OFFICERS ASSOCIATION BHILAI STEEL PLANT Vs. UNION OF INDIA

JUDGEMENT

(1.) PETITIONER No. 1, in this petition, is the Officers' Association, Bhilai Steel Plant, which is a society registered under the Madhya Pradesh Societies Registrikaran Adhiniyam, 1973. PETITIONER No. 2 is an officer of the Bhilai Steel Plant (hereinafter referred to as "the Plant") serving at present as Divisional Engineer (Construction). PETITIONER No. 2 is in occupation of a quarter, the rent of which is Rs. 100 per month. This rent was fixed as the standard rent by the plant under Rule 45A of the Fundamental Rules which have been applied to the officers. In other words, the rent of the quarter is Rs. 100 irrespective of the salary of the occupant. The salary payable to petitioner No. 2 works out to nearly Rs. 1,500 per month. PETITIONER No. 2 is thus paying a rent which is less than one-tenth of his salary. There are other officers employed in the Plant who are also occupying quarters and paying rent less than one-tenth of the salary of an officer. In deducting income-tax at source under Section 192 of the I.T. Act (hereinafter referred to as "the Act"), the management of the Plant is treating the difference between the one-tenth of his salary and the rent paid by him as a perquisite. The management says that this course is being adopted on the basis of the instructions received from the I.T. authorities. The petitioners contend that merely because the rent paid by an officer is less than one-tenth of his salary, the difference cannot be treated as perquisite and income-tax cannot be deducted at source on that footing. The petitioners pray for a direction that the respondents be restrained from treating the difference between 10 per cent. of the salary and the rent paid as a perquisite for purposes of deduction of income-tax at source.

(2.) THE I.T. authorities, joined as respondents in this petition, deny that there is any circular or instruction issued to the management for treating the difference between 10 per cent. of the salary and the rent paid as a perquisite for purposes of deduction of income-tax at source. THEy, however, submit that this is the correct legal position. THE stand of the management is that it has to deduct the income-tax on this interpretation, otherwise it would be made liable for the payment of tax under Section 201 of the Act. Normally a question of the nature raised in this petition is determined at the stage of assessment but having regard to the fact that the dispute involves a large number of employees and relates to the construction of certain provisions of the Act and the Rules made thereunder and touches the performance of the statutory function entrusted to an employer under Section 192 in making the deduction at source, it is desirable that the question be decided in this petition under Article 226 of the Constitution.

(3.) RULE 3 of the I.T. RULEs made under Section 295 deals with the valuation of perquisites. In so far as relevant, the rule reads as follows: