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TMI Blog1983 (8) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... of right. The maximum amount of loan that can be granted to an employee is laid down. The rate of interest to be charged from the employee was 4 per cent per annum. The loan was to be repaid over a maximum period of twenty years in equal monthly instalments together with the interest as aforesaid. The employee has to authorise the employer to deduct the monthly instalments from his salary. Further, the employee has to sign a promissory note in favour of the employer for the full amount of the loan. In addition, the employee has to give a letter of authority to the employer to collect from the provident fund or gratuity payable to the employee, the amount of outstanding loan with interest due to the employer at the time of the termination of the employment. If the employee leaves the services of the employer, the whole outstanding balance of the loan together with the interest would become payable forthwith. The employee should undertake not to sell or otherwise dispose of the flat without obtaining the employer's prior consent in writing. The employer also reserved to itself the right to alter or amend the aforesaid scheme at any time as it may deem necessary. 4. The assessee be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is very great and this fact is well known to all. Hence, he urged that the whole issue has to be seen from a broad and humanitarian point of view instead of from a narrow technical view. However, he hastened to add that the case of his client did not rest on the above ground alone. He stated that the meaning of any particular provision in a statute has to be understood in the context and in the setting in which it appears. The particular context in which the definition of 'perquisite' appears in section 17(2) is the taxation of salaries in the hands of employees. He pointed out that the assessee's case could come only within item (c) of section 17(2)(iii) as he was neither a director nor a shareholder having substantial interest in the company. His case came under item (c) only because his salary just exceeded the sum of Rs. 18,000 (the salary income was, in fact, Rs. 19,179). He stated that the sum of Rs. 18,000 is not a big figure considering the value of money in real terms. In any case, the definition of 'perquisite' in terms of benefit or amenity granted by the employer to the employee has to be understood in that context. Evidently, one cannot take a too technical view and st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor was she subject to any of the various restrictive conditions laid down in the scheme of the employer of the assessee before us. It has also been held in that case that the advantage received by the employee must have a legal origin and any unauthorised advantage taken by the employee would not amount to a benefit or advantage for the purpose of section 17(2)(iii). However, in that case it was held that the director had authority to withdraw. In view of those distinguishing features, Shri N.A. Palkhivala contended, the decisions therein went against the assessee. He urged that the facts in the case before us are quite different and so the revenue authorities were not justified in relying on the said decision of the Madras High Court in the case of Late A.K. Lakshmi. 9. Then he referred to the decision dated 24-3-1981 of the Tribunal in the case of O.P. Khanna relied on by the learned AAC. He also referred to two other decisions of the Tribunal which have gone against the assessees. Those decisions are the one dated 10-2-1982 in the case of ITO v. M.G. Bagrecha Udhna [1982] 1 ITD 292 (Ahd.) and the other dated 3-7-1982 in the case of ITO v. Charanjit Singh [1982] 2 ITD 530 (Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the AAC. He strongly relied on the aforesaid Madras High Court decisions as well as the decisions of the Tribunal which have gone in favour of the department. He referred to a later decision of the Madras High Court in the case of CIT v. S.S.M. Lingappan [1981] 129 ITR 597 for the proposition that even in the case of a collateral agreement, the advantage can be taxed as perquisite. He then took us through the language of section 17(2). He contended that once the relationship of employer and employee is established and a benefit or an amenity is granted by the employer to the employee free of cost or at concessional rate, section 17(2) comes into play. According to him, the assessee before us did receive a benefit in the form of concessional rate of interest for the loan granted to him by his employer. Consequently, he urged that the order of the AAC deserved to be upheld. 12. Shri N.A. Palkhivala replied that it is very difficult to call the loan taken by the assessee, on payment of interest and after agreeing to very stringent conditions, a benefit or amenity. He pointed to the statement of facts filed by the assessee before the AAC, wherein it is stated that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions in the cases of D.D. Khavilkar and B.C. Shah. In these two latter cases also, the loan was given on stringent conditions regarding its use and repayment at an interest of 4 per cent per annum. We have gone through the aforesaid orders in detail and we are in respectful agreement with the same. We have considered the decision in the case of S.S.M. Lingappan relied on by the learned representative for the department, but, we find that the only principle laid down therein is that even if a benefit is conferred unilaterally without the aid of any agreement between the parties, the benefit could be a perquisite under section 17(2)(iii). This is a principle which does not affect our conclusion already arrived at. This decision merely states that even in the absence of a collateral agreement, there can be a perquisite. This decision does not say that the presence of a collateral agreement will not make any difference as to whether the employee received any benefit or advantage which can be called a 'perquisite'. Hence, we do not find anything in this judgment which helps the department, or which requires any modification in the conclusion already arrived at by us. 14. We also find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business or profession', namely, section 28(iv) of the Act, which says that any benefit or perquisite arising from the business or the exercise of a profession has to be taxed under the head 'Profits and gains of business or profession'. No such corresponding provision is there in section 17. Consequently, it is not enough that the benefit should arise to an employee from his employer. In addition to the above, the benefit should be relatable to his contract of service, i.e., it should be a part of the remuneration for the normal services rendered by him. We find indirect support for this conclusion of ours in the decision in the case of T. T. (P.) Ltd. v. ITO [1980] 121 ITR 551 (Kar.). