ACIT CEN CIR 2, MUMBAI V. YUSUF K HAMIED, MUMBAI

ITA 5319/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88163 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 03-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 24-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Assessee Lawyers: D P BAPAT
• Keywords: Salary income
• Section: 143(3)

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER & SHRI SANJAY GARG, JUDICIAL MEMBER ./ I.T.A. NO.5319 /MUM/2012 ( / ASSESSMENT YEAR : 2009-2010 A CIT CENTRAL CIRCLE 2, ROOM NO. 904, PRATISTHA BHAVAN, MARINE LINES, MUMBAI 400 020. / VS. SHRI YUSUF K. HAMIED, WINDSOR VILLA, WEST FIELD ESTATE, 63, BHULABHAI DESAI ROAD, MUMBAI 400 028. ./ PAN : AAAPH 4309 K ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI JEETENDRA KUMAR R E SPONDENT BY : SHRI D.P. BAPAT / DATE OF HEARING : 31-12-2014 / DATE OF PRONOUNCEMENT : 21-01-2015 [ !' / O R D E R PER R.C. SHARMA, A.M . : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF LD. CIT(A) 36, MUMBAI DATED 19-6-2012 FOR THE A.Y . 2009-10 WHEREIN THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENU E: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,33,26,1431- WITHOUT APPRECIATING THE DIFFERENCE BETWEEN THE MARKET RENT AND THE RENT ACTUALLY PAID BY THE ASSESSEE IS A PERQUISITE WITHIN THE MEANING OF SECTION 17(2)(II) OR A BENEFIT WITHIN THE MEANING OF SECTION 2(24)(IV). ITA 5319/M/12 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN APPRECIATING THE FACT THAT THE ASSESSEE HAS BEEN RESIDING IN THE BUNGALOW BY PAYING A MEAGER RENT IN HIS CAPACITY AS A CHAIRMAN BECAUSE OF THE EXISTENCE OF EMPLOYER- EMPLOYEE RELATION AND NOT AS A PROTECTED TENANT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING RELIEF TO THE ASSESSEE WITHOUT APPRECIATING THE REALITY AFTER LIFTING CORPORATE VEIL, IN THE CASE OF THE ASSESSE E.' 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND PERUSED TH E RECORDS. ASSSSEE IS AN INDIVIDUAL BY STATUS. FOR A. Y. 2009- 10, THE ASSESSEE HAS FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME A T RS. 9,78,56,3601-. THE ASSESSMENT WAS LATER COMPLETED D ETERMINING THE INCOME AT RS. 11,11,82,503/- VIDE ORDER DATED SEPTE MBER 12, 2011 PASSED U/S 143(3) OF THE ACT. DURING THE YEAR THE A SSESSEE HAD INCOME BY WAY OF INCOME FROM SALARY, HOUSE PROPERTY AND FROM OTHER SOURCES. IN THE ASSESSMENT ORDER, THE AO OBSERVED T HAT THE ASSESSEE IS RESIDING IN A PROPERTY OWNED BY M/S. CIPLA LTD. BY PAYMENT OF A MEAGER RENT OF RS. 1,670/-. THEREFORE, IN THE OPINION OF T HE AO, SINCE