Commissioner of Income-tax Vs. Jagadish Prosad Goenka - Court Judgment

Excerpt:
- shyamal kumar sen, j.1. the assessee is a director of m/s. duncan bros, and co. ltd. the assessment year involved in the case is 1982-83.2. as per the terms of an agreement with m/s. duncan bros, and co. ltd., the assessee was entitled to rent-free accommodation. the assessee was occupying the premises no. 19, belvedere road, calcutta-27.3. the assessee explained in his letter dated march, 21, 1985, that he was a tenant in the said house. he was also a whole time director of m/s. duncan bros, and co. ltd., 31, netaji subhas road, calcutta. in accordance with the agreement with the said company, the assessee had to be provided with rent-free accommodation. therefore, the said company, m/s. duncan bros, and co. ltd., paid rent on behalf of the assessee to the landlord of the said premises. the monthly rent was rs. 1,900.4. he, accordingly, computed the perquisite value of the accommodation as per section 17(2)(i) of the income-tax act, 1961, read with rule 3 of the income-tax rules, 1962, at rs. 10,234. the income-tax officer, however, did not accept the assessee's computation at rs. 10,234 as per section 17(2)(i) of the act. instead he applied the provisions of section 17(2)(iv) of the act and computed the perquisite value of the accommodation at rs. 22,800 (rs. 1,900 x 12). he applied the provisions of section 17(2)(iv) of the act instead of section 17(2)(i) on the ground that the assessee was the actual tenant under an obligation to pay lease rent of rs. 1,900 per month and the assessee's employer on behalf of the assessee paid those rents to the landlord.5. against the income-tax officer's computation of the perquisite value of the accommodation at rs. 22,800 under section 17(2)(iv) of the act, the assessee filed an appeal before the appellate assistant commissioner of income-tax. the appellate assistant commissioner confirmed the income-tax officer's order on the point.6. against the appellate assistant commissioner's order confirming the income tax officer's order on the point of computation of the perquisite value of the rent as per section 17(2)(iv) of the act, the assessee filed an appeal before the appellate tribunal. the appellate tribunal, following its earlier order dated april 27, 1987, in the assessee's case in i.t.a. no. 694 of 1986, observed that the employer, by paying rent directly to the landlord, provided the assessee only the facility of free accommodation and the assessee was not under any obligation to pay rent. the tribunal thereby held that the application of section 17(2)(iv) of the act was not correct in the circumstances of the case and, therefore, the assessee's computation of the perquisite value of the accommodation under section 17(2)(i) of the act was correct. the tribunal then allowed the assessee's appeal.7. on these facts, at the instance of the commissioner of income-tax, the following two questions of law have been referred under section 256(1) of the income-tax act, 1961, for the opinion of this court.'1. whether, having regard to the fact that the assessee being the actual tenant of the house occupied by him for which the assessee was under an obligation to pay rent to the landlord, the tribunal was correct in law in holding that since the assessee's employer had directly paid rents to the landlord, the computation of perquisite value in accordance with the provision should be made in accordance with the provisions of section 17(2)(i) of the income tax act, 1961, and the application of section 17(2)(iv) of the act made by the income-tax officer was not correct 2. whether, on the facts and in the circumstances of the case, the tribunal misdirected itself in law and in fact in holding that the assessee was not under any obligation to pay rent to the landlord and since the rent was paid directly by the employer to the landlord, the provisions of section 17(2)(i) and not section 17(2)(iv) of the income-tax act, 1961, would be applicable in the case ?' 8. it has been argued on behalf of the revenue that the assessee being a tenant of the premises occupied by him is under obligation to pay rent and, as such, section 17(2)(iv) of the income-tax act would apply. it has been further submitted that although the assessee's employer under the terms of the agreement had to provide free accommodation to the assessee, but, at the same time, the employer is not the tenant of the premises occupied by the assessee. therefore, when rent of rs. 1,900 per month is paid, the perquisite value is to be computed in accordance with the provisions of section 17(2)(iv) of the act, and not according to the provisions of section 17(2)(i) of the act. the said sections 17(2)(i) and 17(2)(iv) are set out herein below :'section 17(2). 'perquisite' includes- (i) the value of rent-free accommodation provided to the assessee by his employer ; . . . (iv) any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee; and ' 9. it is clear from the terms of the agreement with his employer that the assessee was entitled to rent-free accommodation. by letter dated march 21, 1985, the assessee also made it clear that he is a tenant in respect of premises no. 19, belvedere road, calcutta, and he is also a whole-time director of the company and, in terms of the agreement with the company, the company is to provide the assessee rent-free accommodation and, as such, the company has been paying the rent on his behalf to the landlord in terms of the service condition. so long as the agreement by and between the employer and the assessee subsists, there is really no obligation on the part of the assessee to pay rent to the landlord. the said payment was made by the company on his behalf to the landlord since the assessee is entitled to rent-free accommodation. accordingly, it is not proper to apply section 17(2)(iv) of the income-tax act, 1961, instead of section 17(2)(i). the company being the employer of the assessee has been paying rent directly to the landlord as the assessee is entitled to rent-free accommodation as an employee which the company was under an obligation to provide under the terms of the agreement of the company with the assessee. accordingly, there is no scope for the application of the provisions of section 17(2)(iv) of the act. the assessee's computation of the perquisite value of the accommodation under section 17(2)(i) of the act was correct and the contention of the learned advocate for the revenue that the assessee, being a tenant of the premises occupied by him, is under an obligation to pay rent cannot be accepted.10. accordingly, both the questions are answered in the affirmative and in favour of the assessee.11. there will be no order as to costs.ajit k. sengupta, j.12. i agree.