Wednesday 30 May 2012

“Tax paid by employer not salary for perquisite valuation” – Delhi High Court affirms the Tribunal ruling

This alert is in continuation to our GES Alert dated 11th November 2011 on the Delhi Tribunal ruling in the case of Isao Sakai.
Facts
 Telsuo Mitera, Isao Sakai and Yuji Horikawa, employees of Japan Airlines International Company Limited (the employer) filed their return of income for tax year 2005-06 (relevant to assessment year 2006-07) including perquisite value of accommodation.
 The employees were entitled to tax free salary and such payment was considered as perquisite. Consequently, tax payment by employer was not considered as part of salary for computing the value of rent free accommodation.
 The assessing officer and the Commissioner of Income-tax (Appeals) had held that taxes paid by the employer should be considered as salary for determining the value of accommodation. However, the Delhi Tribunal ruled that such payment was in the nature of benefit and should not be considered for perquisite valuation. The present appeal is by the Revenue against the order of the Delhi Tribunal.
Issues before the High Court
 Whether the tax paid by the employer is to be included as part of salary for determining perquisite value of rent free accommodation?

Observations and ruling of the High Court
 Rule 3 was amended with effect from 1 April 2001 to exclude perquisites for the purpose of computing perquisite value of rent free accommodation.
 Prior to the amendment, perquisites were to be treated as part of salary. Hence, tax paid by employer had to be considered for determining the benefit value of accommodation.
 Section 10(10CC) (which deals with exemption on taxes paid on non-monetary perquisites) is not examined.
 Appeal dismissed since no substantial question of law arises for consideration.
Source : CIT vs. Telsuo Mitera; CIT vs. Isao Sakai; CIT vs. Yoshimi Kamano; CIT vs. Yuji Horikawa [ITA Nos. 323, 325, 326, 343/2012 dated 17 May, 2012
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1 comment:

Jaffy said...

do a singaporean working in India on an employment visa need to contribute to the Provident Funds?

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