a) Provision for hospitality of every kind by the employer to any person, whether by way of provision for food or beverages or in any other manner whatsoever and whether or not such provision is made by reason of any express or implied contract or custom or usage of trade, but does not include expenditure on or payment for, food or beverages provided by the employer to his employees in office or factory (refer note 1).

b) Expenses on conference other than expenses by way of fees for participation in the conference.

c) Sales promotion expenses, including publicity other than expenditure on advertisement.

d) Employee welfare expenses other than those incurred to fulfil a statutory obligation or to mitigate occupational hazards or provide first aid facilities.

e) Conveyance, tour and travel, including foreign travel (notes 2 and 3).

f) Use of hotel, boarding and lodging facilities (note 3).

g) Repair, running (including fuel), maintenance of motorcars and amount of depreciation thereon (note 4).

h) Repair, running (including fuel), maintenance of aircrafts and amount of depreciation thereon (note 5).

i) Use of telephone, including mobile phone, other than expenditure on leased telephone lines.

j) Expenditure on guesthouse other than accommodation used for training purposes.

Note 1: If the employer is engaged in the business of hotel, 20 per cent is to be substituted with 5 per cent.

Note 2: If the employer is in the business of construction, 20 per cent is to be substituted with 5 per cent

Note 3: If the employer is engaged in the manufacture or production of pharmaceuticals or computer software, 20 per cent is to be substituted with 5 per cent

Note 4: In the case of an employer engaged in the business of carriage of passengers or goods by motorcar, 20 per cent is to be substituted with 5 per cent

Note 5: In the case of an employer engaged in the carriage of passengers or goods by aircraft, 20 per cent is to be substituted with `nil'.

The tax is payable in respect of the value of fringe benefits provided or deemed to have been provided by an employer to his employees during the previous year. The value of fringe benefits so calculated is subject to additional income-tax in respect of fringe benefits at the rate of 30 per cent (increased by the surcharge at 10 per cent and additional surcharge at 2 per cent on such tax and surcharge). The fringe benefit tax is payable by the employer even where he is not liable to pay income-tax on his total income computed in accordance with the other provisions of this Act.

Query

I purchased a flat in Bangalore for Rs 15 lakh. To stay close to the company I work in, I live in a rented house, which is also in Bangalore. I have not let out the property that I own on rent. There is a housing loan which I had taken for purchasing the flat. I am paying EMI as well as rent for the premises that I stay in. Will it be possible for me to claim the tax benefits in respect of the repayment of the housing loan while also claiming the exemption under Section 10(13A) in respect of the rent paid?

Krishna

Reply

There is no prohibition on claiming the exemption under Section 10(13A) in respect of the rent paid while also claiming the interest on the housing loan as a deduction and rebate/deduction in respect of the principal repayment. The issue that can arise is with regard to whether the house that is owned by you can be treated as a self-occupied so as to take the annual value of the property as nil.

In this context you may note that Section 23 permits a house which is not actually occupied by the owner to be treated as self-occupied if the property is at a place different from the place at which the assessee's place of employment or business or profession is situate and where the assessee does not derive any benefit from the property. The section also requires that the assessee should not be the owner of any other house property. At this stage it may not be out of place to mention that there is no minimum distance prescribed with reference to the property being in a place other than the place where the assessee exercises employment or carries on business or profession.

In this context the Delhi High Court, in CIT vs Justice Avadh Behari Rohatgi (1986 157 ITR 441), held that where a sitting judge of a court resided in his official residence provided by the government and kept his own house in the same town vacant, he could still claim the benefit of taking the annual value as nil for the official residence was in New Delhi while his residence was at Delhi. The court specifically referred to the fact that the section uses the words "other place" and not "other town".

(Mail your queries to taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.)

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