COMMISSIONER OF INCOME-TAX VS D.S. BLACKWOOD
1991 P T D 230
[Calcutta High Court (India)]
Before Ajit K Sengupta and J.N. Hore, JJ
COMMISSIONER OF INCOME-TAX
versus
D.S. BLACKWOOD
Income-tax Reference No. 346 of 1982, decided on 22/12/1988.
Income-tax--
----Perquisite---Assessee, employee of foreign company, deputed to supervise erection work in the country ---Assessee provided with rent-free accommodation- Accommodation provided for discharge of official duty---Provision of rent-free accommodation is not a perquisite and thus exempt from tax.
The assessee, an employee of a foreign company, who was deputed to supervise certain erection work in India, was provided with rent-free accommodation during his stay in India. The Income-tax Officer held that the rent-free accommodation provided by the foreign company to the assessee was in the nature of a perquisite and added a certain sum as perquisite under rule 3 of the Indian Income-tax Rules, 1962. The Commissioner (Appeals) deleted the addition on the ground that the assessee was on tour to India and the benefit of the rent-free accommodation was exempt under section 10(14) of the Indian Income-tax Act, 1961. The Tribunal upheld the view taken by the Commissioner (Appeals). On a reference:
Held, that the Tribunal had found as a fact that the rent-free accommodation was provided by the foreign company to the assessee necessarily for the discharge of his official duty for which he was sent to India. The assessee was not occupying the rent-free accommodation by virtue f his posting as an employee of the foreign company. Therefore, the expenditure incurred in providing the rent-free accommodation must be held to be wholly and exclusively incurred for the purpose of performing the official duties and could not be- treated as a perquisite and was exempt from Income-tax.
R.C. Prasad for the Commissioner.
R.N. Dutta for the Assessee.
JUDGMENT
AJIT K. SENGUPTA, J: --The assessee is a permanent employee of John Brown Engineering (Clyde Bank) Ltd., Scotland, UK The said concern was entrusted with the work under an agreement with the West Bengal State Electricity Board for erection of gas turbines at Kasba (Calcutta), Siliguri and Haldia. In connection with the aforesaid work, the UK firm deputed the assessee-engineer to India, from time to time, to supervise the erection work. While staying in India the assessee was provided with rent-free accommodation. The Income-tax Officer was of the opinion that the rent-free accommodation provided by the foreign company was in the nature of a perquisite. He, therefore, added a sum of Rs. 40,111 as perquisite under rule 3 of the Income-tax Rules, 1962. When the matter went up in appeal before the Commissioner of Income-tax (Appeals), he deleted the addition of Rs. 40,111 on the ground that the assessee was on tour to India and the benefit of rent-free accommodation was exempt under section 10(14) of the Income-tax Act, 1961. The Revenue preferred an appeal before the Tribunal and there was a difference of opinion and ultimately by a majority decision the Tribunal upheld the view taken by the Commissioner of Income-tax (Appeals). On those facts, the Tribunal has referred the following question under section 256(1) of the Income-tax Act, 1961, for the assessment year 1979-80:
"Whether, on- the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the rent-free accommodation provided to the assessee by his employer was exempt under section 10(14) of the Income-tax Act?"
Section 10(14) of the Income-tax Act, 1961, provides that in computing the total income of a person, any special allowance or benefit, not being in the nature of entertainment allowance or other perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, to the extent to which such expenses are actually incurred for that purpose, shall not be included.
Here, the assessee was provided with rent-free accommodation by his employer while he was on tour in India. It has been found by the Tribunal as a fact that the rent-free accommodation was provided by the foreign company to the assessee necessarily for the discharge of his official duty for which he was sent to India. He visited India several times between May, 1977, and March, 1980. The assessee was not occupying the rent-free accommodation by virtue of his posting as an employee of the foreign company in Calcutta. It is in connection with his official duty for the purpose of supervising the erection of gas turbines at Calcutta, Siliguri and Haldia that the assessee had to visit these places. Such visits are in connection with his official duty. In the premises, the expenditure which has been incurred must be held to be wholly and exclusively incurred for the purpose of performing his official duties. This expenditure, on these facts, cannot be treated as a benefit given to the assessee.
For the reasons aforesaid, we are of the view that the Tribunal came to the correct conclusion and the question referred in this reference must be answered in the affirmative and in favour of the assessee.
There will be no order as to costs.
Leave is given to Orr. Dignam & Co. to file the vakalatnama within two weeks after the Christmas vacation.
J.N. Hore, J.--I agree.
Z.S./759/TOrder accordingly.