TMI Blog1998 (2) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... ith rent-free quarters. During the previous year ended on March 31, 1980, relevant to the assessment year 1980-81, the assessee occupied the house at Alwarpet, Madras, is an employee of Addison Paints and Chemicals Ltd. The assessee in the assessment proceedings for the assessment year 1980-81, admitted the value of the perquisites from the rent-free quarters at Rs. 6,000 which was the rent actually paid by Addision Paints and Chemicals Ltd. to Amalgamations Ltd. The Income-tax Officer, however, invoked the provisions of rule 3 of the Income-tax Rules and determined the perquisite value of the rent-free accommodation as under : Perquisites in respect of rent-free accommodation : Perquisites in respect of rent-free accommodation : Rs. Basic salary 54,000 Annual value 60,000 10 per cent of salary 5,400 Annual value in excess of 20 per cent of salary 49,200 -------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of rule 3 of the Income-tax Rules are directory in nature and that the provisions of the said rule are not applicable where the accommodation was provided to the employee by the employer and the rent was paid by the employer. Learned counsel submitted that the provisions of rule 3 have to be applied irrespective of whether the employer takes up a residential quarter on lease and pays rent and allows its employee to occupy the rented house or allows its employee to occupy its own building free of rent and in both the cases, the provisions of rule 3 would apply. Mr. Janarthana Raja, learned counsel for the assessee, on the other hand, submitted that the provisions of rule 3 are only directory in nature and the expression, "ordinarily" occurring in rule 3 of the Income-tax Rules clearly shows that the provisions are directory in nature. He further submitted that the provisions of section 17 of the Act do not suggest that the value of perquisite should be determined as per the Income-tax Rules and in the absence of such an indication in section 17 of the Act, the pro visions of the said rule must be held to be directory. He also submitted that the fair rental value in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under, namely :--- . . . (iii) in any other case,--- (A) the value of rent-free residential accommodation which is not furnished shall ordinarily be a sum equal to 10 per cent. of the salary due to the assessee in respect of the period during which the said accommodation was occupied by him during the previous year : Provided that--- (1) where the fair rental value of the accommodation is in excess of 20 per cent. of the assessee's salary, the value of the perquisite shall be taken to be 10 per cent. of the salary increased by a sum equal to the amount by which the fair rental value exceeds 30 per cent. of the salary ; so, however, that the Income-tax Officer may, having regard to the nature of the accommodation, determine the sum by which 10 per cent. of the salary is to be increased, as a percentage (not exceeding 100 per cent.) of the amount by which the fair rental value exceeds 20 per cent. of the salary ; (2) where the assessee claims, and the Income-tax Officer 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 ; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. of the salary. In other words, where the salary of the employee is taken to be one lakh rupees, normally 10 per cent. of the salary is regarded as perquisite value of the unfurnished accommodation. But, if 20 per cent. of the fair rental value of the property-let us assume the fair rental value of the property is Rs. 60,000 and 20 per cent. of the salary is only Rs. 20,000 the sum of Rs. 40,000 is regarded as the value of perquisite. But the Income-tax Officer is given the power to restrict the value of the perquisite either to 100 per cent. of the salary or the fair rental value of the property. In this case, the Income-tax Officer had chosen to adopt the first course and deter mined 100 per cent. of the salary as the perquisite value by applying the proviso to rule 3(a)(iii) of the Income-tax Rules in computing the perquisite value. We are of the view that mere employment of the expression, "ordinarily" in the main part of rule 3(a)(iii) does not show that the rule is directory. When the statute provides for a uniform method of valuation of the perquisite,, the. statutory method of valuation of perquisite should be adopted and all the authorities functioning under the Act in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the High Court by sub-section (1) of section 80A of the Act. The word 'ordinarily' does not indicate that the provisions of sub-section (2) of section 80A are not mandatory and that relaxation in compliance. with those provisions is permissible. The word 'ordinarily' only qualities the number of judges who can exercise the jurisdiction which is vested in the High Court to try an election petition. Tile said word indicates that normally it would be single judge of the High Court who can exercise the jurisdiction which is vested in the High Court, but in appropriate cases, such jurisdiction can also be exercised by two or more judges." The principle laid down by the apex court will equally apply to the facts of the case as well. The employment of the expression, 'ordinarily' in the main part of rule 3(a)(iii) indicates that ordinarily the value of the property will be taken as 10 per cent. of the salary and where the fair rental value of the property in occupation of the employee exceeds 20 per cent. of the salary, then, instead of normal rule of 10 per cent. of the salary, the value of the perquisite should be determined in the manner provided in the proviso. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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