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Interest-free Loan from employer taxable as Perquisite: ITAT Mumbai


Held: The value of the interest free loan is taxable in the hands of the employee as perquisite as per section 17(iii)(c) of the Income Tax Act, 1961. Further, the value of the interest free loan will be calculated as per Rule 3(7)(i) of the Income Tax Rules.

Facts of the Case:
1) The assessee has filed her return of income for the AY 2011-12 declaring total income of Rs. 34,90,510/- consisting of income from salary and income from other sources.

2) During the assessment proceedings, the Assessing Officer (AO) noted that the assessee was employed with M/s Teej Impex Pvt Ltd. and drawn salary income of Rs. 24 lakhs per annum.

3) Further, it was noticed that the assessee has obtained interest free unsecured loan from the said employer.


a) By Assessing Officer –  The Ld. AO has held that since the assessee is drawing salary of Rs. 2 lakhs and more per month, in view of the provisions of the section 17(iii)(c), the value of any benefit obtained by the employee by way of interest free unsecured loan is assessable as perquisite and chargeable to tax and accordingly determined value of perquisite by invoking rule 3(7)(i) of the Income Tax Rules, 1962 and estimated 15% interest on such loan and made additions of Rs. 43, 80, 165/-.

b) By CIT(A) – The CIT(A), after considering relevant facts, allowed partial relief in respect of value of interest free unsecured loan by holding the fact that the facts indicate the value of interest free unsecured loan has to be assessed as perquisite and the allowability or otherwise of the interest in the hands of the employer is not relevant to the nature of the benefit enjoyed by the assessee. However, it was held that the AO has not followed Rule 3(7)(i) while determining the quantum of perquisite and corrected the valuation at Rs. 20,64, 938 /- and the appellant gets relief of Rs. 23,15, 227/-

c) By ITAT – ITAT after considering all the relevant facts placed on record held that the CIT(A) was right in determing the value of perquisite as per rule 3(7)(i) and dismiss the appeal filed by the assessee.


For complete ITAT order, Click Here

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