THE PROPERTY COULD HAVE FETCHED THE RENT MUCH HIGHER TH AN THE RENT PAID BY THE ASSESSE, THE ASSESSEE HAD DERIVED THE BENEFIT U /S. 17(2)(II) OF THE ACT. BEFORE THE A.0, IT WAS EXPLAINED THAT THE ASSESSEE WAS A TENANT OF THE PROPERTY PURSUANT TO AGREEMENT DATED 23.8.1978. AS PER THE SAID AGREEMENT ENTERED INTO BY THE ASSESSEE WITH M/S. C 1 IPLA LTD., THE ASSESSEE WAS ENTITLED TO OCCUPY THE PREMISES AS A T ENANT WITH AN OPTION TO HIM TO ACQUIRE THE PROPERTY AT A SUBSEQUE NT DATE. THE ASSESSEE WAS OCCUPYING THE SAID PROPERTY IN PURSUAN CE OF THE SAID AGREEMENT DATED 23.8.1978 AND HENCE BY VIRTUE OF TH E BOMBAY RENT ACT, 1947 READ WITH MAHARASHTRA RENT CONTROL ACT, 1999, THE ASSESSEE WAS A PROTECTED TENANT. THE ASSESSEE THEREFORE EXPLAINED THAT THE ITA 5319/M/12 3 BENEFIT OR PERQUISITES HAS TO BE DETERMINED CONSIDE RING THE FACT THAT THE ASSESSEE WAS A TENANT OF THE PREMISES. IT WAS A CCORDINGLY EXPLAINED THAT THE RENT IN THE PRESENT CASE HAS TO BE DETERMI NED BASED ON STANDARD RENT. UNDER THE CIRCUMSTANCE, NO ADDITION COULD HAVE BEEN MADE AS THERE WAS NO PERQUISITE OR BENEFIT DERIVED BY THE ASSESSEE. HOWEVER THE A.O. DID NOT ACCEPT ASSESSEES CONTENTI ON AND DETERMINED THE PERQUISITES IN RESPECT OF THE RENT FREE ACCOMMO DATION AT RS. 1,33,46,183/- AND MADE THE ADDITION OF RS . 1,33,26, 143/- AFTER GIVING THE CREDIT OF THE RENT PAID BY THE ASSESSEE. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION BY OBSER VING AS UNDER:- 7.0 I HAVE CONSIDERED THE ABOVE SUBMISSIONS AND T HE ORDER OF THE AO. FIRST, CAN THERE BE A CONTRACT OF EMPLOYMENT AND IN DEPENDENT CONTRACT OF TENANCY BETWEEN THE VERY SAME PARTIES, ONE IN THE CAPACITY OF EMPLOYER - EMPLOYEE AND THE OTHER IN TH E CAPACITY OF LANDLORD AND A TENANT. SECOND, IS THE CONTRACT OF T ENANCY VALID IF THE LAND LORD AGREES TO SELL THE PROPERTY TO THE TENANT, FOR A PREDETERMINED CONSIDERATION, ON THE HAPPENING OF A CERTAIN EVENT? AND THIRD, IF THE ANSWER TO THIS QUESTION IS IN AFFIRMATIVE, CAN THE PROVISION OF SECTION 17(2)(11) BE INVOKED T O DETERMINE THE AMOUNT OF PERQUISITE BEING THE DEEMED VALUE OF THE BENEFIT AT SPECIFIED RATE OF SALARY TO THE EXTENT IT IS IN EXC ESS OF THE RENT RECOVERED FROM THE .EMPLOYEE/ TENANT? ON THE FIRST QUESTION, I FIND NO LEGAL AUTHORITY OR PRINCIPLE TO DENY COEXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP AND LANDLORD-TENANT RELATIONSHIP. THE SEPARATE CONT RACTUAL RELATIONSHIPS CAN CO-EXIST WITH INDEPENDENT TERMS. NO LAW OR PRINCIPLE CAN COME IN THE WAY OF DISTINCT AND INDEP ENDENT CONTRACTUAL RELATIONSHIPS