Tribunal upholds rent assessment as income; directs recalculation of rent-free accommodation valuation

The Tribunal upheld the AAC's decision to assess the rent from the property as income from property and the perquisite value of rent-free accommodation under IT Rules. It acknowledged the property ownership by the assessee despite rental through M/s. Escorts Ltd. However, the Tribunal found an error in the valuation of the rent-free accommodation, directing the ITO to recalculate it in accordance with a specific CBDT Circular. The appeal was partly allowed due to the Tribunal's decision on the valuation method for the rent-free accommodation.

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Issues:
Assessment of income from house property and rent-free unfurnished accommodation.

Analysis:
The appeal pertains to the assessment of income for the assessment year 1976-77, involving a senior employee of M/s. Escorts Ltd. The primary dispute revolves around the income derived from a property rented by M/s. Escorts Ltd. from the wife of the assessee. The Income Tax Officer (ITO) treated the rent received by the wife as actually received by the assessee, resulting in an addition to the assessee's income. The assessee appealed to the Appellate Assistant Commissioner (AAC), who determined that the assessee should be considered in receipt of rent-free accommodation and added the perquisite value according to IT Rules, 1962. The AAC directed the ITO to recompute the income accordingly.

The assessee contended that the AAC erred in taxing the same income under two heads and that the valuation of the rent-free accommodation was not done in accordance with a specific CBDT Circular. The Department argued that the rent received should be assessed as income from property due to the wife being a benamidar and that the perquisite provided by the employer should be assessed under IT Rules, 1962.

Upon review, the Tribunal found no legal infirmity in the AAC's order, stating that the rent from the property should be assessed as income from property and the perquisite value received by the assessee as an employee under IT Rules. It was acknowledged that the property belonged to the assessee, even though it was rented through M/s. Escorts Ltd. The Tribunal concurred with the AAC's computation of property income.

Regarding the valuation of the rent-free accommodation, the Tribunal noted an error by the AAC in not following a specific CBDT Circular. The Circular stipulated a different method for valuation, which the AAC did not adhere to. The Tribunal directed the ITO to recompute the value of the rent-free accommodation in line with the Circular, emphasizing the binding nature of CBDT Circulars on the assessing authorities. Consequently, the appeal was partly allowed.

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