is taxable under the Act unless, 'of course, it is exempted under one or the other provision of the Act. It is from the said angle that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning and not to restrict it to the works included in its inclusive part unless the context otherwise requires. The interpretation sought to be placed by the learned counsel for the assessee was not accepted giving the following reasons: Firstly, we have already pointed out that the definition is inclusive and it is a well-settled rule of interpretation of inclusive definition that it is not controlled or confined to the words or expressions which are included in the said definition. On the contrary, it is intended to enlarge the scope of the concept which is sought to be defined. Secondly, the purpose of r. 3 is to lay down the mode of valuation of the perquisite for the purpose of computing the income chargeable under the head "Salaries" under s. 15 of the Act. The definition of the word "salary" given in s. 17, as the section itself shows, is for the purposes of ss. 15 and 16 of the Act. It is, therefore, legitimate to presume that the Legislature did not intend to give a different meaning to the word "salary" in r. 3 from that given in s. 17 of the Act. Therefore, the two definitions will have to be construed as co-extensive in their scope except so far as there is an expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aïve on the part of the assessee to argue that the issue was contentious or debatable in nature. By showing that the issue has been admitted adjudication as a substantial question of law in some appeals by this Court are pending in this Court, the assessee cannot come out of the clear mandate of the aforesaid judgments. The admission of certain appeals may be on the basis of certain facts appearing in those cases. Even otherwise, when we find that the issue which is involved in the instant appeals was the same on which the aforesaid pronouncements existed at the time when the AO invoked its powers under Section 154 of the Act. It can clearly be treated as mistake in law which has been corrected." (emphasis supplied) 19. Accordingly, under the then applicable Rule 3 value of perquisite "rent free accommodation" has to be calculated. The underlined portions above support and affirm our findings. We only record that Rule 3 has undergone change/ amendment with effect from 01.04.2001 and as per the amended Rule, perquisite under Section 17(2) has to be excluded for the purpose of computing perquisite value of "rent free accommodation". We clarify that we have not examined and in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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