CIT Vs. BALWANT RAI DEWAN

JUDGEMENT

(1.) PRESENT appeal filed under Section 260A of the Income Tax Act against the order dated 18th January, 2002 passed by the Income Tax Appellate Tribunal, Delhi has been admitted on the following substantial question of law:

(2.) BRIEFLY stated the facts giving rise to the present appeal are as follows: The appeal relates to the assessment year 1990 -91. The respondent assessee is a Director in M/s. Dewan Rubber Industries Ltd., Meerut (hereinafter referred to as the Company). The Company had provided rent free accommodation to the respondent assessee in order to enable him to manage the affairs of the Company even in holidays and beyond the normal working hours. The respondent assessee in his return had not included the perquisite value of the rent free accommodation provided by the Company. However, the Assessing Officer determined the value of the rent free accommodation at Rs. 2,05,912 by including annual letting value of the house as Rs. 1,20,000, maintenance of the building on estimated basis, at Rs. 22,000, depreciation of the building claimed by the Company at Rs. 51,115, House Tax at Rs. 540, and electricity cost at Rs. 12,257. In appeal the Commissioner of Income tax (Appeals) -I, Meerut deleted the entire addition on the ground that the assessee was not an employee of the Company and hence no perquisite value of rent free accommodation could be added under section 17 of the Act. The Revenue preferred an appeal before the Tribunal which vide order dated 23rd July, 1999 held that the provisions of section 2(24(iv) of the Act were clearly attracted and hence the perquisite value of the rent free accommodated was to be added in the hands of the assessee. The matter was restored back to file of the Commissioner of Income Tax (Appeals). The Commissioner of Income tax (Appeals) held that the municipal tax of the house being low could not be made the basis of annual letting value, whose WDV as on 30th June, 1987 was Rs. 10,22,295. He, therefore, estimated the perquisite value of the rent free accommodation at Rs. 1,00,000 inclusive of electricity charges and maintenance expenses. The assessee feeling aggrieved further preferred an appeal before the Tribunal. The Tribunal by the impugned order had restricted the addition to Rs. 32,540 (wrongly mentioned by the Tribunal as Rs. 26,540) by taking value of benefit for the house provided by the Company at Rs. 18,000, House Tax at Rs. 540 and Electricity expenses at Rs. 14,000. The Tribunal determined the said figure on the ground that the company had not incurred any expenses towards maintenance of the house. It was further of the view that as the assessee was not drawing any salary and the other Directors of the Company were paid salary of Rs. 10,000 per month, the notional salary payable to the assessee was taken at Rs. 15,000 per month and as per Rule 3 of the Income tax Rules, 1962 perquisites was determined at Rs. 18,000 per year.

(3.) WE have heard Sri R.K. Upadhyaya, learned senior standing counsel for the Revenue.