In a recent ruling of Income Tax Appellate Tribunal (ITAT) Mumbai has held that Income Tax cannot be levied from Assessee for the notional interest on the security deposit paid by the employer for the free accommodation for the employee to the Flat owner.
The assessee, an employee of the Kotak Investment Advisors Ltd., having income from salary and other sources, filed his return of income for A.Y. 2010-11 on 28.07.2010 declaring income of `1,90,66,894. The case was taken up for scrutiny and the assessment was concluded under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’)`vide order dated 28.02.2013, wherein the income of the assessee was determined at `1,93,06,890/-. This was in view of the addition of `2,40,000/- made by the AO on the grounds that the notional interest on a deposit of `20,00,000/- given by his employer to the landlord for accommodation provided by the employer to the assessee is to be considered as a prerequisite.
The contention of the assessee is that notional interest on a deposit of `20,00,000/- given by the employer for securing the rented premises for the assessee is not to be treated as a prerequisite.
The ITAT Mumbai bench comprising of Judicial member Sandeep Gosain and Accountant Member Jason P. Boaz observed that “the contention of the authorities below that notional interest on the deposit of `20,00,000/- paid by the employer to the landlord for securing accommodation while computing the perquisite value of the residential accommodation is to be included in the assessee’s income is not sustainable in view of the express words used in Rule 3 of the I.T. Rules, 1962 as amended w.e.f. 01.04.2001 and accordingly direct the AO to delete the addition of `2,40,000/- made in this regard. Consequently, the assessee’s ground of appeal is allowed”.
Read the full text of the order here.
