K.T. Thakore, Accountant Member -
(1.) THIS set of four appeals which are filed by the revenue relate to the assessment years 1974-75 to 1977-78. As these appeals involve a common ground and contention they are taken up and disposed of together by this combined order for the sake of convenience. The common ground raised by the revenue, which is material for our purpose, reads as follows :
On the facts and in the circumstances of the case and in law, the learned AAC has erred in deleting the addition of Rs. 2,325 as perquisite under Section 11(2)(iii)(c) of the Income-tax Act, being interest at concessional rate on loan given by the employer for construction of house.
The facts leading to the controversy are stated thus :
The assessee is an employee with Baroda Rayon Corpn. In course of the assessment proceedings, the ITO noticed that the assessee has been granted facility of loan by his employer at a concessional rate of 4 per cent for construction of house property. He, therefore, took the view that the difference between the market rate of interest and the interest charged from the employee amounted to perquisite which was assessable in the hands of the assessee under the head "Income from salaries". The ITO, therefore, brought to tax the undermentioned amount for the respective years:
(2.) Being aggrieved the assessee carried the matter in appeal before the AAC. Before him reliance was placed on an order of the Commissioner, Baroda, in which, in case of an employee of LIC it was held that the difference between the interest calculated at the rate of 10 per cent being market rate and the rate charged from the employee was not exigible to tax as perquisite. Relying on the said decision of the learned Commissioner, the AAC deleted the additions as aforesaid for the respective years.
Being aggrieved the revenue has come up in appeal before us. The learned departmental representative relying on the decision of the Tribunal in IT Appeal No. 1777 (Ahd.) of 1979, decided on 25-7-1981, pointed out that the Tribunal in a similar case has held that granting of loan at a concessional rate as compared to the market rate would be a benefit given to the employee by the employer. He next pointed out that according to the decisions of the Madras High Court in CIT v. C. Kulandaivelu Konar (Deed.)  100 ITR 629 and Addl. CIT v. Late A.K. Lakshmi  113 ITR 368, the ITO was justified in determining the value of perquisite as he did. It was next submitted that the decision of the AAC was not in accord with Rule 3(g) of the Income-tax Rules, 1962, and as such the decision of the ITO was required to be restored. Shri Patel, on the other hand, fairly pointed out that the learned Commissioner had occasion to reconsider his earlier decision in proceedings under Section 264 of the Income-tax Act, 1961 ("the Act"), before him in case of Shri Natwarlal K. Desai, an employee of Bank of India. In that case it was held that the value of perquisite should be determined on the basis of the difference between the interest charged by the Central Government to its employees on housing loans and the rate of interest actually charged by the Bank of India Employees' Co-operative Housing Society Ltd. It was, therefore, pointed out that in the instant case even assuming for the sake of argument that grant of loan at concessional rate would amount to a benefit granted to an employee, the value of the benefit has to be determined in the light of the conditions which were laid down at the time when the loan was granted. In this connection, Shri Patel pointed out that the assessee was required to mortgage his house property in favour of employers and had also to obtain an insurance policy from LIC which was required to be assigned to the employers. The assessee was required to pay premium on the life insurance policy and if the value of the premium and the interest were taken into consideration vis-a-vis the interest charged on housing loans by the Central Government to its employees, then it could not be said that there was any "benefit" derived by the assessee which could be brought to tax as perquisite chargeable to tax under the head "Salaries".
(3.) WE have carefully considered the rival submissions. Section 17(2) of the Act defines the expression "perquisites" for the purpose of determining income chargeable under the head "Salaries". The said definition reads as follows :-
(2) 'perquisite' includes :
(i) the value of rent-free accommodation provided to the assessee by his employer ;
(ii) the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer ;
(iii) the value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following case :
(a) by a company to an employee who is director thereof ;
(b) by a company to an employee being a person who has a substantial interest in the company ;
(c) by any employer (including a company) to an employee to whom the provisions of paragraphs (a) and (b) of this sub-clause do not apply and whose income under the head 'Salaries' exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds eighteen thousand rupees ;
(iv) any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee ; and
(v) any sum payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund or a Deposit-linked Insurance Fund established under Section 3G of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948) or, as the case may be, Section 6C of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952) to effect an assurance on the life of the assessee or to effect a contract for an annuity ;
The above definition is an inclusive one and, therefore, ordinary meaning of the expression "perquisite" would apply in all cases. The perquisite is a gain or profit made incidentally from an employer in addition to regular salary or wages especially one of the kind expected or promised-WEbster's dictionary. Thus, whenever any benefit or advantage comes to an employee as an addition or as incidental to the salary received from an employer it would amount to perquisite of the employment. Now Section 17(2)(m) lays down that the perquisite would include value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the cases mentioned therein. There is no dispute about the fact that the assessee's case falls within the categories mentioned in the said Section 17(2)(iii). Now the value of the perquisite is to be determined with reference to Rule 3. The said rule provides the method and manner in which the perquisites, relating to (a) rent-free accommodation, (b) residential accommodation at concessional rate, (c) value of motor car provided by the employer for the use by the employee for his private and personal purposes, (d) value of benefit to the assessee resulting from supply of gas, electric energy, water for his household consumption free of charge, and (e) the value of benefit to the assessee resulting from provision of free educational facility for any member of his household, is to be determined. It also provides that in certain cases the value of benefit or amenity shall be taken as nil. The Rule 3(g) deals with the value of benefit or amenity not included in Clauses 3(a) to 3(f). The Rule 3(g) reads as follows :
The value of any benefit or amenity not included in the preceding clauses of this rule shall be determined on such basis and in such amount as the Income-tax Officer considers fair and reasonable.
According to this sub-rule the ITO is required to determine the value of any benefit or amenity not specifically covered on such basis and in such amount as is fair and reasonable. Now there is no dispute about the fact that the interest charged to the employee-assessee is found to be at concessional rate, as such the same would amount to be a "benefit" which in turn could be taxed as "perquisite". The question, therefore, is whether on the facts the assessee has derived any such benefit and if so the amount of such benefit. Now, if the basis adopted by the learned Commissioner in his order in revision (cited supra) which, in our opinion, lays down a very fair basis, is taken into consideration, then the value of benefit in the instant case will have to be determined with reference to the interest charged to Central Government employees by the Central Government under its Rules governing house building advances as prevalent for the relevant assessment years and the interest paid by the assessee on the loan at the rate of 4 per cent plus the value of insurance premium which he is required to pay on the insurance policy which he was required to take and assign in favour of the employer as a condition for obtaining the said loan. This aspect of the matter, however, has not been considered by the authorities below. WE, therefore, remit the matter to the ITO to reconsider the question relating to determination of value of perquisite in the instant case for all the years in the light of our observations above.;