MURLIDHAR DALMIA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THESE are five reference petitions under S. 256 (1) of the IT Act of 1961 (the Act). They relate to the accounting years 1968 -69, 1969 -70, 1970 -71, 1971 -72 and 1972 -73, In all the five references one identical point is involved. This judgment will govern them all.

(2.) THE assessee, Shri Murli Dhar Dalmia, was an officer of Birla Cotton Spinning and Weaving Mills Ltd., Delhi. He was appointed some time in 1936. In that year, he was provided with a residential accommodation by the mills at a rent of Rs. 25 per month by virtue of his being in its employment. Since then he continued to be in the employment of the Mills and continued to occupy the residential accommodation at the same rate. He retired in 1976. For the first time in the asst. yr. 1967 -68 the ITO acting under the provisions of S. 17(2)(ii) of the Act found that the accommodation provided to the assessee by his employer was on a concessional rent. He accordingly, charged to tax the aggregate value of the perquisite at 12 -1/2 per cent of the assessee's salary from Birla Mills and after deducting Rs. 300 stated to have been paid as rent by the assessee to the employer, the balance of Rs. 7,200 was added in the income of the assessee as the value of the perquisite in each of the years in question. From this order the assessee appealed. The AAC took the view that the assessee's case was governed by the Delhi Rent Control Act, 1958 (hereinafter called "the Rent Act"). In his opinion, the assessee was a tenant to whom cl. (i) of the proviso to S. 14(1) and S. 22 of the Rent Act applied. He held that it was a case of a tenancy where the premises were let to the assessee by reason of his being in the service of the landlord, Birla Cotton Mills, and that the assessee could be evicted from the premises only at the time when he ceased to be in the service or employment of the mills. As regards rent he thought that ss. 4,5,6 and 48 of the Rent Act did not permit the mills to enhance the rent of Rs. 25 per month except by a sum of Rs. 3 only which was the permitted increase under the Act and that too only if "the employer cares to get the rent fixed under the provisions of the Rent Act." In his opinion, it was not a case of concessional rent because "the rent prevalent in mid -thirties in a place like Delhi" was not more than Rs. 25 per month. As a consequence, the AAC deleted the addition of Rs. 7,200. From the order of the AAC, the Revenue appealed to the Tribunal. The Tribunal reversed the order of the AAC. They held that it was a case of concessional rent and that the assessee's case was governed by S. 17(2)(a)(ii) of the Act and r. 3(b) of the IT Rules, 1962. As regards the applicability of the Rent Act they were of the view that those provisions did not apply. Disagreeing with the AAC, they held that the provisions of the Rent Act were wholly inapplicable in arriving at the perquisite value of the accommodation occupied by the assessee. They agreed with the ITO that the perquisite value of the accommodation had to be determined in accordance with S. 17(2)(a) of the Act and r. 3(b) of the Rules. At the instance of the assessee, the Tribunal has referred the following question to us for our opinion :

(3.) NOW it is important to notice that the house occupied by the assessee was situated within the precincts of the mills. Electricity was supplied to the assessee not from any outside agency but from the generating plant of the mills. During the relevant time the assessee had risen to the position of the executive president of the mills. As an employee of the mills he was occupying the house owned by it. It seems to us that his occupation can properly be described as a service occupation. He was a service occupier or a licensee. A service occupation is only a particular kind of licence whereby a servant is required to live in the house in order to do his work better. The assessee's residence in the mills' premises was for the better performance of his duties. The creation of a tenancy cannot be inferred from the facts and circumstances of the case.