appeal filed by assessee is directed against order passed by learned CIT(A) on 22nd Aug., 2007. appeal relates to asst. yr. 2004-05. Ground No. 1 taken by assessee has two sub-grounds which read as under: "Ground No. 1. (1) On facts and in circumstances of case and i n law, learned CIT(A) erred in confirming order of ITO 26(2)(2) treating Rs. 9,60,000 being amount paid by employer of appellant towards maintenance of premises taken by it on leave and licence and provided to appellant for his residential accommodation, as perquisite in hands of appellant. appellant prays that amount paid by employer of appellant f o r maintenance of premises taken on lease cannot be treated as perquisites in hands of appellant and hence addition made on this count ought to be deleted." Facts of case, in brief, are that assessee, individual, was employed as Vice President with M/s Hutchison Max Telecom (P) Ltd. during previous year relevant to assessment year under appeal. AO perused certificate of deduction of tax at source in Form No. 16 and Form No. 12BA filed by assessee along with his return of income and noticed that assessee s employer had provided rent-free residential accommodation to assessee in respect of which assessee had taken perquisite value at Rs. 2,71,747 and consequently added same to his salary. AO called for details and noticed that assessee s employer had entered into two agreements, both of which were dt. 5th May, 2003. By first agreement described as Leave and License Agreement executed between assessee s employer, namely, M/s Hutchison Max Telecom (P) Ltd. and M/s Sterling & Wilson Property Developers (P) Ltd., assessee s employer had hired flat No. 1101 admeasuring 2150 sq. ft. at 11th floor in building known as Sterling Sea Face at Dr. Annie Besant Road, Worli, Mumbai on monthly licence fee of Rs. 15,000 for use by assessee as residential accommodation. In cl. 4 of said Leave and License agreement , licenser had confirmed that said premises were in good condition and also undertaken to maintain same in good condition at all times. Clause 9 of said agreement placed licenser under responsibility to carry out all major and structural repairs to said premises including those to all walls, roofs, floors, drains and sewers, etc., and to carry out such repairs and bear and pay all costs, charges and expenses in respect thereof. Clause 8 of said agreement permitted licensee, i.e., assessee s employer to carry out all renovations repair and interior work in said premises at his own costs. By second agreement described as amenities agreement executed between assessee s employer and M/s Shapoorji Palloonji & Co. Ltd. (service provider); assessee s employer provided certain amenities to assessee through M/s Shapoorji Palloonji & Co. Ltd. on monthly payment of Rs. 80,000 per month. It is stated in cl. 2 of said agreement that service provider has carried out changes, additions and alterations in said premises so as to make same serviceable as per reasonable requirements of users . Clause 3 provides that service provider shall render certain services periodically or otherwise in respect of said premises, which included (i) plastering, etc., (ii) painting of good quality, (iii) keep said premises in tenantable condition, (iv) housekeeping, (v) providing and maintaining granamite or equivalent flooring in said premises, (vi) maintaining car parking space allotted to user apart from providing adequate security arrangement in respect of said premises. Clause 5 of said agreement provides that user shall not be entitled to reduce or decrease amount of compensation fixed at Rs. 80,000 per month even if there is any deficiency in any of services provided by service provider to user or if user is not availing those facilities. As already stated earlier, both agreements were simultaneously executed on 5th May, 2003. While first agreement was with landlord of premises in question, second agreement was with provider of certain services to assessee. While making assessment, AO applied r. 3(1) of IT Rules for valuation of residential accommodation covered by Leave and License Agreement and r. 3(8) of IT Rules for valuation of amenities provided by employer to assessee under amenities agreement. As regards valuation of residential accommodation, AO noticed that actual amount of rental payment was Rs. 15,000 per month or Rs. 1,80,000 annually while 10 per cent of salary of assessee was only Rs. 2,71,747 and therefore took lower of two and accordingly valued residential accommodation taken on lease (rent) by employer at Rs. 1,80,000. As regards valuation of amenities provided by employer, AO invoked r. 3(8) of IT Rules as applicable at relevant point of time. Rule 3(8) provided that value of any other benefit or amenity, service, right or privilege provided by employer shall be determined on basis of cost to employer under arm s length transaction as reduced by employees contribution if any......." According to AO amenities agreement was intended as nomenclature of agreement itself revealed to provide certain amenities, service or benefit, right or privilege to assessee for which assessee had not made any payment and therefore value of such perquisite, according to AO, was liable to be added to salary of assessee. Since amenities agreement itself had quantified value of amenity at Rs. 80,000 per month, AO valued amenities at Rs. 9,60,000 and accordingly added same to salary of assessee. assessee carried matter in appeal before learned CIT(A). His submission before learned CIT(A) was that both agreements were intended to provide residential accommodation to assessee in manner that t h e assessee is in position to enjoy accommodation and therefore payments made pursuant to both agreements partook character of rent in respect of residential accommodation provided by assessee s employer to assessee and accordingly perquisite value should have been computed under r. 3(1) of IT Rules as done by assessee and not under rr. 3(1) and 3(8) of said Rules as done by AO. He submitted before learned CIT(A) that both agreements should be read together as intending to provide residential accommodation to assessee. He had also submitted before CIT(A) that assessee s employer had treated payments made under both agreements as rent and accordingly deducted tax at source under s. 194- I. Learned CIT(A) however rejected submissions made on behalf of assessee and consequently confirmed order of AO. According to him maintenance of premises was responsibility of landlord under leave and license agreement and, therefore, there was no question of making any payment for same to service provider. He further held that amenities provided to assessee were liable to be valued in terms of provisions of r. 3(8) of IT Rules and taxed accordingly. In support of appeal, learned Authorised Representative for assessee reiterated submissions earlier made before CIT(A). His case was that payments made in pursuance of amenities agreement related to residential accommodation and hence it was r. 3(1) under which