1. In consequence of the difference of opinion between the learned Judicial Member and learned Accountant Member of the Division Bench, the Hon’ble President, Income-tax Appellate Tribunal has nominated me as Third Member of the Bench, on the following points of difference :

1.Whether deduction on account of housing norm and auto norm made by the employer from the base pay of the assessee in lieu of free housing and transport facility provided in India as per the terms of employment, falls within the definition of perquisite enshrined in section 17(2)(iii) of the Indian Income-tax Act and form part of the base pay and is exigible to tax ?

2.Whether a profit or benefit earned/acquired by the assessee on account of exercise of stock option, earlier granted, in terms of his employment on subsequent dates and its sale is a perquisite as per provisions of section 17(2) of the Indian Income-tax Act or capital gain ?

2. I have heard the parties and perused the records.

I will first take up the first point of dispute for consideration.

3. Though the facts of this case have been described by the learned Members of the Bench, I, for the sake of coherence, would like to refer to some of these facts, which are considered to be of relevance for a decision on the points of dispute.

4. The assessee, an Australian citizen, was appointed as Managing Director and President by Whirlpool Corporation, USA (The terms and conditions of appointment are available on pages 27 to 29 of the paper book). As per the offer of appointment, the assessee was to join the US based company as an employee on an international assignment. In view of the same, the compensation, benefits and other working conditions of the assessee were covered by the company’s U.S. expatriate policies. In respect of the residential accommodation, the terms of offer provided that the assessee would be entitled to company paid housing after deducting U.S. housing norm of about US$ 16,000. Likewise, the company provided free car facility (minor expenses whereof were to be paid by the assessee) after a car deduction of US$ 3,000 per year. The assessee failed the return of income on the basis of salary drawn by him in US Dollars. The tax was also to be paid by the company and, therefore, the assessee also included the tax paid by the assessee-company as part of his assessable salary.

5. There was a dispute about the conversion of US Dollars into Indian rupees. Whereas assessee had converted the salary at the average exchange rate, the Assessing Officer calculated the salary drawn in Indian currency at the exchange rate prevalent on the date of payment. The issue relating to conversion has been decided by the CIT(A) in favour of the revenue. This fact would be relevant in computation of the perquisite value at the rate of 10 per cent of the salary, if applicable. The assessee had also offered the perquisite value in respect of the free residential accommodation as well as free car provided to him in India. The assessee worked out the value of perquisite in respect of residential accommodation as under :—

It is noteworthy that the assessee has calculated the salary of Rs. 1,16,92,570 on the following basis :—

The Assessing Officer has worked out the perquisite value of residential accommodation at Rs. 15,53,803 as under :—

Salary for the purpose of Rule 3