Employer-provided accommodation is a taxable perquisite valued under income-tax rules, not the Delhi Rent Control Act.

Employer-provided residential accommodation given as part of service conditions was treated as a service occupation, not a tenancy; the employee was therefore only a licensee and the Delhi Rent Control Act, 1958 did not govern the occupation. For income-tax purposes, the accommodation constituted a concessional perquisite under section 17(2) of the Income-tax Act, 1961, and its value had to be computed under rule 3 of the Income-tax Rules, 1962. The Rent Act standard of rent was not imported into perquisite valuation, and the references were answered in favour of the revenue.

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Issues: (i) Whether accommodation provided by an employer to an employee in the circumstances of service occupation was governed by the Delhi Rent Control Act, 1958, or whether the employee was merely a licensee. (ii) Whether the value of the accommodation for income-tax purposes had to be determined under section 17(2) of the Income-tax Act, 1961 read with rule 3 of the Income-tax Rules, 1962, without regard to the Delhi Rent Control Act.

Issue (i): Whether accommodation provided by an employer to an employee in the circumstances of service occupation was governed by the Delhi Rent Control Act, 1958, or whether the employee was merely a licensee.

Analysis: The occupation arose from the contract of service and was intended to enable the employee to perform his duties more effectively. The surrounding circumstances showed no creation of a tenancy or any interest in the premises in favour of the employee. The accommodation was supplied by the employer as part of service conditions, with nominal rent and ancillary facilities, which was consistent with a service occupation and not with a landlord-tenant relationship. In such a case the Rent Act provisions governing standard rent and eviction did not apply.

Conclusion: The employee was a licensee in service occupation, not a tenant protected by the Delhi Rent Control Act, 1958.

Issue (ii): Whether the value of the accommodation for income-tax purposes had to be determined under section 17(2) of the Income-tax Act, 1961 read with rule 3 of the Income-tax Rules, 1962, without regard to the Delhi Rent Control Act.

Analysis: Section 17(2) treats the value of accommodation provided by an employer at concessional rent as a taxable perquisite, and rule 3 provides the method of computation. Once the accommodation is found to be provided as a concessional service benefit, the income-tax provisions supply their own measure for valuation. The Rent Act does not supply the governing standard for perquisite valuation in such a case.

Conclusion: The value of the residential accommodation was correctly determined under section 17(2) of the Income-tax Act, 1961 read with rule 3 of the Income-tax Rules, 1962, and the Tribunal was right in disregarding the Delhi Rent Control Act.

Final Conclusion: The references were answered against the assessee and in favour of the revenue on both the tenancy issue and the valuation of the perquisite.

Ratio Decidendi: Where residential accommodation is provided by an employer to an employee as part of service occupation and the employee has no tenancy interest, the accommodation is a taxable perquisite under section 17(2) of the Income-tax Act, 1961, to be valued by the income-tax rules without importing the Rent Act standard of rent.

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