2003 (12) TMI 24 - HC - Income Tax

By this application the petitioners being the Officers Organisation of the Corporation Bank have challenged the taxability of the use of furniture at concessional hire rent. Under the direction of the Income-tax Department, the bank concerned has treated this use of the furniture to be a perquisite under section 17(2)(iii) Petitioner submit that the rate of hire of furniture being charged by the employer has not been accepted judicially as being a concessional one so as to treat the same as perquisite under the aforesaid section. - held that the furniture supplied at a particular hiring rate by the employer to the employee cannot be treated to be a concessional rate

Summary

Issues:
Challenge to taxability of use of furniture at concessional hire rent under section 17(2)(iii) of the Income-tax Act, 1961.

Analysis:
The petitioners, as the Officers' Organisation of a bank, contested the taxability of using furniture at concessional hire rent, following a directive from the Income-tax Department. The officers could avail the furniture facilities at a fixed rate of 2.05% of the basic pay as per the service rules. If not utilized, no monetary benefit was provided. The bank contended that the furniture was supplied at a rate lower than the market rate as a standard practice. The petitioners argued that the employer's hiring charges for furniture were not concessional, citing a previous judgment. The court noted that the bank's statement on market rates did not establish a concessional rate, as hypothetical comparisons were irrelevant. Differentiating scenarios where furniture was rented at higher rates and then provided at lower rates were not presented in the bank's submission. The court upheld the previous judgment, ruling that the concept of a concessional rate was not applicable in this case.

The respondents argued that the value of the furniture provided to officers at a lower rate constituted a taxable perquisite. They contended that the term "perquisite" in section 17(2) was inclusive, and the concession should be evaluated based on market values. The court reviewed the bank's affidavit and rejected the argument that the hiring rate was concessional, as it did not demonstrate a marked differentiation in rates or inter-employee variations. The court found no reason to deviate from the previous judgment and allowed the writ petition in favor of the petitioners.

In conclusion, the court ruled in favor of the petitioners, holding that the hiring charges for furniture at a purportedly concessional rate could not be considered taxable under section 17(2)(iii) of the Income-tax Act, 1961. The court directed the issuance of a writ in line with the petition's prayers, without imposing any costs. The interim order's undertaking was discharged, and parties were instructed to requisition a signed copy of the order for their records.