Top Stories Complete Case Digest On Perquisites By Ipsita Das – On June 15, 2023 11:00 am – 6 mins read A perquisite is a non-cash benefit granted by an employer to the employee. Under the Income Tax Act, 1961, a perquisite is defined as a benefit which an employee avails of or is entitled to on account of the employee’s job or position in the enterprise.

Perquisites are extra benefits in addition to the normal salaries provided to the employees. These may be provided free of cost or at concessional rates to the employees. Some examples of perquisites are rent-free accommodation, provision of a motor car for personal use, use of health club, refreshment during office hours, etc. M/S CHARTERED HOUSING PVT LTD. VS THE DEPUTY COMMISSIONER OF INCOME-TAX CITATION:   2022 TAXSCAN (ITAT) 163 The Income Tax Appellate Tribunal (ITAT), Bangalore’s two-member bench, has ruled that the money collected for the corpus fund cannot be considered perquisites under Section 28 of the Income Tax Act of 1961. The Tribunal bench comprising Shri Chandra Poojari, Accountant Member and Smt. Beena Pillai, Judicial Member observed that the amount collected towards corpus fund was lying with assessee and it is not perquisites in the hands of the assesses as to apply the provisions of section 28(iv) of the Income Tax Act. “There is no cessation of liability and it is shown as outstanding liability in the books of account. Being so, the CIT(Appeals) rightly deleted the same. We do not find any infirmity in his order and the same is confirmed. The revenue’s appeal is dismissed,” the Tribunal said. M/S. TCG LIFESCIENCES PVT. LTD V. INCOME TAX OFFICER  CITATION: 2018 TAXSCAN (ITAT) 151 In this case, the Kolkata branch of the Income Tax Appellate Tribunal (ITAT) ruled that the reimbursement of car running and maintenance costs paid to employees would constitute perquisites for which the employer is required to withhold tax at source (TDS) in accordance with the Income Tax Act, 1961. It was therefore, held that “the value of perquisite provided by the assessee company to its employees in the form of reimbursement of car running and maintenance charges was chargeable to tax in their hands and the assessee was liable to deduct tax at source from the said value.” SHRI ALTAF HUSSAIN LASKAR VS DEPUTY COMMISSIONER OF INCOME TAX CITATION: 2023 TAXSCAN(ITAT)293 The Income Tax Appellate Tribunal (ITAT) Kolkata bench has ruled in virtual mode that genuine errors in income tax returns filed without the help of a tax professional are not subject to a penalty. It was observed that the assessee made a few errors when calculating the income at first, causing some exempt income to be listed as taxable income and certain perquisites to be claimed as exempt in the updated form. Later, it omitted this from the revised return, but did so in error by also excluding the perquisite’s value in terms of LIC maturity amount, i.e., not taxable.

A Coram comprising of Shri Rajpal Yadav, Vice-President & Dr Manish Borad, Accountant Member observed that the assessee might have not filed the return with the assistance of the Tax Consultant. Later he explained his position and corrected the figure before completing of the assessment proceedings. While allowing the appeal, the Tribunal held that the assessee can’t be penalized and deleted the penalty. IN RE: M/S YAADVI SCIENTIFIC SOLUTIONS PRIVATE LIMITED CITATION:2022 TAXSCAN (AAR) 287 The Karnataka Authority of Advance Ruling (ARR), ruled that the reimbursement of expenses at actual cost which are incurred by the employees on behalf of the company is not taxable under Goods and Services Tax Act, 2017 since it comes under the ambit of Schedule III of Central Goods and Services Tax Act. With the help of the circulars and an understanding of the term “expenses paid” on various heads, the bench came to the conclusion that Reverse Charge Mechanism (RCM) is not applicable to the expenses paid by the whole-time director on behalf of the company who is also an employee of the company and falls under the ambit of Schedule III of the Goods and Services Tax Act. According to the authority members all of the director’s activities are carried out in the context of an employer-employee relationship (i.e., a “contract of service”) and that reimbursement of expenses is not considered to be part of salaries or perquisites and is not subject to TDS under section 194J of the Income Tax Act of 1961. M/S. HEWLETT PACKARD (INDIA) SOFTWARE OPERATION PVT. LTD VS DEPUTY COMMISSIONER OF INCOME-TAX CITATION: 2022 TAXSCAN (ITAT) 1702 While granting relief to M/s. Hewlett Packard (India) Software Operation Pvt Ltd (HP) the Bangalore Bench of the Income Tax Appellate Tribunal (ITAT), held that Employee Stock Option Plan (ESOP) paid to Overseas Ultimate Holding Company are allowable as expenditure. A Bench consisting of N V Vasudevan, Vice President and Chandra Poojari, Accountant Member observed that “The ESOP expenditure incurred is a compensation/incentive to the employee and has direct nexus with his/her employment. Such compensation to the employees in the form of ESOP is included in salary of the employees under Section 17 of the Income Tax Act, 1961. Therefore, such expenses are incurred for the purposes of business and hence allowable expenditure under section 37 of the Income Tax Act in the hands of the employer i.e. the Company.”

