Perquisite- rent free accommodation

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This query is : Resolved

Madhurima Darisi (Querist)

21 January 2013 I have a query regarding taxability of Rent Free Accommodation of an employee.

Suppose A enters into a contract with B for constructing a capital asset for B(spanning over 5 years). C is an employee of A who is working on this contract. B provides rent free accommodation to C for which no monetary consideration is borne by A. Will such accommodation be taxable in the hands of C?

As per sec 17(1), "Rent free Accommodation provided by the employer is taxable." Since B is not the employer of C, is the contention that such rent free accommodation is exempt in the hands of C correct?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

21 January 2013 As C is under the employment of A, so it can not be said that C and B are having employer employee relationship.
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C can not feel free until the most remote chances of being taxed are discussed here under.
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If you go through AS-15, you will find that C is also treated as an employee for the limited purpose of Disclosures related with employees benefits. But in IT we can say
that B is neither C's present nor past nor prospective employer.
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Secondly, if we consider Section 28(iv), it can easily be argued that C is neither doing any business for himself nor exercising his own profession there at-so perquisites in this case are also not taxable.
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Now you may conclude accordingly....as you have thought.

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