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TMI Blog2015 (7) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing relief to the assessee without appreciating the reality after lifting corporate veil, in the case of the assessee." 3. Rival contentions have been heard and perused the records. Assssee is an individual by status. For A. Y. 2009-10, the assessee has filed its Return of Income declaring total income at Rs. 9,78,56,3601-. The assessment was later completed determining the income at Rs. 11,11,82,503/- vide order dated September 12, 2011 passed u/s 143(3) of the Act. During the year the assessee had income by way of income from Salary, House Property and from other sources. In the Assessment Order, the AO observed that the assessee is residing in a property owned by M/s. Cipla Ltd. by payment of a meager rent of Rs. 1,670/-. Therefore, in the opinion of the AO, since the property could have fetched the rent much higher than the rent paid by the assesse, the assessee had derived the benefit u/s. 17(2)(ii) of the Act. Before the A.0, it was explained that the assessee was a tenant of the property pursuant to agreement dated 23.8.1978. As per the said agreement entered into by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of benefit to the tenant beyond the terms of the tenancy. In such a case the contract of tenancy will not become invalid. In the present case, the employer, viz. CIPLA has agreed to sell the accommodation to the appellant at a pre-determined price on the termination of his employment. However, this term may be construed to confer some benefit to the employee, beyond the benefits of tenancy, if the value of the accommodation on termination of the employment were to be higher than the pre- determined sale price. In such a case, it may be said that the employee may obtain some benefit in that capacity as such. However, the benefit, in such a case, would accrue either at the time when the right of purchase was granted to the employee or when the right is actually exercised by the employee on the termination of his employment. In this case, the right was granted in the year 1978 and the right has not been exercised in the previous year relevant to AY 2009 - 10, being the year in appeal. I therefore, hold that no benefit beyond the landlord-tenant relationship has accrued to the appellant in the year under appeal. So long as the term of tenancy subsist, the tenant pays the standard re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existence of the relationship of employer and employee as also of landlord and tenant particularly if the latter arrangement for taking the house at rent as per standard rent is not barred if separate contractual relationship co-exist with independent terms. In the instant case, even though as per the terms of employment, Cipla was to provide accommodation to the assessee, however the fact that assessee has not availed this benefit but opted to receive HRA and offered the same for tax in his return of income is not in dispute. It is also a matter of record that the assessee was granted the rights to purchase the premises in terms of agreement entered in the year 1978 and this arrangement did not negate the agreement of tenancy between the assessee and Cipla. Since the assessee was not availed rent free accommodation, Cipla was paying HRA which was duly offered by the assessee in his return of income. The question of determining perquisite value for provision of accommodation at concessional rent, being the excess of the specified rate of salary over the rent recovered from the employee will arise only where the rent is recovered from the employee and not when the rent is received f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case. Moreover, there was no provision under 1947 Act, identical to sec. 55 of MRCS, 1999. Para 3.4.4. of AO's order The absence of any written tenancy agreement between A11/s. Cipla Ltd., and assessee shows that the property was rented to assessee only by virtue of employer-employee relation with M/s. Cipla Ltd. Even if we consider the other argument of assessee that in absence of any written agreement and on the basis of oral agreement the assessee automatically assumes tenancy is also not correct because the assessee has been able to take such liberty simply because of his relation as an employee with the owner. Otherwise it is highly unlikely that such a prime property will be given to a third person without agreement in writing at such a nominal rent which is otherwise required to be registered as per law. The employer-employee relationship is not at all denied since if the fact on record. The real issue is whether any unacceptable motive could be ascribed to the arrangement. In this behalf, the only gravamen of the AO is that a prime property was given on a nominal rent. However, while leveling this allegation, the AO has not considered that standard rent ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained from a company either by a director or by a person who has substantial interest n the company, By the very fact that the assessee has paid standard rent to CIPLA, it cannot be held that the assessee has obtained any benefit whch or by a relative of director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by director or other person aforesaid. Therefore, the use of accommodationowned by the employer at a concessional rent shall be chargeable to tax asperquisite within the meaning of section 17(2)(ii) of the I.T. Act. By the very fact that the assessee has paid standard rent to CIPLA, it cannot be held that the assessee has obtained any benefit which could be considered as income under section 2(24)(iv) of the Act. Para 3.6 of the order The assessee instead of purchasing the property (as agreed in the agrement to sale dated 23/08/1978) had preferred to stay in it by paying rent. Had this property beenpurchased in the name of assessee then he would have been liable to pay taxes on it under the head income from house property as he is the owner of more than one rsidentail property. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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