BETWEEN THE VERY SAME PAR TIES. HOWEVER, THE MOOT QUESTION, IN SUCH A CASE, IS THE EFFECT ON AMOUNT CHARGEABLE TO TAX UNDER THE HEAD SALARIES IF THE LANDLORD-TENANT RELATIONSHIP CONTAINS A COVENANT WH ICH COULD RESULT IN TO CONFERMENT OF BENEFIT TO THE TENANT BEYOND TH E TERMS OF THE TENANCY. IN SUCH A CASE THE CONTRACT OF TENANCY WIL L NOT BECOME INVALID. IN THE PRESENT CASE, THE EMPLOYER, VIZ. C IPLA HAS AGREED TO SELL THE ACCOMMODATION TO THE APPELLANT AT A PRE-DETERMI NED PRICE ON THE TERMINATION OF HIS EMPLOYMENT. HOWEVER, THIS TERM M AY BE CONSTRUED TO CONFER SOME BENEFIT TO THE EMPLOYEE, B EYOND THE BENEFITS OF TENANCY, IF THE VALUE OF THE ACCOMMODAT ION ON TERMINATION OF THE EMPLOYMENT WERE TO BE HIGHER THA N THE PRE- ITA 5319/M/12 4 DETERMINED SALE PRICE. IN SUCH A CASE, IT MAY BE SA ID THAT THE EMPLOYEE MAY OBTAIN SOME BENEFIT IN THAT CAPACITY A S SUCH. HOWEVER, THE BENEFIT, IN SUCH A CASE, WOULD ACCRUE EITHER AT THE TIME WHEN THE RIGHT OF PURCHASE WAS GRANTED TO THE EMPLOYEE OR WHEN THE RIGHT IS ACTUALLY EXERCISED BY THE EMPLOYE E ON THE TERMINATION OF HIS EMPLOYMENT. IN THIS CASE, THE RI GHT WAS GRANTED IN THE YEAR 1978 AND THE RIGHT HAS NOT BEEN EXERCISED IN THE PREVIOUS YEAR RELEVANT TO AY 2009 - 10, BEING T HE YEAR IN APPEAL. I THEREFORE, HOLD THAT NO BENEFIT BEYOND TH E LANDLORD- TENANT RELATIONSHIP HAS ACCRUED TO THE APPELLANT IN THE YEAR UNDER APPEAL. SO LONG AS THE TERM OF TENANCY SUBSIST, THE TENANT PAYS THE STANDARD RENT TO THE LAND LARD AND THERE ARE NO LEG AL GROUNDS TO EVICT THE TENANT, THE TENANT-EMPLOYEE CANNOT BE DEE MED TO HAVE DERIVED ANY BENEFIT WHICH COULD BE CHARGED TO TAX U NDER THE HEAD SALARIES. STANDARD RENT CANNOT BE CALLED AS NOMINAL RENT, IN FACT IT IS A FAIR RENT WHICH IS ALSO THE MEASURE FOR CAL CULATING INCOME FROM HOUSE PROPERTY. 7.1 THE LAST QUESTION THAT ARISES IS WHETHER, IN SU CH A CASE, DEEMED PERQUISITE VALUE OF PROVISION OF ACCOMMODATI ON AT CONCESSIONAL RENT CAN BE CHARGED TO TAX. IN THIS CA SE, THE FIRST POINT TO BE NOTED IS THAT AS PER THE TERMS OF APPOI NTMENT, CIPLA WAS CONTRACTUALLY BOUND TO PROVIDE RENT FREE ACCOMM ODATION TO THE APPELLANT. HOWEVER, THE APPELLANT DID NOT AV AIL OF THIS BENEFIT IN THAT HE PAID STANDARD RENT FOR THE ACCOM MODATION. THIS FACT IS RE-ENFORCED BY THE RECEIPT OF HRA FROM CIPL A WHICH PAYABLE ONLY IF THE APPELLANT WAS NOT PROVIDED RENT FREE AC COMMODATION. THE AMOUNT OF HRA IS FULLY TAXED. IN THESE CIRCUMST ANCES, THE PROVISIONS OF SECTION 17(2)(11) CAN BE INVOKED ONLY IF CIPLA HAS PROVIDED ACCOMMODATION TO THE APPELLANT IN THE CAPA CITY OF THE EMPLOYER. IN THE PRESENT CASE, IT IS NOT SO. THE AP PELLANT HAS OCCUPIED THE ACCOMMODATION AS A TENANT OF CIPLA, BE ING THE LAND LORD OF THE PREMISES. CIPLA HAS NOT RECOVERED ANY RENT FROM T E APPELLANT PURSUANT TO EMPLOYER-EMPLOYEE RE LATIONSHIP; RATHER CIPLA HAS RECEIVED RENT FROM THE APPELLANT I N TERMS OF CONTRACT OF TENANCY INDEPENDENT OF THE CONTRACT OF EMPLOYMENT. THEREFORE, I AM OF THE CONSIDERED VIEW THAT THE DEEMED MECHANISM OF COMPUTATION OF VALUE OF PERQUIS ITE UNDER SECTION 17(2)(II) CANNOT BE APPLIED TO THE FACTS OF THIS. 7.2 AS A RESULT THE ADDITION OF RS. 1,33,26,143/- M ADE BY THE A.O. U/S 17(2)(II) IS DELETED. 4. WE HAVE CONSIDERED THE RIVAL CONTENTION, CAREFUL LY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND DELIBERATED UPO N THE JUDICIAL ITA 5319/M/12 5 PRONOUNCEMENTS REFERRED BY THE LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS THE DECISIONS CITED BY THE LD. A. R. AND LD. D.R. DURING THE COURSE OF HEARING BEFORE US. FROM THE RECORD W E FOUND THAT THE ASSESSEE WAS HAVING TENANCY AGREEMENT WITH HIS LAND LORD AND OCCUPYING THE HOUSE IN THE CAPACITY OF TENANT. MER ELY BECAUSE OF THE FACT THAT THE ASSESSEE WAS EMPLOYEE OF CIPLA LABORA TORY WHO WAS ALSO OWNING THE HOUSE, THERE WAS NO PROHIBITION IN LAW R ESTRICTING THE ASSESSEE TO TAKEN THE HOUSE ON RENT BY PAYING STAND ARD RENT. CO- EXISTENCE OF THE RELATIONSHIP OF EMPLOYER AND EMPLO YEE AS ALSO OF LANDLORD AND TENANT PARTICULARLY IF THE LATTER ARRA NGEMENT FOR TAKING THE HOUSE AT RENT AS PER STANDARD RENT IS NOT BARRED IF SEPARATE CONTRACTUAL RELATIONSHIP CO-EXIST WITH INDEPENDENT TERMS. IN T HE INSTANT CASE, EVEN THOUGH AS PER THE TERMS OF EMPLOYMENT, CIPLA WAS TO PROVIDE ACCOMMODATION TO THE ASSESSEE, HOWEVER THE FACT THA T ASSESSEE HAS NOT AVAILED THIS BENEFIT BUT OPTED TO RECEIVE HRA AND O FFERED THE SAME FOR TAX IN HIS RETURN OF INCOME IS NOT IN DISPUTE. IT I S ALSO A MATTER OF RECORD THAT THE ASSESSEE WAS GRANTED THE RIGHTS TO PURCHAS E THE PREMISES IN TERMS OF AGREEMENT ENTERED IN THE YEAR 1978 AND THI S ARRANGEMENT DID NOT NEGATE THE AGREEMENT OF TENANCY BETWEEN THE ASS ESSEE AND CIPLA. SINCE THE ASSESSEE WAS NOT AVAILED RENT FREE ACCOMM ODATION, CIPLA WAS PAYING HRA WHICH WAS DULY OFFERED BY THE ASSESSEE I N HIS RETURN OF INCOME. THE QUESTION OF DETERMINING PERQUISITE VALU E FOR PROVISION OF ACCOMMODATION AT CONCESSIONAL RENT, BEING THE EXCES S OF THE SPECIFIED RATE OF SALARY OVER THE RENT RECOVERED FROM THE EMP LOYEE WILL ARISE ONLY WHERE THE RENT IS RECOVERED FROM