SCOTT R BAYMAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The present appeal is directed against an order of Income Tax Appellate Tribunal (ITAT) dated 21.08.2012 in ITA No.1617/Del/97. The following question of law was framed for consideration in the present appeal on 30.07.2004.

(2.) The brief facts are that the assessee was the President and CEO of M/s GE International Operations Corp. Inc. (in short GEIOCI). He had filed a return of income on 30 th June 1994; which was processed under Section 143(1)(a) at Rs.39,27,839/-. He later filed a revised return disclosing his total income as Rs.84,74,828/-. He had filed a certificate of salary from his employer showing a total receipt of US $ 276442 as salary and furnished residential accommodation as well as other benefits. The Assessing Officer, during the course of proceedings, observed that for the year under consideration the assessee s employer had incurred expenses of Rs.50 lakhs towards repair and renovations of the residential accommodation occupied by him. To examine the matter further, a notice under Section 131 was issued to the assessee. In response to certain queries, the assessee s representative furnished answers. He had contended that his predecessor in the corporation had stayed longer than was expected and for that duration very little money was incurred by GE International Operations Corp. Inc. for maintaining the residence i.e. 4 Panchsheel Marg. When the assessee took over his position, it was difficult for him to find a residence comparable to what he was used to in United States, as a result of which the employer decided to extend the lease for the house which had been leased for the assessee s predecessor and upgrade the facilities befitting a person of his seniority and status. The employer GEIOCI approved this arrangement and accordingly paid about Rs.50 lakhs to M/s Framework Interiors for carrying out various works like electric wiring, plumbing, aircondition ducting, security fencing, guard rooms etc. With this amount some furniture etc. was also bought. The Assessing Officer held that the amount of Rs. 50,51,971/- was a perquisite in the hands of the assessee by virtue of Section 17 (2) (iv).

(3.) The reasoning of the Assessing Officer was that the expenses incurred by the employer was to suit the requirements of employee and that it had nothing to do with the performance of his duties for his office. The order of assessment rejected the contention that perquisite value if any could be calculated only on the basis of Rule 3 of the Income Tax Rules, it was held that if the expenses are only towards repairs or maintenance they could have been taken as expenditure incurred in order to keep the house habitable. The Assessing Officer, thus, concluded that: