Law: Income Tax Act, 1961

Section: 17,3b

Income-tax------Perquisite---Accommodation provided by employer at concessional rate--¬Nationalised bank providing accommodation to officers charging standard rent---Rates of standard rent uniform for all employees of bank and fixed under bank regulations---No concession---No perquisite---Indian Income Tax Act, 1961, S.17(2)----Indian Income Tax Rules, 1962, R.3(b). The respondent was a nationalised bank, which provide residential accommodation to some of its officers charging standard rent as fixed under the Regulations framed by the bank. By a circular, dated October 14, 1992, the bank informed its branches that the standard rent recovered by the bank in the case of accommodation provided to the employees, was not a fair rental value and that it was a perquisite to be calculated in accordance with rule 3(b) of the Income Tax Rules, 1962. On writ petition filed by the association of officers of the bank, a Single Judge held in favour of the employees. On appeal to a Division Bench by the Department: Held, dismissing the appeal, that rule 3(b) was for the purpose of valuation of the perquisite provided to the employee and if there was no perquisite, the question of valuation did not arise. Rule 3(b) of the Income Tax Rules could 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 Rules was not applicable. The question of concession depended 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. The rent paid by all the employees of the bank was at a uniform rate and there was no departure of any kind in favour of any of the employees. In fact, the rent had been fixed in accordance with the Regulations and employees similarly situated paid the rent in accordance with the Regulations. Therefore, the provision of accommodation to the employees on payment of standard rent was not a concession so as to be included within the meaning of perquisite. Indian Bank…

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