THE EMPLOYEE AND N OT WHEN THE RENT IS RECEIVED FROM A TENANT UNDER A SEPARATE ENFORCEABL E TENANCY AGREEMENT EVEN IF THE TENANT IS ALSO THE EMPLOYEE OF THE LAND LORD. THE LD. CIT(A) HAS DEALT WITH EACH AND EVERY OBJECTION OF THE A.O. AND AFTER CALLING THE ASSESSES REPLY, SYNOPSIZE THE A.O.S OBJECTION WHI CH ARE AS UNDER:- ITA 5319/M/12 6 AOS FINDINGS CONTENTIONS ON BEHALF OF THE APPELLANT PARA 4.4.2 OF AOS ORDER AN EXAMINATION OF THE AGREEMENT TO SELL THE PROPERTY DATED 23/8/1978 REVEALED THAT THIS AGREEMENT WAS BETWEEN M/S CIPLA LTD. AND THE ASSESSE FOR THE SALE OF THE WINDSOR VILLA TO ASSESSEE FOR A CONSIDERATION OF RS. 8 LAKH PLUS STAMP DUTY AND IS NOT A TENANCY AGREEMENT. THIS AGREEMENT BASICALLY Y SAYS ABOUT THE MANNER IN WHICH THE PAYMENT FOR TRANSFER OF PROPERTY SHALL BE MADE AND THAT THE ASSESSEE SHALL BE BOUND TO PURCHASE THE PROPERTY SUBJECT TO SPECIFIC TERMS AND CONDITIONS MENTIONED THEREIN. THE AGREEMENT IS OF A COMPOSITE NATURE CONTAINING THE COVENANTS OF CONDITIONAL SALE OF PROPERTY AND GRANT OF TENANCY RIGHTS. PARA 3.4.3 OF AOS ORDER FURTHER IT IS NOTICED THAT AS PER THIS AGREEMENT, THE ASSESSEE HAS GOT AN OPPORTUNITY TO STAY IN THIS HOUSE BY VIRTUE OF HIS RELATION WITH THE COMPANY BEING ITS CHAIRMAN AND NOT IN A CAPACITY OF PROTECTED TENANT. THE PERUSAL OF THIS AGREEMENT REVEALS THAT THIS PROPERTY WAS PURCHASED BY M/S CIPLA LTD ESPECIALLY FOR THE RESIDENTIAL USE OF ASSESSEE. THE ASSESSEE WAS ELIGIBLE TO RECEIVE THE BENEFITS OF RENT FREE ACCOMMODATION FROM THE CIPLA LIMITED AS PER THE TERMS OF APPOINTMENT. THERE SHOULD BE NO OBJECTION IF THE ASSESSEE ELECTED TO FORGO THIS BENEFIT. THERE IS NO PROHIBITION IN LAW FOR CO-EXISTENCE OF RELATIONSHIP OF EMPLOYER AND EMPLOYEE AS ALSO OF LANDLORD AND TENANT PARTICULARLY IF THE LATTER ARRANGEMENT IS ON ARMS LENGTH BASIS ON CONSIDERATION OF PAYMENT OF STANDARD RENT. PARA 3.4.4. OF AOS ORDER THE RENT ACT IN MAHARASHTRA WAS EARLIER GOVERNED BY THE BOMBAY RENT ACT, 1947 WHICH HAS NOW BEEN REPLACED BY MAHARASHTRA RENT CONTROL ACT, 1999. SECTION 55, OF THE MAHARASHTRA RENT CONTROL ACT 1999 DEALS WITH THE REGISTRATION OF TENANCY AGREEMENTS AND SAYS THAT ALL THE TENANCY AGREEMENTS AFTER COMMENCEMENT OF THIS ACT MUST BE COMPULSORILY REGISTERED. SINCE THE AGREEMENT ENTERED INTO BY THE APPELLANT WITH M/S CIPLA LTD. OR FOR THAT MATTER, TENANCY IN FAVOUR OF APPELLANT WAS CREATED PRIOR TO COMMENCEMENT OF THIS ACT, SEC. 55 DOES NOT APPLY TO THE FACTS OF THE PRESENT CASE. MOREOVER, THERE WAS NO PROVISION UNDER 1947 ACT, IDENTICAL TO SEC. 55 OF MRCS, 