Salary: Perquisite: S/s 17(2)(iii) and 17(2)(iv) of I. T. Act, 1961 and Rule 3 of I. T. Rules, 1962: Expenditure on repairs of residential accommodation occupied by employee:

The assessee was an employee (President and CEO) of a company M/s. GE. In the relevant year, the employer had spent an amount of Rs. 50 lakhs towards repair and renovation of the residential accommodation occupied by the assessee. The Assessing Officer treated this amount as perquisite and added in the salary income of the assessee. The Tribunal confirmed the addition.

On appeal by the assessee, the Delhi High Court reversed the decision of the Tribunal and held as under:

“i) Express provisions of Rule 3 which elaborates various contingencies in relation to perquisite of rent free accommodation rules out the intention of the Parliament to treat expenses in relation to improvement, repairs or renovation as falling within the meaning of “perquisite”.

ii) Argument on behalf of the Revenue that the repairs and renovation expenses constituted an obligation of the employee, which was borne by his employer is meritless. Lease deed nowhere spells out any obligation on the employee to carry out repairs and renovations. Section 17(2) (iv) cannot be made applicable.

iii If the Assessing Officer had returned a finding that the premises were to be valued at market value (of the rental), in case it is increased as a result of the renovations, the only prescribed mode was to apply the method indicated by Rule 3(a)(iii).

iv) In view of the above, the appeal has to succeed. The impugned order of the Tribunal is hereby set aside. The cost of repairs and renovation shall be deleted from the taxable income of the assessee.”