By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Bhadresh Doshi Chartered Accountants
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Section 17 of the Income-tax Act, 1961 – Where assessee occupies accommodation that belongs to employer as per independent rent agreement by paying standard rent and also receives HRA from his employer for not getting accommodation then no perquisite addition can be made u/s. 17(2)(ii).
FACTS
The assessee was having tenancy agreement with his landlord, M/s CIPLA, who was also employer of assessee.
The assessee was occupying the house in the capacity of a tenant by paying standard rent.
The AO held that the assessee had derived the perquisite benefit u/s. 17(2)(ii), since the property could have fetched the rent much higher than the rent paid by the assessee. Accordingly, he made the addition
On appeal, the CIT-(A) deleted the addition holding that the assessee did not derive any benefit in his capacity of employee.
On appeal by the revenue.
HELD
The findings recorded by the ld. CIT(A) for deleting the addition made were as follows –
There is no legal authority or principle to deny coexistence of employer-employee relationship and landlord-tenant relationship. Separate contractual relationships can co-exist with independent terms. No law or principle can come in the way of distinct and independent contractual relationships between the very same parties.
Also the assesse is paying standard rent and standard rent cannot be called as nominal rent. In fact, it is a fair rent which is also the measure for calculating income from house property.
The assessee has occupied the accommodation as a tenant of CIPLA, being the landlord of the premises. CIPLA has not recovered any rent from the appellant pursuant to employer-employee relationship; rather CIPLA has received rent from the assessee in terms of contract of tenancy independent of the contract of employment.
Therefore, CIT(A) was of the considered view that the deemed mechanism of computation of value of perquisite u/s. 17(2)(ii) cannot be applied to the facts of this.
The aforesaid findings of CIT-(A) has not been controverted by the Department.
Hence, since the assessee has occupied accommodation that belongs to employer as per independent rent agreement by paying standard rent and has also received HRA from his employer for not getting accommodation no perquisite addition can be made u/s. 17(2)(ii).
In the result, appeal of the Revenue is dismissed.
