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T. Banusekar

MY WIFE and I work for LIC. We took a loan of Rs 7 lakh, in 1999, and constructed a house in Hyderabad. The loan was given to us partly at 5 per cent and partly at 7 per cent.

My wife and I are co-borrowers in respect of the loan. Initially there was no perquisite value which was computed in respect of the concessional loan.

With the amendment in Rule 3 the value of concession in respect of the loan had to be taken as a perquisite.

My employer has computed the concession in accordance with Rule 3 and has taken the entire value of perquisite as forming part of my salary.

My view is that 50 per cent of the concession should be taken as my wife's income and only 50 per cent as mine. You may note that the entire amount repayable is recovered only from my salary. Under these circumstances which is the correct position in law?

Anonymous

Reply

The perquisite value should be taken as part of salary in the hands of the person who has actually borrowed the loan.

The fact that you are repaying the entire loan along with interest is a prima facie pointer to show that you are the real borrower and that your wife has not been treated as a co-borrower, but probably, as a co-applicant.

That being so your employer appears justified in taking the entire value of perquisite as part of your salary income.

The matter, however, is a pure question of fact and needs to be decided based on the agreement entered into with your employer at the time of availing the loan and also the understanding between you and your wife. It may be possible that though the loan is recovered along with interest from your salary in full, your wife may be repaying to you 50 per cent thereof. This may obviously lead to the conclusion that your wife is a 50 per cent owner of the property and is a co-borrower of the loan to the extent of 50 per cent. This loan may not be the only evidence, which could draw one to this conclusion.

You may also have to see how the tax benefits in respect of interest and principal repayment were claimed in the earlier years. If you have taken the full benefit, it would be very difficult for you to now go back and say that your wife is co-borrower of the loan to the extent of 50 per cent.

This could lead you to a situation where your earlier year returns will be treated as wrongly filed.

If, however, you could establish on facts that your wife is the owner of the property to the extent of 50 per cent, and if your employer has taken the entire concession as your income, you could file a return excluding the perquisite to the extent of 50 per cent of the concessional loan and taking the same as your wife's income.

This will result in a refund for you and an additional tax payable by your wife's hands. You may also remember that the burden will be on you to show that the perquisite only to the extent of 50 per cent is to be taken as your income and the balance as that of your wife.

Query

The Madras High Court in CIT vs G. V. Venugopal [2005] 273 ITR 307 (Mad) has held that the excess over the amount exempt u/s.10 (10C) in respect of the compensation received at the time of voluntary retirement will qualify for relief u/s.89(1). In a case where the relief has been denied in assessment and where no appeal has been filed against the order of assessment, what is the remedy available, now that the Madras High Court has held that the relief can be availed?

V. Sundararajan

Reply

You write out an application u/s.154 before the Assessing Officer requiring him to rectify his earlier order and grant the relief u/s.89(1).

If the Assessing Officer falls within the jurisdiction of the Madras High Court, he would be bound by the decision of the jurisdictional High Court and would have to grant the relief in proceedings u/s.154 for rectification of a mistake apparent on the record. It may be mentioned that a subsequent decision of the jurisdictional High Court will amount to, there being an error in the order of the Assessing Officer. If the Assessing Officer were to deny your claim in proceedings u/s.154, you could file an appeal against such order before the Commissioner of Income Tax (Appeals). If the Assessing Officer is not within the jurisdiction of the Madras High Court it may not be possible to claim that the order of the Madras High Court has given rise to a mistake apparent on record. In such a case, it would be advisable to make a revision petition u/s.264 before the Commissioner of Income Tax or alternatively to file an appeal before the Commissioner of Income Tax (Appeals) with a petition to condone the delay.

It may be mentioned that the time limit for making a petition u/s.264 would be within one year from the date on which the order sought to be revised was communicated to the assessee.

If there is any delay in making the application for revision, you may file a petition condoning the delay, which power can be exercised by the Commissioner of Income Tax. It may also be mentioned that the time limit to make a petition u/s.154 for rectification would be four years from the end of the financial year in which the order sought to be rectified was passed and also that the time limit for filing an appeal before the Commissioner of Income Tax (Appeals) would be 30 days from the date on which the notice of demand was served on the assessee. You may also note that there can be no appeal against an order made u/s.264 and that the only remedy would be by way of a writ petition before the High Court.

(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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