1991 (4) TMI 99 - HC - Income Tax

High Court: Accommodation for Employees = Perquisite under Income-tax Act

The High Court of Bombay held that providing accommodation to an employee constitutes a perquisite under section 40A(5) of the Income-tax Act, 1961. The ... Business Expenditure, Disallowance, Gratuity, Perquisite Issues:1. Provision of accommodation as a perquisite under section 40A(5) of the Income-tax Act, 1961.2. Evaluation of the perquisite value under section 40A(5) for accommodation provided.3. Determination of house rent allowance, conveyance allowance, and medical charges reimbursement as perquisites under section 40A(5).4. Allowability of gratuity liability as a deduction for the assessment year 1973-74.Analysis:The High Court of Bombay addressed various issues in this judgment. Firstly, concerning the provision of accommodation as a perquisite, it was acknowledged that providing accommodation to an employee constitutes a perquisite under Explanation 2(b)(ii) to section 40A(5) of the Income-tax Act, 1961. The court emphasized that the evaluation of the perquisite value should align with the provisions of section 40A(5), emphasizing actual expenditure incurred by the assessee and depreciation allowed in respect of the asset used by the employee. The court agreed with the argument presented by the counsel for the assessee in this regard, highlighting the specific language of section 40A(5) to determine the value of the perquisite accurately.Secondly, the judgment delved into the issue of whether certain allowances and reimbursements qualified as perquisites under section 40A(5). Referring to a previous court judgment, the court concluded that the house rent allowance, conveyance allowance, and medical charges reimbursement to employees did not constitute perquisites for the purposes of section 40A(5) of the Income-tax Act, 1961.Thirdly, the court examined the allowability of gratuity liability as a deduction for the assessment year 1973-74. The court noted that this issue was previously addressed in a Supreme Court decision and a specific case judgment. After reframing the question based on the facts of the case, the court answered in the affirmative, stating that the gratuity liability amount was an allowable deduction. However, the court emphasized that the Tribunal must consider any new provisions applicable in the year under reference while giving effect to the court's order.Overall, the judgment provided detailed analysis and interpretations of the relevant provisions of the Income-tax Act, 1961, to determine the treatment of various allowances, reimbursements, and liabilities for the assessment year 1973-74.