1999. PARA 3.4.4. OF AOS ORDER THE ABSENCE OF ANY WRITTEN TENANCY AGREEMENT BETWEEN A 1 1/S. CIPLA LTD., AND ASSESSEE SHOWS THAT THE PROPERTY WAS RENTED TO ASSESSEE ONLY BY VIRTUE OF EMPLOYER-EMPLOYEE RELATION WITH M/S. CIPLA LTD. EVEN I F WE CONSIDER THE OTHER ARGUMENT OF ASSESSEE THAT IN ABSENCE OF ANY WRITTEN AGREEMENT AND ON THE BASIS OF ORAL AGREEMENT THE ASSESSEE AUTOMATICALLY ASSUMES TENANCY IS ALSO NOT CORRECT BECAUSE THE ASSESSEE HAS BEEN THE EMPLOYER-EMPLOYEE RELATIONSHIP IS NOT AT ALL DENIED SINCE IF THE FACT ON RECORD. THE REAL ISSUE IS WHETHER ANY UNACCEPTABLE MOTIVE C O U L D B E A S C R I B E D T O T H E ARRANGEMENT. IN THIS BEHALF, THE ONLY GRAVAMEN OF THE AO IS THAT A PRIME PROPERTY WAS GIVEN ON A NOMINAL RENT. HOWEVER, WHILE LEVELING THIS ALLEGATION, THE AO HAS NOT CONSIDERED THAT STANDARD RENT CANNOT BE HELD TO BE NOMINAL RENT WHEN THE VERY SAME MEASURE IS ALSO ITA 5319/M/12 7 ABLE TO TAKE SUCH LIBERTY SIMPLY BECAUSE OF HIS RELATION AS AN EMPLOYEE WITH THE OWNER. OTHERWISE IT IS HIGHLY UNLIKELY THAT SUCH A PRIME PROPERTY WILL BE GIVEN TO A THIRD PERSON WITHOUT AGREEMENT IN WRITING AT SUCH A NOMINAL RENT WHICH IS OTHERWISE REQUIRED TO BE REGISTERED AS PER LAW. APPLICABLE FOR DETERMINATION OF MUNICIPAL RATEABLE VALUE AND FURTHER, THE ATTRIBUTE OF PRIMENESS TO THE PROPERTY BY THE AO, BASED ON PRESENT SITUATION, THAT WAS TENANTED WAY BACK IN THE YEAR 1978 IS BOTH UNFAIR AND UNREALISTIC. PARA 3.4.4 OF AO'S ORDER IN FACT THE AGREEMENT TO SELL DATED 2310811978 ON WHICH THE ASSESSEE IS HARPING, ACTUALLY PROVIDES FOR A TEMPORARY OR INTERMEDIATE ARRANGEMENT OF STAY OF ASSESSEE IN THE PROPERTY TILL THE CONDITIONS IN THE AGREEMENT ARE NOT COMPLETED. IT DOES NOT GIVE THE ASSESSEE A RIGHT AS A TENANT AND IN FACT IS ONLY A STANDBY ARRANGEMENT. IT IS ONLY BECAUSE OF THE AUTHORITY AND RELATION THAT THE ASSESSEE ENJOYS WITH HIS EMPLOYER THAT DESPITE OF THE SPECIFIC AGREEMENT THE SAME HAS NOT BEEN PURCHASED BY HIM EVEN AFTER THE LAPSE OF MORE THAN 32 YEARS. IT WOULD NOT HAVE BEEN POSSIBLE FOR ANY OTHER PERSON BUT THE CHAIRMAN OF THE EMPLOYER COMPANY TO ENTER IN AN AGREEMENT AND NOT COMPLETE IT ON HIS WILL. HAD THERE BEEN ANY OTHER PERSON STAYING IN THIS PROPERTY AT SUCH A NOMINAL RENT THE OWNER WOULD HAVE DEFINITELY MADE EFFORTS TO EVICT HIM. NO SUCH EFFORT WAS MADE OR EVEN CONTEMPLATED BY THE OWNER OF THE PROPERTY MIS. CIPLA LTD., JUST BECAUSE ITS CHAIRMAN IS STAYING THERE. THEREFORE, IT IS CLEAR THAT M/S. CIPLA LTD., WAS UNDER NO OBLIGATION TO OUT THIS PROPERTY TO THE ASSESSEE AT A NOMINAL RENT