Court rules standard rent paid by nationalized bank employees not taxable under Income-tax Act

The court ruled that the standard rent paid by employees of a nationalized bank for accommodation provided by the bank did not constitute a "perquisite" chargeable to income tax. The court found that the standard rent, being uniform for all employees without preferential treatment, did not amount to a concession or perquisite under section 17 of the Income-tax Act. Additionally, the court clarified that the rent being less than 10% of employees' salaries did not trigger taxation under rule 3(b) of the Income-tax Rules, as there was no concession in rent. The appeal was dismissed, affirming that the standard rent paid was not taxable.

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Issues involved: Interpretation of whether standard rent paid by employees of a nationalized bank for accommodation provided by the bank constitutes a "perquisite" chargeable to income tax.

Summary:
The judgment pertains to an appeal against a decision where a writ petition was made absolute in favor of an association of officers of a nationalized bank, challenging the treatment of standard rent paid for bank-provided accommodation as a perquisite under the Income-tax Act. The bank, under its regulations, provided residential accommodation to officers on payment of standard rent. The Income-tax Department contended that the standard rent should be considered a perquisite under section 17 of the Income-tax Act, attracting income tax. The court analyzed the definition of "perquisite" under section 17(2) of the Act, which includes rent-free accommodation and concessional rent as perquisites chargeable to tax. The court examined whether the standard rent paid by employees constituted a concession, crucial for determining if it qualified as a perquisite. It was established that the rent paid was uniform for all employees as per regulations, without any preferential treatment, leading to the conclusion that the standard rent did not amount to a concession or perquisite.

The Income-tax Department argued that the rent being less than 10% of employees' salaries should be considered a perquisite under rule 3(b) of the Income-tax Rules, 1962. However, the court clarified that rule 3(b) applies only when there is a concession in rent, which was not the case here. Therefore, the court dismissed the appeal, upholding that the standard rent paid by employees for bank-provided accommodation was not a perquisite chargeable to income tax. The judgment was delivered by V. N. Khare, Chief Justice, and Barin Ghose, J., with the latter concurring.

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