TMI Blog2018 (1) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... t establishing the fact that the assessee is an employee of the company and the benefit given is in the nature of salary. Without factually establishing the existence of employer–employee relationship between the company and the assessee it cannot be assumed that the assessee has been given a benefit in lieu of salary, even, in the absence of contract of employment between the company and the assessee. This is so because as per section 17(2)(iii)(a) of the Act, the director to whom any benefit or amenity is granted must be an employee of the company. Merely on the basis of the difference between stamp duty valuation and actual sale consideration the Assessing Officer has concluded that a benefit in the nature of perquisite has been given to the assessee by the company. However, there is nothing on record nor any positive finding by the Assessing Officer on the basis of any enquiry to suggest that the fair market value is the value determined for stamp duty purpose. There is no allegation by the Assessing Officer that any consideration over and above the sale value has changed hands. That being the case, the addition made by the Assessing Officer by treating the difference in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in the present appeal relates to addition of an amount of ₹ 1,95,03,678 as perquisite in lieu of salary under section 17(2)(iii) of the Income-tax Act, 1961 (for short the Act ). 3. Brief facts relating to the issue in dispute are, the assessee is an individual. For the assessment year under dispute, the assessee filed his return of income on 1st April 2011, declaring total income of ₹ 19,23,229. During the assessment proceeding, on the basis AIR information that assessee has entered into transaction relating to purchase of properties, the Assessing Officer called upon the assessee to furnish the necessary details. On a perusal of the details furnished by the assessee, he found that in the relevant previous year, the assessee and his wife as co owners have purchased certain immovable properties from M/s. Su Yojana Impex Pvt. Ltd., wherein the assessee is also a director. Further, on verifying the details, he found that as per the stamp duty valuation, the market value of the properties purchased is much higher than the value at which the assessee has purchased the properties. Therefore, the Assessing Officer was of the view that by selling properties at a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholder of the company. He submitted, the assessee is full time engaged in his own stationery business carried out for the past so many years. He submitted, the assessee became a director of the company to protect his own interest and to keep track of the development of the project so as to protect his own capital investment. He submitted that the assessee had entered into agreement for purchase of eight shops from the company. It was submitted, the assessee and his wife had paid the entire sale consideration up front. Further, the developers did not have sufficient standing and experience which required the assessee to keep a vigil on the affairs of the company to ensure completion of the project as per schedule, since, it was a re development project involving permission from various statutory authorities as well as existing tenants. He submitted, the assessee was not given any salary as per the contract of appointment and there is no employer / employee relationship between the company and the assessee. Further, in the absence of any contract of employment, by merely becoming a director, the assessee does not become a employee of a company. Learned counsel for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. We have also applied our mind to the decisions relied upon. It is evident from the factual matrix that the addition made of ₹ 1.95 crore as perquisite under section 17(2)(iii) of the Act was on the reasoning that the assessee has received a benefit in lieu of salary, since, the actual sale consideration received by the assessee is lesser than the value determined for stamp duty purposes. Though, the Assessing Officer in so many words has not referred to the provisions of section 50C of the Act, however, it is manifest, the Assessing Officer importing the fiction created under the deeming provisions of section 50C of the Act has assumed that the fair market value of the property is the value adopted for stamp duty purposes. Hence, he has concluded that the difference between the stamp duty value and actual sale consideration is a benefit given to the assessee as per section 17(2)(iii) of the Act. However, there is nothing on record, either in the assessment proceeding or in the order of the first appellate authority to suggest that the Assessing Officer has made any enquiry to ascertain the fair market value of the property. Even, he has not conducted any enquiry with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tually establishing the existence of employer employee relationship between the company and the assessee it cannot be assumed that the assessee has been given a benefit in lieu of salary, even, in the absence of contract of employment between the company and the assessee. This is so because as per section 17(2)(iii)(a) of the Act, the director to whom any benefit or amenity is granted must be an employee of the company. In this context, we may refer to the following decisions: i) CIT v/s Lady Navajvai R.J. Tata, 15 ITR 8; and ii) CIT v/s Laxmipati Singhania, 92 ITR 598. 9. Moreover, as observed by us earlier, merely on the basis of the difference between stamp duty valuation and actual sale consideration the Assessing Officer has concluded that a benefit in the nature of perquisite has been given to the assessee by the company. However, there is nothing on record nor any positive finding by the Assessing Officer on the basis of any enquiry to suggest that the fair market value is the value determined for stamp duty purpose. There is no allegation by the Assessing Officer that any consideration over and above the sale value has changed hands. That being the case, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, there is no room for doubt that applying the deeming fiction of section 50C, the Assessing Officer has adopted the stamp duty value as the deemed sale consideration while making the disputed addition. Therefore, in view of the aforesaid, we hold that the addition made of ₹ 1.95 crore is unsustainable in law. Accordingly, we delete the same. 11. In the result, appeal is allowed. ITA no.4938/Mum./2016 A.Y. 2012-13 12. Facts and issues involved in this appeal are more or less identical to the issues raised in ITA no.6023/Mum./2014, decided in the earlier part of the order, except, the fact that in the impugned assessment year the learned Commissioner (Appeals) while upholding the addition made of ₹ 49,72,740 as perquisite in lieu of salary u/s 17(2)(iii) has also upheld the addition on alternative grounds i.e., it is adventure in the nature of trade / business under the head profit and gain of business or profession as per section 28(iv) of the Act. While doing so, he has also enhanced the income of the assessee by concluding that the benefit accruing to a relative of the director should also be treated as income of the director as per section 2(24)(vi) o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
