1982 (2) TMI 82 - AT - Income Tax

Summary

Issues:
- Whether the difference between the market rate of interest and the interest charged from the employee on a loan for house construction is a taxable perquisite under section 17(2)(iii)(c) of the Income-tax Act.
- Interpretation of the definition of "perquisite" under section 17(2) of the Act.
- Determination of the value of perquisite in cases not covered by specific rules.

Analysis:
1. The appeals before the Appellate Tribunal ITAT Ahmedabad-B involved the question of whether the difference between the market rate of interest and the interest charged from an employee on a loan for house construction constitutes a taxable perquisite under section 17(2)(iii)(c) of the Income-tax Act for the assessment years 1974-75 to 1977-78. The Revenue contended that the difference in interest amounts to a perquisite, while the assessee argued otherwise based on precedents and specific conditions attached to the loan.

2. The controversy revolved around the interpretation of the definition of "perquisite" under section 17(2) of the Act. The section defines "perquisite" inclusively, encompassing benefits or amenities granted to employees by employers. The Tribunal noted that any benefit or advantage received by an employee beyond regular salary amounts to a perquisite. The specific provision in section 17(2)(iii) includes benefits provided at a concessional rate, which applied to the case at hand.

3. The determination of the value of a perquisite not covered by specific rules was crucial in this case. Rule 3(g) of the Income-tax Rules, 1962, empowers the Income-tax Officer (ITO) to assess the value of any benefit or amenity not explicitly addressed in the rules. In this scenario, where the interest charged to the employee was at a concessional rate, it was deemed a benefit that could be taxed as a perquisite. The Tribunal emphasized the need for a fair and reasonable assessment of such benefits, considering all relevant factors like market rates and additional conditions attached to the benefit.

4. Ultimately, the Tribunal remitted the matter back to the ITO for reconsideration of the determination of the value of the perquisite for all relevant years. The decision highlighted the importance of assessing the value of benefits in a comprehensive manner, taking into account all relevant factors and conditions specific to each case. The appeals were treated as allowed for statistical purposes, pending the reassessment by the ITO based on the Tribunal's observations and guidelines.