Perquisites [Sec. 17(2)]:

The term “perquisite” is defined in Webster’s New International Dictionary as “a gain or profit incidentally made from employment in addition to regular salary or wage, especially one of a kind expected or promised”. Similarly in Murray’s English Dictionary, it is defined as “any casual emolument or benefit attached to an office or position in addition to salary or wages”. The Chambers Twentieth Century Dictionary defines “perquisite” as “property acquired otherwise than by inheritance: a casual: anything left over that a servant or other has by custom a right to keep: a tip expected upon some occasion: emoluments: something regarded as falling to one by right”.Thus, the phrase “perquisite” signifies some benefit in addition to the amount that may be legally due by way of contract for services rendered.

The following propositions should also be kept in view:

Personal benefit-“Perquisite” denotes something that benefits a man by going into his own pocket; it does not, however, cover a mere reimbursement of necessary expenses incurred by him.

Cash or kind- It may be provided in cash or in kind.

Should be provided by employer- Perquisites are included in salary income only if they are received by an employee from his employer (maybe former, present or prospective). Perquisites, received from a person other than employer, are taxable under the head “Profits and gains of business or profession” or “Income from other sources”.

Enforceable right- A benefit or advantage would be taxable as perquisite only if it has a legal origin. As an authorized advantage taken by an employee without his employer’s authority would create a legal obligation to restore such advantage, it would not amount to “perquisite” taxable under the Act On the other hand, if the benefit has been conferred unilaterally without the aid of an agreement between the parties, the employee can be taxed under perquisite. It is

not necessary that the benefit should have been received under an enforceable right.

Personal accident policy- Premium paid by employer towards personal accident policy of employee is not taxable as perquisite.

Pensionary deferred annuity benefits- Payments made by an employer to provide deferred annuity benefits to his employees are taxable as perquisites only when a vested interest accrues to the employee.

Personal advantage during employment- Perquisites are taxable under the head “Salaries” only if they are:

(a) Allowed by an employer to his employee, (b) allowed during the continuance of employment, (c) Directly dependent upon services, (d) Resulting in the nature of personal advantage to the employee, and (e) Derived by virtue to employer’s authority. It is not necessary that recurring and regular receipt alone is a Perquisite. Even a casual and non-recurring receipt can be perquisite if The aforesaid conditions are satisfied.

“Perquisite” as defined by the Act- A combined reading of section 15 and 17 suggests that salary would include, among other things, perquisites. Section 17(2) gives an inclusive definition of perquisite, as including:

a. the value of rent free accommodation provided to the assessee by his employer [sec. 17(2)(i)];

b. the value of any concession in the matter of rent respecting any accommodation provided to the asessee by his employer [sec. 17(2)(ii)[;

c. the value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases:

i. by a company to an employee who is a director thereof;ii. by a company to an employee, being a person who h

substantial interest in the company;iii. by an employer (including a company) to an employee

to whom provision of (i) and (ii) above do not apply

and whose income under the head “Salaries” exclusive of the value of all benefits or amenities not provided for by way of monetary benefits, exceeds Rs. 50,000 [sec. 17(2)(iii)];

d. any sum paid by the employer in respect of any obligation which but For such payment would have been payable by the assessee [sec. 17(2) (IV)];

e. any sum payable by the employer, whether directly or through a fund other than a recognized provident fund or approved superannuation fund or a deposit-linked insurance fund, to effect an assurance on the life of the assessee or to effect a contract for an annuity [sec. 17(2)(v)];

f. The value of any other fringe benefit or amenity as may be prescribe [sec. 17(2) (VI)].