perquisite value should have been worked out. He submitted that r. 3(8) of IT Rules would come into play in case where r. 3(1) was not attracted. According to him, all payments in respect of residential accommodation provided to employee were required to be taken into account for purpose of valuation of perquisite in form of residential accommodation under r. 3(1) alone and not under r. 3(8). It was also his case that all payments made for effective enjoyment of residential accommodation under both agreements were in nature of rent and, therefore, ought to have been considered under r. 3(1) alone. He further contended that amenities agreement sought to provide certain services like plastering, painting, house-keeping, car parking space etc. for effective enjoyment of property and, therefore, payments made in pursuance thereof would be in nature of rent and consequently liable to be considered for valuation as perquisite under r. 3(1). In reply, learned Departmental Representative supported order passed by AO and CIT(A) in this behalf. We have heard parties. Rule 3 of IT Rules deals with valuation o f perquisites. Rule 3(1) deals with determination of value of residential accommodation provided by employer to employee on basis provided in Table given in said Rule. Where accommodation is taken on "lease o r rent" by employer and provided as unfurnished accommodation to employee, it is "actual amount of lease rental paid or payable by employer or 10 per cent of salary whichever is lower as reduced by rent, if any, actually paid by employee" which is treated as value of residential accommodation so provided to assessee. assessee s employer has entered into leave and licence agreement with landlord for hiring residential accommodation for use by assessee. said agreement stipulates payment of Rs. 15,000 per month for use of accommodation by assessee. Perusal of various clauses in Leave and License agreement show that licenser has not only provided residential accommodation but also undertaken to keep same in good condition and also to carry out necessary repairs and bear all costs and expenses in respect thereof. There is no doubt that r. 3(1) of IT Rules is applicable for valuation of rent-free accommodation covered by leave and license agreement. assessee however claims that payments made pursuant to amenities agreement should also be treated as part of lease rental paid for hiring t h e residential accommodation. We are unable to accept aforesaid submission. case of assessee is that amounts paid in pursuance of both agreements should be treated as lease rental and accordingly considered for valuation under r. 3(1) of IT Rules. short question therefore is whether "compensation" paid in pursuance of amenities agreement can be treated as "lease rental" in lieu of grant of lease in respect of residential accommodation obtained by assessee s employer for use by assessee. scope of r. 3(1) is restricted to accommodation taken on lease or rent by employer and also to "actual amount of lease rental paid or payable by employer or 10 per cent of salary whichever is lower as reduced by rent, if any, actually paid by employee". It is thus clear that it is only "lease rental" paid or payable and nothing else which can be taken into account for purpose of valuation of residential accommodation under r. 3(1). Any payment which is not "lease rental" cannot enter into computation under r. 3(1) of IT Rules. term "rent" signifies return made by tenant or occupant of land or corporeal hereditaments to owner for possession and use thereof; pecuniary sum agreed upon between tenant and his landlord and paid at fixed intervals by tenant to landlord for use of land or its appendages. Clause 1 of Explanation to s. 194-I of IT Act, as it stood at relevant point of time, defined rent as any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for use of any land or any building (including factory building), together with furniture, fittings and land appurtenant thereto, whether or not such building is owned by payee. According to s. 105 of Transfer of Property Act, rent is price paid or promised by transferee to transferor in lieu of grant of lease of any immovable property by transferor. Thus rent is monetary compensation payable by tenant to landlord in lieu of grant of tenancy or lease. Any payment that is not made by tenant to landlord or in consideration of grant of lease by landlord cannot be termed as "rent". Turning to facts of present case, amount paid or payable to service provider is termed as "compensation" in amenities agreement itself and not as "lease rental" or "rent" for grant of lease. Payments have been made under amenities agreement to service provider and not to landlord/licenser and hence cannot be termed as "lease rental" or "rent" for grant of lease in law. Similarly compensation paid to service provider for availing certain amenities also not be termed as lease rental or "rent" paid for grant of lease or tenancy. There is no evidence on record to establish that compensation paid to service provider is in lieu of grant of tenancy. It is further seen that compensation paid or payable in pursuance of amenities agreement is for availing certain amenities and not in lieu of grant of lease. There is no clause in amenities agreement to show that compensation was paid to service provider for grant of lease by landlord/licenser. Further there is no material on record before us to show that landlord or licenser had treated amount of compensation paid to service provider as lease rental in its hands or that service provider had treated compensation received by it as lease rental and offered same for taxation as such. It is therefore not possible to hold that amount of compensation paid in pursuance of amenities agreement is in nature of "lease rental" or license fee paid to landlord for grant of lease. Since amount of compensation paid to service provider cannot be construed as lease rental and hence it cannot be taken into account for valuation of residential accommodation under r. 3(1) of IT Rules. learned CIT(A) is right in excluding aforesaid compensation from ambit of "lease rental" for valuation of residential accommodation under r. 3(1). assessee s employer has indeed provided certain benefits or amenities or services covered by amenities agreement to assessee through service provider and, therefore, value thereof has got to be worked out and taxed under r. 3(8) of IT Rules. Learned CIT(A) has rightly invoked r. 3(8) of IT Rules for valuation of amenities provided to assessee under amenities agreement. Ground No. 2 taken by assessee reads as under: "On facts and circumstances of case and in law, CIT(A) erred in confirming order of AO levying interest under s. 234B of Act." We have heard parties. learned counsel for assessee fairly conceded that levy of interest under s. 234B was consequential and linked with assessed tax. In this view of matter ground No. 2 is dismissed. In view of foregoing appeal filed by assessee is dismissed. *** HARIT NAGPAL v. INCOME TAX OFFICER