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[ In the High Court of Calcutta, Writ Petition Appeal No. 259 of 1998. ] 02/03/2001
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  "2001 (250) ITR 500"  

    Income Tax Rules 1962 ? Section 17(2) Rule 3 -Cases Referred:Ito v. All India Vijaya Bank Officers Association 1997 225 Itr 37Officers Association Bhilai Steel Plant v. Union of India 1983 139 Itr 937Steel Executives Association v. Rashtriya Ispat Nigam Ltd. 2000 241 Itr 20     KALYAN JYOTI SENGUPTA J.(1) BY this writ petition writ petitioner No. 1 being the Officers Association and Nos. 2 and 3 being the respective office-bearers of petitioner No. 1 have challenged the action of the respondent-bank authorities in recovering the amount of the alleged tax on perquisites on account of supply of furniture at a concessional rate. The deductions have already been made and still are being made. Mr. Murarka learned counsel appearing for the petitioner contends that there is no legal basis to recover the aforesaid amount after deducting standard rent of the furniture being supplied as per service condition to the officers concerned over and above a nominal rent being charged and recovered. He contends further that the levy of income-tax on the perquisite of the employees can be imposed under the provisions of Section 17 Sub-section (2). The aforesaid section authorises the employer concerned to deduct at source on account of tax on the value of any benefit or amenity granted or provided free of cost or at a concessional rate in any of the cases as mentioned in Clauses (a) (b) and (c). In this case he contends that admittedly the furniture by way of amenities has been provided by the bank but for this purpose the rent for such user is being collected from all the employees at a uniform rate and there is no difference nor any concession being granted by the employer-hank to any of the employees. He contends that the concessional rate cannot be reckoned from the view point of the market rate but from the rate charged by the employer from the other employees. In support of his contention he has relied on the following decisions in Officers Association Bhilai Steel Plant v. Union of India [1983] 139 ITR 937 (MP) ; ITO v. All India Vijaya Bank Officers Association and Steel Executives Association v. Rashtriya Ispat Nigam Ltd. He contends therefore that when there is no legal basis to impose tax on the aforesaid perquisites under the law the whole action of deduction done in the past and presently as well as in future is ultra vires and without jurisdiction. Moreover he contends that there is no basis and/or method for calculating the rate at which income-tax should be levied. He contends further that it is not for the employer to calculate at the rate which has been done by it. It would be for ihe Assessing Officer to calculate if the situation arises. (2) HE has drawn my attention to the factual position as to whether the rent is being realised for furnishing these amenities at a uniform rate to all the employees or not. He contends that on the factual score there is no denial by the respondent. (3) NONE appears for the respondent in spite of the matter being called on. Mr. Murarka learned counsel has drawn my attention to a particular paragraph of the affidavit filed by the Department. He contends that the stand taken by the Department for computing the aforesaid rate is not in accordance with the correct legal position as they have justified showing a particular notification which contemplates for charging the rate on the basis of the market value. In view of the aforesaid decisions of the High Courts the method contemplated in the aforesaid regulations is wholly inappropriate and inapplicable. (4) SINCE none appeared for the respondents and having heard Mr. Murarka and considering the materials placed before me the question which has fallen for my consideration is as to whether the market rate can be reckoned in order to arrive at concessional rate for levying tax at source on the amenities. In other words is there any concession in the rate for realisation of rent in this case. (5) THE approach of the Department is to rely on market rate to work out this concessional rate. Such approach has not been approved by this court as well as the Andhra Pradesh High Court and Madhya Pradesh High Court. First of alt I shall consider the decision of the Madhya Pradesh High Court which is one of the earliest decisions on this subject as far as I have been able to lay my hands which is reported in Officers Association Bhilai Steel Plant v. Union of India [1983] 139 ITR 937 (MP). In the decision of this Division Bench it has been held amongst others that the concession is to be judged from the rate charged by the employer from the employee and if the employer gives no concession to the employee in the matter of realisation of rent then there cannot be any question of any perquisite within the meaning of Section 17 (2) of the Income-tax Act.(6) IN the next decision of the Division Bench of this court reported in ITO v. All India Vijaya Bank Officers Association [1997] 225 ITR 37 the same principle has been followed. It has been held therein amongst others that if there was no perquisite the question of valuation did not arise. Rule 3 (b) of the Income-tax Rules 1962 would only be applied where the accommodation had been given to the employees at a concessional rate and if there was no concession Rule 3 (b) of the said rule was not applicable. The question of concession depends on the nature of accommodation provided to the employee namely the normal rent for such accommodation provided by the employer payable by other employees similarly situated and employed by the same employer and the actual rent paid by the assessee-employee concerned cannot be termed to be concession. The rent paid by all the employees of the bank was at a uniform rate and there was no departure in any manner in the case of any employee. In this situation the question of concession does not arise. Therefore the provision of the accommodation to the employees on the payment of standard rent was not a concession so as to be included in the meaning of perquisite. (7) IN the next decision on this subject cited by Mr. Murarka reported in Steel Executives Association v. Rashtriya Ispat Nigam Ltd. it has been held that the rent charged was not a concessional rent and therefore the difference between the rent actually paid and ten per cent of the salary was not a perquisite within the meaning of Rule 3 (b) of the Income-tax Rules 1962 and therefore the Department had illegally called upon the employers to make a higher deduction of tax at source by adding a perquisite when there was none and more so where in the individual assessments it had been declared that there was no perquisite at all. When there was no discrimination amongst the employees of the same organisation there cannot be any deduction at source treating the same being perquisites. (8) FOLLOWING the principles laid down as above I hold in this case that there is no concession being given by the employer-bank to the members of writ petitioner No. 1 and writ petitioners Nos. 2 and 3 providing amenities by letting out the furniture at an uniformly standard rate so as to bring it within the purview of the definition of perquisite. As I do not find any material that the bank concerned has made any concession in the matter of realisation of rent vis-a-vis the other employees the rate charged for realisation of rent by the bank concerned from all the employees who are similarly situate and placed is uniform and there is no discrimination. Therefore 1 hold that the recovery which has been done already and is being done is illegal and unjustified and there is no sanction under the law. Therefore the writ petition succeeds. Whatever deductions have already been done the same shall be adjusted accordingly. I direct the respondent-bank not to deduct any amount save and except the standard deduction which is being done. There will be no order as to costs. (9) ALL parties concerned are to act on a signed copy of the minutes of the operative portion of this judgment on the usual undertakings.