Interest subsidy under a housing loan scheme treated as taxable perquisite when employer pays lender on employee's behalf.

Interest subsidy paid by an employer to a financing agency under a House Building Advance Scheme was treated as a taxable perquisite under the Income-tax Act because it discharged an amount that would otherwise have been payable by the employee. The scheme allowed employees to borrow through outside agencies, while the employer met the difference between the company rate and the higher external borrowing rate. On that basis, the subsidy fell within the statutory concept of perquisite under section 17(2)(iv) and was not exempt merely because the employees did not themselves remit the amount. The challenge to tax deduction therefore failed.

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Issues: Whether the interest subsidy paid by the employer to the financing agency on behalf of employees under the House Building Advance Scheme constitutes a taxable perquisite under the Income-tax Act.

Analysis: The Scheme permitted employees to obtain house-building loans through outside agencies, with the employer meeting the difference between the company rate and the higher outside borrowing rate by way of subsidy. The governing provision treated as perquisite any sum paid by an employer in discharge of an obligation which would otherwise have been payable by the employee. On that footing, the subsidy paid by the employer to the lender on behalf of the employees was held to fall within the statutory concept of perquisite and was not exempt merely because the employees were not directly disbursing the amount themselves.

Conclusion: The interest subsidy is a taxable perquisite under section 17(2)(iv) of the Income-tax Act, 1961, and the challenge to the tax deduction fails.

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