1998 (4) TMI 58 - HC - Income Tax

Summary

Issues Involved:
1. Inclusion of perquisite value for residential accommodation in taxable salary income.
2. Discrimination in tax treatment among employees in different states.
3. Legitimacy of trade unions challenging tax deductions on behalf of employees.

Summary:

1. Inclusion of Perquisite Value:
The primary issue in these writ petitions is whether the difference between the standard rent and 10% of the salary for residential accommodation provided by the employer constitutes a taxable perquisite u/s 17(2) of the Income-tax Act. The petitioners argue that there is no perquisite when accommodation is provided at standard rent, as per rule 45-A of the Fundamental Rules. The court found that the Income-tax Department had coerced employers into making higher tax deductions by incorrectly assuming a perquisite existed. The court clarified that a perquisite arises only if the rent charged is concessional, which was not established in this case.

2. Discrimination in Tax Treatment:
The petitioners highlighted that employees in other states were not subjected to the same tax treatment, leading to discrimination. The court noted that there was a glaring inconsistency where employees in Calcutta were not taxed on the same basis as those in Andhra Pradesh. The court emphasized that such discrimination is untenable and that the Revenue's actions were illegal and unreasonable.

3. Legitimacy of Trade Unions Challenging Tax Deductions:
The Revenue's technical objection that trade unions cannot espouse the personal income-tax issues of employees was dismissed by the court. The court recognized that the trade unions were acting in the interest of the employees' welfare and service conditions, which are affected by improper tax deductions. The court appreciated the unions' intervention as it prevented unnecessary litigation for thousands of employees.

Conclusion:
The court issued a mandamus restraining the respondents from treating standard rent charged for accommodation provided by the employer as a concession for the purpose of deducting income-tax at source. The writ petitions were allowed with costs of Rs. 1,000 each.