COMMISSIONER OF INCOME TAX Vs. SHANKAR KRISHNAN

JUDGEMENT

(1.) Where an employer takes residential premises on rent by giving security deposit for the benefit of employees, whether the notional interest on such security deposit is liable to be included in the perquisite value of the accommodation given to the assessee employee is the question raised in this appeal. The assessment year involved here is A.Y. 2001-2002.

(2.) The assessee is a salaried employee with McKinley & Company Inc., India. The assessee was provided with rent free accommodation in Cuffe Parade, Mumbai by his employer company. The monthly rent paid by the employer in respect of the said flat was Rs. 10,000/ p.m. The employer had given an interest free refundable security deposit of Rs. 30 lacs to the landlord for renting out the said premises.

(3.) In the assessment year in question, the assessee computed the perquisite value of the accommodation at Rs. 1,20,000 calculated (@ Rs. 10,000/ p.m.) being the rent paid by the employer to the landlord. The assessing officer was of the opinion that since the employer had given interest free deposits of Rs. 30 lacs to the landlord, interest @ 12% on the said deposit is required to be taken into consideration for estimating a fair rental value of the flat given to the assessee and, accordingly, the Assessing Officer enhanced the perquisite value of the residential accommodation provided to the assessee.