TaxTMI 
TaxTMI 
1986 (1) TMI 171
X X X X Extracts X X X X
X X X X Extracts X X X X
.... alone but that the loan was given jointly by the bank to the assessee and his wife and that, therefore, the question of adding anything by way of perquisite did not arise. The ITO did not accept the above contention of the assessee and he pointed out that the entire loan of Rs. 3,03,000 had been advanced by the employer bank to the assessee under 'Banking Housing Loan Scheme' contained in the staff Circular No. 400 dt. 19th May, 1973 and that under the aforesaid scheme of the bank only the permanent employees of the bank were eligible for obtaining the loan and that even though the loan could be available also in the name of the spouse yet it was to the advanced to both jointly and severally and the loan was given to the employee, as as he was in employment with the bank and that such a loan could not have been given to him, if he had not been an employee of the bank or to his wife, if she were not in employment. The basic connection of the employer and employee must subsists before the bank granted the loan and, therefore, granting the loan to the employee at the concessional rate would amount to providing perquisite to the employee, because it amounted to a benefit of raising lo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of any benefit. The question was rightly answered by the High Court in the affirmative. In the Instant case the employer bank has charged interest though in the opinion of the ITO, it was the concessional rate of interest. Since the addition made by the ITO on account of perquisite under s. 17(2)(iii) is based on the market rate of interest and not on the cost to the bank-the addition made by the ITO in respect of perquisite cannot be upheld." 6. The Revenue is in appeal against the aforesaid order of the ld. AAC and it is urged by the ld. Departmental representative that the granting of loan @ 4 per cent and 12.5 per cent rate of interest was without doubt a concessional rate, because, at the above rates, the bank never advanced loans to its customers. The loans at the above rates of interest were advanced to the assessee only because he was an employee of the bank and as such the loan in question had to be regarded as given at concessional rate. For finding out as to whether or not a loan was given at concessional rate of interest, one had to ask whether the other customers would be given loans at the same interest, if not, the loan in question at the above rates would be con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stion should be deleted and the ld. AAC was justified in deleting the same. 8. We have given careful consideration to the facts of the case and rival submission. Clauses (iii) of sub-s. (2) of s. 17 of the IT Act, 1961 reads, so far so its relevant for our purpose, as below: "perquisite" includes- (iii) the value of any benefit or amenity grated or provided free of cost or at concessional rate in any of the following cases- (a) x x x (b) x x x (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. The assessee's salary in terms of the aforesaid cl. (c) was Rs. 43,290 in the accounting period corresponding to 1978-79 when the loan in question was given by the Punjab & Sind Bank to the assessee. His salary was thus above Rs. 18,000. Punjab & Sind Bank is the employer of the assessee. Therefore, if it can be shown that a benefit or amenity has been granted by the said bank of the assessee an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is so, there would be a benefit granted to the assessee by the employer and such benefit would be taxable in terms of s. 17(2)(iii). 10. The approach of the ld. AAC to determine whether or not the loan advanced to the assessee @ 4 per cent and 12. 5 per cent is at concessional rate was in our opinion wrong because he compared the rate of advancing of the loan with the cost of the said loan to the bank. The ld. AAC did not even ascertain the cost of the loan to the bank and proceeded on the footing that the cost was not lower than 4 per cent and as such no concession was involved. Apart from the above lacuna in the approach of the ld. AAC, the test evolved by her, namely, the comparison of the cost of the loan with the rate at which the loan was advanced by the bank to the assessee is, in our opinion, erroneous. Whether or not there was concessional rate of interest has to be determined with reference to the interest chargeable by the bank from its normal customers, and not with reference to its cost of raising the amount which was given by way of loan. The loan in question was given by the bank @ 4 per cent to the extent of Rs. 2,50,000 and Prima facie the aforesaid rate is conc....