TaxTMI 
TaxTMI 
1998 (4) TMI 58
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....es of house rent charged were brought on par with the rates charged for the Central Government employees under rule 45-A of the Fundamental Rules and fixed as standard rents on the basis of the plinth area of the accommodation provided irrespective of the location of the accommodation anywhere in India. For the assessment year 1992-93 the Income-tax Officer Ward-4 Visakhapatnam issued notices to the some of the employees stating that the difference between 10 per cent. of the salary and the standard rent paid by them was a perquisite under section 17(2) of the Income-tax Act and had to be included in the income assessable under the head "Salary". This was contested and in the appeal all those appeals were allowed by the Deputy Commissioner (Appeals). However the Income-tax Officer Ward-6 TDS Visakhapatnam treated the Nigam as an assessee in default for not deducting the tax at source with reference to the said perquisite and levied a sum of Rs. 31.20 lakhs in respect of the assessment year 1994-95 corresponding to the financial year 1993-94. The Nigam filed an appeal which was dismissed. Thereupon the Nigam issued a circular dated February 5, 1996, to the employees proposing to ded....
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....r. But thereafter the house rent was rationalised on par with the Central Government employees governed by rule 45A of the Fundamental rules and accordingly only the standard rent was charged. For the assessment year 1996-97 Hindustan Shipyard included the difference between the standard rent and ten per cent. of the pay as a perquisite for the purpose of deduction of tax at source. It is claimed that there was no perquisite in providing accommodation on a standard rent and a direction is sought to that effect. Counter affidavit has been filed by the Income-tax Officer as the second respondent in W.P. No. 4400 of 1996. It is stated that the standard rent being less than 10 per cent. of the salary the employees enjoy accommodation at a concessional rent which had to be valued and added as a perquisite. It is also stated that the order passed under section 201 against the Nigam was confirmed in appeal and therefore the employees cannot collaterally challenge that action against the employer. Learned counsel for the petitioners submitted that the issue whether the difference between the standard rent and 10 per cent. in the salary could be treated as perquisite has been decided ....
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....ection 17(2) defines "perquisites" to include (ii) the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer. Rule 3 of the Income-tax Rules provides for valuation of perquisites. According to sub-rule (a) the value of the rent-free residential accommodation (unfurnished) provided to a Government servant is taken as the rent which would be payable by the Government servant in accordance with the rules framed by the Government for allotment of residences. In the case of others it is taken as 10 per cent. of the salary. Sub-rule (b) states "the value of residential accommodation provided at a concessional rent shall be determined as the sum by which the value computed in accordance with clause (a) as if the accommodation provided free of rent exceeds the rent actually payable by the assessee for the period of his occupation during the relevant previous year." A reading of these two sub-rules will at once indicate the difference in treatment between the Government servant and others. In the case of Government servants the rent-free accommodation is valued at the standard rent. Consequently, if accommodation is provided at s....
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.... respect of the same type of accommodation. In other words the import of concession is similar to the import of rent-free accommodation. Where others pay rent and one employee is provided rent-free accommodation there is a perquisite and the value of that perquisite is the rent paid by the others. Similarly only if an employee pays less than what other employees for similar accommodation pay can it be said that there is a concession. In our considered opinion there can be no concession at all where all employees are treated alike and standard rents are charged in respect of the same type of accommodation. In fact the rents charged had been rationalised looking to the nature of the accommodation provided removing the anomaly where 10 per cent. of the salary is deducted irrespective of the nature of the accommodation provided. As pointed out by the Calcutta High Court in Indian Bank Officers' Association vs Indian Bank [1994] 209 ITR 72, it would be illogical to determine the norm of rent payable with reference to the paying capacity of the employee which is variable in respect of the nature of the accommodation which is fixed. It is also stated that the rationalisation achieved b....