In a ruling that has potentially far reaching implications for employees living in company-leased accommodation, the Delhi High Court has ruled that money spent on repairs and renovations of such residences is not a taxable perk.

The verdict, delivered on August 17, comes 18 years after the income-tax department (I-T) issued a notice on Scott R Bayman, who was then the president and CEO of GE's India unit, for not including the value of taxable perks in his income for the financial year 1993-94.

The ruling, if unchallenged in the Supreme Court, implies those living in company-providedaccommodation will not have to pay tax on expenses incurred by their employers on repair and renovation of their houses.

In Bayman's case, this was a one-time expense but legal expert and chartered accountant Rakesh Gupta says it may also apply to annual expenses maintenance and renovation. "But there are reasonable restrictions in such matters. A person living in a house with a rent of Rs 25,000-30,000 cannot submit a renovation bill of Rs 20-30 lakh and expect it to be passed," he says.

GE had spent Rs 50.6 lakh on repairs and renovation of the residence - 4, Panchsheel Marg, New Delhi - before Bayman moved in. The work involved electrical wiring, plumbing, AC ducting, security fencing and building a room for a security guard and was executed by Delhi-based interior designing firm Framework Interiors. Some furniture was also purchased.

The assessing officer argued that these expenses incurred by GE would otherwise have been paid for by Bayman and therefore the perquisite value should be taxed. Under the relevant section of the I-T Act, 10% of such expenses are included in the income of the employee. This would have pushed up Bayman's taxable income by Rs 5 lakh and led to a tax of Rs 1.5 lakh.

Given that the amount at stake is not very large, it seems unlikely that the I-T authorities will move theSupreme Court against the High Court ruling, according to a source in the income-tax department. The counsel for the tax department said the I-T was still studying the judgement.

When Bayman moved to India, he wanted an accommodation comparable to what he used in the US. GE had spent very little on maintaining the house occupied by Bayman's predecessor. It was then decided to extend the lease of the property and upgrade the facilities befitting Bayman's seniority and status.