1982 (3) TMI 99 - AT - Income Tax

Summary

Issues:
1. Whether the concessional rate of interest on a loan provided by the employer to the employee constitutes a perquisite under section 17(2)(iii) of the Income-tax Act, 1961.

Detailed Analysis:
1. The judgment dealt with the issue of whether a concessional rate of interest on a loan provided by an employer to an employee should be considered a perquisite under section 17(2)(iii) of the Income-tax Act, 1961. In this case, the assessee, an employee of LIC, had taken a loan for house construction at a concessional rate of 5% interest, while the normal rate charged by LIC to customers was 10 1/2%. The Income Tax Officer (ITO) added 5 1/2% interest as a perquisite, which was contested in appeal by the assessee.

2. The Appellate Tribunal considered the arguments presented by both parties. The counsel for the assessee contended that as interest is a matter regulated between the employer and employee, no benefit accrues, and thus, the sum added as a perquisite was unjustified. On the other hand, the departmental representative supported the lower authorities' decision and cited precedents to justify the treatment of the concessional interest as a perquisite.

3. The Tribunal analyzed the provisions of section 17(2)(iii) of the Income-tax Act, which define a perquisite to include any benefit or amenity provided at a concessional rate to an employee by the employer. Referring to a previous judgment and expert opinions, the Tribunal concluded that the concessional rate of interest on the loan should indeed be considered a benefit and treated as a perquisite. The Tribunal upheld the ITO's decision to add the amount as a perquisite for each year under appeal.

4. The Tribunal also referenced a previous decision by the Madras High Court and a judgment by the same Tribunal bench in a similar case, where it was held that an interest-free loan provided by an employer to an employee constitutes a benefit and qualifies as a perquisite. These precedents supported the Tribunal's decision in the current case.

5. Ultimately, the Tribunal ruled that the concessional rate of interest granted by the employer to the assessee was a benefit and should be treated as a perquisite under section 17(2)(iii) of the Income-tax Act. Consequently, the Tribunal upheld the decision of the ITO to add the specified amount as a perquisite for each year under appeal, leading to the dismissal of the appeals.

This detailed analysis highlights the interpretation of the relevant legal provisions, the application of precedents, and the reasoning behind the Tribunal's decision on the issue of whether concessional interest on a loan constitutes a perquisite under the Income-tax Act.