TaxTMI 
TaxTMI 
1987 (10) TMI 10
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.... employees could be treated as perquisite for the purpose of section 40A(5) of the Income-tax Act ? 2. Whether, on the facts and in the circumstances of the case, the buildings owned by the assessee and allowed to be occupied by some highly-paid employees could be treated as the business assets of the assessee for the purpose of section 40A(5) ? 3. Whether, on the facts and in the circumstances of the case, the expenditure incurred for replacement of crockery used by the employees in the buildings allotted to them could be treated as a separate perquisite for the purpose of computing the disallowance under section 40A(5) ? 4. Whether, on the facts and in the circumstances of the case, the reimbursement of medical expenses did not c....
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...., 5 and 6 alone survive for our consideration. Among these three questions, again questions Nos. 2 and 6 go together. We have to answer question No. 6 first and the answer to question No. 2 will follow as a consequence. We shall, therefore, first take up question No. 6. The assessee owns certain buildings which it allots for the occupation of its directors and other senior executives. It does not collect any rent from them. They are given free of rent. The Income-tax Officer felt that the notional income from these properties should be determined and included in the income of the assessee under the head " Income from property ". The assessee's contention, however, was that these buildings are business assets of the company and are being ....
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....tion by the assessee for the purpose of section 22 of the Act. It must also be said that the occupation by its employees is for the purpose of the assessee's business. With a view to illustrate the proposition, we may take a slightly different example. Take a case where an assessee builds a number of houses or a colony for the purpose of accommodating its workers. The idea is that the workers should be nearer to the factory or should be housed in hygienic and proper conditions so as to improve their productivity, health and their commitment to the employer. No rent is collected from such workers, though, according to the terms of employment, the assessee is under no obligation to provide such houses. It is done only with a view to keep t....
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....9% per annum. The Department says that the difference between the concessional rate of interest and the prevailing market rate of interest should be disallowed under section 40A(5) of the Act. On this question too, the Tribunal, following its earlier decision, held in favour of the assessee. This question has to be answered with reference to the language employed in sub-section (5) of section 40A of the Act. In so far as it is relevant, the provision reads thus: "40A.(5)(a) Where the assessee (i) incurs any expenditure which results directly or indirectly in the payment of any salary to an employee or a former employee, or (ii) incurs any expenditure which results directly or indirectly in the provision of any perquisite (whether conv....