EIT SERVICES INDIA PVT. LTD VS DEPUTY COMMISSIONER OF INCOME-TAX CITATION: 2022 TAXSCAN (ITAT) 1366 The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) held that a discount on Employee Stock Option Plan (ESOP) amounts to expense and deduction under section 37 of the Income Tax Act,1961 is allowable. A Coram of Shri Chandra Poojari, AM and Smt. Beena Pillai, J M observed that the Company has deducted appropriate TDS under section 192 of the Act in respect of share-based compensation under ESOP schemes, which have been taxed in the hands of employees as ‘perquisites’ under section 17 of the Act. It was evident that the expression “expenditure” also includes a loss and therefore, issuance of shares at a discount where the assessee absorbs the difference between the price at which they are issued and the market value of the shares would be expenditure incurred for section 37(1) of Income Tax Act. SUSMITA SEN V. ASSISTANCE COMMISSIONER OF INCOME TAX   CITATION: 2018 TAXSCAN (ITAT)152 The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has deleted an addition made by the department against Sushmita Sen, Bollywood actress and former Miss India Universe in respect of the amount received by her from Coca Cola Company in connection with settlement of a sexual harassment case filed against one of the employees of the Company. “The compensation could not be termed as any benefit, perquisites arising to the assessee out of the exercise of profession,” the Tribunal said. MS NEHA SARAF V ACIT CITATION: 2018 TAXSCAN (ITAT) 153 The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) recently held that the interest-free or concessional loan from employer is taxable as perquisite in the hands of the employee under the Income Tax Act. Assessee, Neha Saraf has taken interest free unsecured loan from her employer, Teej Impex, a private company. While completing Assessment for the relevant year, the Assessing Officer held that such loan can be treated as perquisite and therefore, levied income tax. On appeal, the commissioner of Income Tax (Appeals) held that the assessing officer had rightly treated the value of the interest-free loan as a taxable perquisite in the hands of the employee, and dismissed the appeal of the assessee. GAURAV SEKSARIA V. ITO, CITATION: 2020 TAXSCAN (ITAT) 147 The Kolkata bench of the ITAT observed that reimbursement of credit card payments incurred by the Director on behalf of the Company to meet the business expenditure during his foreign visits cannot be taxable as ‘perquisites’ under the provisions of the Income Tax Act, 1961. The bench observed that there cannot be any element of perquisite to be taxed in the hands of the assessee employee. IN ITO V. RAGHU NANDAN MODI CITATION: 2017 TAXSCAN (ITAT) 145 The ITAT bench of Kolkata held that rent-Free accommodation received by a Part Time-Director cum Employee from the Company cannot be taxable as “Business Income” under the provisions of Income Tax Act. The bench noted that as the assessee was not drawing any salary from POL then in our considered view the perquisites cannot be determined in terms of the provision of Section 17(2) read with rules 3 of the Income Tax Rules, 1962. The bench also noted that “the provisions of Sec. 28(iv) of the Income Tax Act are attracted if the benefit of perquisites is arising to the assessee from the business or exercise of the profession. As there is no dispute that there was existing employees and employer relationship between assessee and POL then there is no question of attracting the benefit or perquisites as define under Section 28(iv) of the Income Tax Act.” ALL INDIA BANK OFFICER’S CONFEDERATION v. UOI   CITATION: 2023 TAXSCAN (SC) 103 The Supreme Court recently, sought response from the finance ministry, the Central Board of Direct Taxes (CBDT) and others on a plea challenging the Fringe Benefit Tax provisions of the Income Tax Act that empowers authorities to prescribe value of any additional income (fringe benefit or amenity/perquisites) to the bank employees for income tax purpose.:  They contended that the Parliament ought not to have given to the executive the right to prescribe the value of “perquisites” without any restrictions. According to them, such fiscal liability can only be fixed by a competent legislature under the statute and no such tax or fiscal liability can be imposed by Rules/subordinate legislation. L.SIVARAMAKRISHNAN V. THE DEPUTY DIRECTOR CITATION: 2020 TAXSCAN (HC) 277 The Madras High Court while quashing proceedings under Prevention of Money Laundering Act held that the property purchased from salaries and perquisites paid during employment would not be proceeds of crime. The court disagreed with the observation of the Enforcement Directorate that the salaries and perquisites that were paid to Sivaramakrishnan while he was in employment with FLCI would amount to proceeds of crime and any property purchased with that would stand tainted