TaxTMI 
TaxTMI 
2009 (11) TMI 132
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....ioner, All India Punjab National Bank Officers' Association, is aggrieved by the deduction of tax at source by the authorities of the bank, respondents Nos. 1 to 3 in respect of interest- free loans given to the members of the Officers' Association. Respondents Nos.1 to 3 have issued a Circular for taxing the said loans as the rate of interest being charged from the members of the Association is less than the lending rate of the State Bank of India. It is contended that rule 3 of the Income-tax Rules, 1962, (for short "the 1962 Rules") has been amended by Notification No.271 of 2007 dated November 7, 2007, and is made applicable for the assessment year 2008-09, that is the financial year April 1, 2007 to March 31, 2008. It is urged that vide circular dated January 24, 2008, respondents Nos.1 to 3 have included loan available at concessional rate of interest under the head "Salaries" by treating such loan as a perquisite in case it is less than the SBI lending rate. 3. It is contended that the petitioner Association and its employees had approached this court challenging the constitutional validity of rule 3 and this court in W. P. No.1572 of 2002 dealt with the facet whether the....
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....lia, that the contention raised by the petitioner that interest-free loan or loan at concessional rate of interest provided by the employer satisfies the ingredients of a perquisite by virtue of section 37(2) (vi) and the method of valuation of the perquisite has been laid down in rule 3(7) (i) and hence, the petitioner's reliance on the decision of Arun Kumar[2006] 286 ITR 89 (SC) is misplaced. It is contended that the said decision was only in relation to concession in the matter of rent in respect of any residential accommodation provided by an employer to its employees. In the said decision, the constitutional validity of rule 3 was upheld. As there was no deeming provision in section 17(2)(ii) in the matter of concession in rent the apex court held that it is open to the assessee to contend that there is no "concession" in the matter of accommodation provided by the employer to the employees but the present case with regard to interest stands on a different footing. It is urged that section 17(2)(vi) states that the value of any other fringe benefit or amenity as may be prescribed received by an employee from the employer shall be treated as a perquisite and be liable to tax. ....
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....tax which would be deducted at source or it should be treated as machinery provision and be determined at the time of assessment. The learned counsel for the petitioners has submitted that if the language of sub-clause (i) of clause (7) of rule 3 is read in the proper perspective, it would mean that the value of the benefit to the assessee resulting from interest-free or concessional loan has to be determined as per the basis provided thereafter and hence, the significant term is "concessional loan". The existence of concession, contends the learned counsel for the petitioner, becomes a jurisdictional fact which has to necessarily exist before valuation thereof can be ascertained. The adoption of the SBI interest rate as the yardstick for determining the value and then treating it as a concession is contrary to the principles laid down in Arun Kumar [2006] 286 ITR 89 (SC). It is urged that the factum of concessional loan or otherwise has, therefore, to be determined first before proceeding to apply the second part of the rule relating to valuation of the concessional loan. In this backdrop, Mr. Sumit Nema, learned Counsel who has led the arguments, submitted that the existence of c....
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....unt of such loan or interest is charged at a rate lower than the rate of interest which the Central Government having regard to the rate of interest charged from its employees on loans for such purposes granted to them specified in this behalf by notification in the Official Gazette, an amount calculated on certain basis which would be regarded as "perquisite" received by the employee and charged to tax accordingly. The said amendment was intended to take effect from April 1, 1985. However, subsequently the Finance Act, 1985, omitted the aforesaid provisions with effect from the date of their insertion, i.e., April 1, 1985. At this juncture, it is apposite to mention that, after clause (vi) was inserted in section 17(2) of the Amendment Act, 1984, the income-tax Rules were amended by incorporating rule 3A to give effect to clause (vi). The said rule 3A was also deleted after the omission of sub-clause (vi) of section 17(2). 10. It would not be out of place to refer to certain decisions of various High Courts to indicate how there has been delineation with regard to interest subsidy. In P. V. Rajagopal v. Union of India [1998] 233 FIR 678 (AP') the High Court of Andhra Pradesh ha....
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....of the relevant previous year in respect of loans for the same purpose advanced by it on the maximum outstanding monthly balance as reduced by the interest, if any, actually paid by him or any such member of his household: SBI lending rates are as follows: As on 1-4-2006 For the assessment year 2007-08 As on 1-4-2007 for the assessment year 2008-09 Housing Loan Up to 5 years Above 5 years 8.50% 10.25% But up to 10 years 8.75% 10.75% Above 10 years But up to 15 years 9.00% 10.75% Above 15 years But up to 20 years 9.25% 10.75% Car Loan for new car Up to 3 years (Rs.7.5 lakh**) 8.00% 11.5% Up to 3 years 8.50%* (below Rs.7.5 lakhs**) 8.75%# 11.75% Above 3 years 8.75%* But up to 7 years 9.25%# Two wheeler loan Education loan Loan amount Up to Rs.4 lakhs 10.50% 11.50% Loan amount Above Rs.34 lakhs 11.50% 13.25% Personal Loan 12.75% 15.25% * Applicable in the case of metro/urban b....
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....ntly clear that the Legislature has intended to value the concessional loan for the purpose of arriving at the value of the concession by making a simple calculation of the difference between the State Bank rate and the rate paid by the employee. Rule 3 has been held valid in the decisions which have been referred to by Mr. Rohit Aiya, learned senior counsel for the Revenue. Apart from those decisions, it has also been held valid in Tata Workers' Union v. Union of India [2002] 256 ITR 725 (Jharkhand); [2002] 123 Taxman 426, Aditya Cement Staff Club v. Union of India [2003] 131 Taxman 609; [2004] 266 ITR 70 (Raj) and All India State Bank of Indore Officers' Co-ordination Committee v. CBDT [2004] 134 Taxman 303 (MP). 17. In this context, we may refer with profit to certain paragraphs from the decision rendered in Arun Kumar [2006] 286 ITR 89 (SC). In paragraph 18, their Lordships opined that the definition of the term "perquisite" covers various items mentioned in section 17(2) and the definition is inclusive in nature and not exhaustive. In paragraph 71, it has been held as follows (page 117): "The word 'concession' has neither been defined in the Act nor in the Rules. Accordi....