Taxability of Rent Free Accomodation

Hi friends,

If the company provides accommodation to its employee in the financial year 2007-08, and accounts the rent paid in its books as an expense, is FBT applicable on the same.... Is the employer liable for FBT on the same... Isn't it taxable in the hands of employee under salaries as perquisites....

Actually in a scrutiny, assessing officer is contending that the Company should have paid FBT on rent borne on behalf of the employee. Is he right in his contention....

Thanks in advance.