OF RS. 1670 P.M. AND HAS DONE SO ONL Y BECAUSE OF THE EXISTENCE OF EMPLOYER- EMPLOYEE RELATION. THIS ESTABLISHES BEYOND DOUBT THAT ASSESSEE WAS STAYING IN THE CAPACITY OF HIS POSITION IN THE COMPANY AS AN EMPLOYEE AND NOT AS A PROTECTED TENANT. WE ARE UNABLE TO APPRECIATE AS TO HOW A STANDBY ARRANGEMENT OF OCCUPANCY CANNOT BE CONSISTENT WITH THE AGREEMENT OF TENANCY. THERE IS NO LEGAL BASIS FOR THIS VIEW. FURTHER, CIPLA HAS NO LEGAL GROUNDS FOR TERMINATING THE TENANCY. EVEN IF CIPLA HAS DILUTED ITS RIGHTS FOR EVICTION AFTER THE TERMINATION OF EMPLOYMENT OF THE ASSESSEE, THE BENEFITS, IF AT ALL, HAVE ACCRUED TO THE ASSESSEE WHEN THE RIGHTS OF PURCHASE OF THE PREMISES WERE GRANTED TO THE ASSESSEE IN THE YEAR 1978. THIS ARRANGEMENT DOES NOT NEGATE THE AGREEMENT OF TENANCY BETWEEN THE ASSESSEE AND CIPLA. PARA 3.5 OF THE ORDER AS PER SECTION 2(24(IV) OF THE I.T. ACT, INCOME INCLUDES THE VALUE OF ONLY BENEFT OR PERQUISITE WHETHER CONVERTIBLE INTO MONEY OR NOT, OBTAINED FROM A COMPANY EITHER BY A DIRECTOR OR BY A PERSON WHO HAS SUBSTANTIAL INTEREST N THE COMPANY, BY THE VERY FACT THAT THE ASSESSEE HAS PAID STANDARD RENT TO CIPLA, IT CANNOT BE HELD THAT THE ASSESSEE HAS OBTAINED ANY BENEFIT WHCH ITA 5319/M/12 8 OR BY A RELATIVE OF DIRECTOR OR SUCH PERSON, AND ANY SUM PAID BY ANY SUCH COMPANY IN RESPECT OF ANY OBLIGATION WHICH, BUT FOR SUCH PAYMENT, WOULD HAVE BEEN PAYABLE BY DIRECTOR OR OTHER PERSON AFORESAID. THEREFORE, THE USE OF ACCOMMODATIONOWNED BY THE EMPLOYER AT A CONCESSIONAL RENT SHALL BE CHARGEABLE TO TAX ASPERQUISITE WITHIN THE MEANING OF SECTION 17(2)(II) OF THE I.T. ACT. COULD BE CONSIDERED AS INCOME UNDER SECTION 2(24)(IV) OF THE ACT. PARA 3.6 OF THE ORDER THE ASSESSEE INSTEAD OF PURCHASING THE PROPERTY (AS AGREED IN THE AGREMENT TO SALE DATED 23/08/1978) HAD PREFERRED TO STAY IN IT BY PAYING RENT. HAD THIS PROPERTY BEENPURCHASED IN THE NAME OF ASSESSEE THEN HE WOULD HAVE BEEN LIABLE TO PAY TAXES ON IT UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS HE IS THE OWNER OF MORE THAN ONE RSIDENTAIL PROPERTY. THE ASSESSEE HAS OCCUPIED THS HOUSE OSTENSIBLY FOR THE PURPOSE OF HIS RESIDENCE THROUGH THE CONMVENIENT MEDIUM OF HIS EMPLOYER COMPANY,. THERFORE, IT IS EVIDENT THAT IN THE GARDB OF THE TENANCY RIGHT, THE ASSESSEEHAS CONCEALED THE ACTUAKL BENEFIT ARISING BY USING THE CAPTIONED PROPERTY AS HIS RESIDENCE IN HS CAPACITY OF THE CHAIRMAN AND MANAGING DIRECTOR. THE ASSESSEE HAS NOT DERIVED ANY BENEFIT ACTUAL OR NOTIONAL SINCE HE HAS PAID STANDARD RENT TO CIPLA. PARA 4.1 OF THE ORDER THE