The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) recently held that the interest-free or concessional loan from employer are 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.
Interest-free or concessional loans are free of tax if provided for medical treatment if specified diseases, provided no reimbursement was made under a medical insurance scheme. It is also tax-free if the amount of loan provided to the employee is less than Rs 20,000 a year.
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.
Confirming the orders of the lower authorities, the division bench of the Tribunal held that “Although the AO has determined value of perquisite as per the provisions of section 17(iii)(c), while calculating the value of perquisite he has adopted adhoc 15% on outstanding loan amount instead of determining the value as per the prescribed rule provided under rule 3(7)(i) of IT Rules, 1962. The Ld. CIT(A) has determined the value of perquisites as per rule 3(7)(i) for Rs.20,64,938/- and allowed partial relief to the assessee. Facts remain unchanged. The assessee did not appear before us to controvert the findings of facts recorded by the Ld. CIT(A). Therefore, we are of the considered view that the Ld. CIT(A) was right in determining the value of perquisite as per rule 3(7)(i) and hence we are inclined to uphold the findings of Ld. CIT(A) and dismiss the appeal filed by the assessee.”