Concessional housing loan interest was not a taxable perquisite, as the withdrawn statutory amendment showed no operative intent to tax it.

The interest concession on an employer-granted housing loan to an employee was held not taxable as a perquisite under section 17(2)(iii) of the Income-tax Act, 1961. The Tribunal noted that although a clause had been inserted to tax the benefit arising from the gap between fair interest and concessional loan interest, that clause was withdrawn before it became operative. On that legislative sequence, the concession was treated as outside the perquisite definition at the relevant time, and the deletion of the addition was upheld.

---

---

Issues: Whether the difference between the market rate of interest and the concessional rate charged on a housing loan advanced by the employer to an employee constitutes a perquisite chargeable to tax under section 17(2)(iii) of the Income-tax Act, 1961.

Analysis: The competing Tribunal views and the Madras High Court authorities were noticed, but the decisive consideration was the legislative treatment of concessional housing loans. A specific clause was introduced into section 17(2) to bring within the definition of perquisite the benefit arising from the difference between fair interest and the interest charged on employer loans for house purchase, and that clause was withdrawn before it became operative. This legislative sequence was treated as indicating that the legislature did not intend, at the relevant time, to tax the interest concession as a perquisite under section 17(2).

Conclusion: The interest concession on the employer-granted housing loan was not taxable as a perquisite under section 17(2)(iii), and the deletion of the addition was upheld.

---