VALUE OF ANY CONCESSION IN THE MATTER OF RENT N RESPECT OF ANY ACCOMMODATION PROVIDED TO THE ASSESSEE BY HIS EMPLOYER IS TAXABLE AS PER THE PROVISIONS OF SECTION 1792)(II) OF THE IT ACT. IT HAS BEENHELD N WILKINS V ROGERSON (49 ITR 395(CA) THAT PERQUISITED ARE VALUED ON THE BASIS OF THEIR VALUE TO THE EMPLOYEE AND NOT ON THE BASS OF COST TO THE EMPLOYER FOR PROVIDING SUCH BENEFIT. AN EMPLOYER MAY OWN RESIDENTIAL ACCOMMODATION AND PROVIDE IT AT A CONCESSIONAL RENT TO HIS EMPLOYEE. `THE QUESTION OF DETERMINING PERQUISITE VALUE FOR PROVISION OF ACCOMMODATION AT CONCESSIONAL RENT BEING THE EXCESS OF THE SPECIFIED RATE OF SALARY OVER THE RENT RECOVERED FROM THE EMPLOYEE, WILL ARISE ONLY WHERE THE RENT IS RECOVERED FROM THE EMPLOYEE AND NOT WHEN THE RENT IS RECEIVED FROM A TENANT UNDER AN ENFORCEABLE TENANCY AGREEMENT EVER IF THE TENANT IS ALSO THE EMPLOYEE OF THE LAND LORD. 5. AFTER CONSIDERING THE ASSESSEES REPLY WITH RESP ECT TO EACH AND EVERY ASPECT, THE LD. CIT(A) RECORDED HIS FINDINGS THAT THE ASSESSEE WAS OCCUPYING HOUSE AS PER THE INDEPENDENT RENT AGREEME NT FOR WHICH THE ITA 5319/M/12 9 ASSESSEE WAS PAYING STANDARD RENT AND NO BENEFIT AC CRUED TO THE ASSESSEE IN HIS CAPACITY OF EMPLOYEE, WHEN THE ASSE SSEE WAS INDEPENDENTLY RECEIVING THE HRA FROM HIS EMPLOYER F OR NOT PROVIDING THE ACCOMMODATION. THE FINDINGS RECORDED BY THE LD. CIT (A) ARE AS PER THE MATERIAL AVAILABLE ON RECORD WHICH HAS NOT BEEN CON TROVERTED BY THE DEPARTMENT. THE CONCLUSION DRAWN IN THE IMPUGNED OR DER OF THE LD. CIT(A), DISCUSSION MADE IN THE ASSESSMENT ORDER, CO NTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE & REVENUE, AND MATERIAL AV AILABLE ON RECORD ARE KEPT IN JUSTAPOSITION AND ANALYSES, WE FIND THA T NO BENEFIT ACCRUED TO IN THE HANDS OF THE ASSESSEE IN THE FORM OF PERQ UISITE. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDIN GS RECORDED BY THE LD. CIT(A) WHICH RESULTED INTO THE DELETION OF ADDITION MADE ON ACCOUNT OF PERQUISITE IN THE HANDS OF THE ASSESSEE. 6 . IN THE RESULT, APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COU RT ON 21 ST JANUARY, 2015 !' # $% &! ' 21-01-2015 ( ) SD/- SD/ - (SANJAY GARG) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER $ 5 MUMBAI ; &! DATED 21-01-2015 [ ITA 5319/M/12 10 .6../ RK , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 7 () / THE CIT(A) 36,, MUMBAI 4. 7 / CIT CENTRAL 1, MUMBAI 5. :;( 66<= , <= , $ 5 / DR, ITAT, MUMBAI F BENCH 6. (?@ A / GUARD FILE. ' / BY ORDER, : 6 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 5 / ITAT, MUMBAI