Section 17(2)(iii) — Perquisites under Income-tax Act, 1961

Section 17(2)(iii) of the Income-tax Act, 1961, deals with the taxation of perquisites provided by an employer to an employee. This section specifically includes the value of any benefit or amenity granted or provided free of cost or at a concessional rate to specified employees, which is not covered under other sub-clauses of Section 17(2). The significance of this section lies in its broad scope, capturing various non-cash benefits that employees receive, which are not directly in the form of salary but still constitute a part of their income. The statutory test involves determining whether the benefit is provided by the employer and whether it can be quantified in monetary terms. The burden of proof typically lies with the employer to demonstrate the value of such perquisites. In practice, this section ensures that employees are taxed on the full economic value of their compensation, including non-cash benefits, thereby preventing tax avoidance through non-salary compensation.

Common Litigation Flashpoints

1. Valuation of perquisites provided at concessional rates
2. Classification of benefits as perquisites or business expenses
3. Determination of specified employees for the purpose of taxation
4. Disputes over the inclusion of certain benefits as taxable perquisites

Judgments on Section 17(2)(iii) — Perquisites under Income-tax Act, 1961

• Commissioner of Income Tax, Bangalore vs Infosys Technologies Ltd. — SC,
  A benefit must be made taxable by law before it can be regarded as income.