Updated: January 8, 2010 16:08 IST

Valuation of perquisites

D. Murali
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Where an employee receives remuneration from two or more employers simultaneously, and one of those employers has provided the employee with rent-free residence, what should be the definition of ‘salary’ for the purpose of valuing the perquisite? It is ‘the aggregate salary from all the employers,’ answers a recent Taxmann publication on ‘New Rules Governing Taxation of Perquisites’ (

While such a view (based on the 1989 decision in CIT vs Mohanlal Jalan) may be legally correct, it is bound to cause hardship to the employee, especially in the new set-up under which the value of the perquisite is to be taken at the flat rate of a percentage of salary, the authors note.

“The possibility of the value of the perquisite being more than the rental value or the rent paid cannot be ruled out. It is desirable that the provision is amended so as to ensure that the value of the perquisite is restricted to the rental value or the rent paid by the employer.”

In a chapter on ‘foreign companies,’ the authors mention that stock options given by a parent company to employees of its 100 per cent Indian subsidiary attract tax under Section 17(2)(vi); and the reference given in the book is of a 1998 Advance Ruling based on the doctrine of ‘lifting the corporate veil.’

What if the subsidiary is not a 100 per cent subsidiary of the holding company? “There is no bar to lifting the corporate veil in cases where the subsidiary is not 100 per cent owned by the holding company so long as the facts and circumstances of the case justify it,” the authors caution.

Handy reference for tax professionals.


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