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Issues Involved:
1. Whether accommodation provided by a nationalised bank for which rent is fixed under the Regulations of the bank is a perquisite within the meaning of section 15 read with section 17(1)(iv) and section 17(2) of the Income-tax Act, 1961? 2. Whether the demand for tax treating such accommodation as perquisites could be made retrospectively? Issue 1: The petitioners, as employees of a nationalised bank, were provided accommodation by the bank for which rent was fixed under the Regulations of the bank. The question was whether this accommodation constituted a perquisite under the Income-tax Act. The petitioners had been paying rent in accordance with the standard rent fixed by the Regulations. The income-tax authorities sought to add the value of the accommodation as a perquisite under section 17 of the Act. The court analyzed the definition of "perquisite" under section 17(2) and concluded that since the petitioners were paying rent in accordance with the Regulations and all employees similarly situated were doing the same, there was no concession in the matter of rent. The court referred to a similar case from the Madhya Pradesh High Court and held that a concession in rent arises when the rent normally payable is higher than the rent paid. Issue 2: The court further examined the valuation of perquisites under rule 3 of the Income-tax Rules, 1962. It was argued by the income-tax authorities that the petitioners must be considered as enjoying a perquisite because they were paying less than 10% of their salary as rent. However, the court rejected this argument, stating that the method of valuation provided in the rules cannot determine the existence of a perquisite. The court emphasized that the norm of rent payable should be accommodation-related and not based on a variable factor like a percentage of pay. The court also considered letters from the Income-tax Department stating that if standard rent fixed by the appropriate authority is realized from the employee, the question of perquisite does not arise. Conclusion: The court concluded that the petitioners were not enjoying any perquisite by reason of the accommodation provided by the bank. Therefore, the demand for income tax on the basis of the alleged perquisite was not valid. The court allowed the writ application, restraining the respondents from treating the accommodation as a perquisite and setting aside circulars issued in this regard. Any deductions made based on these circulars were to be returned to the employees. The petitioners were discharged from their undertaking, and there was no order as to costs.
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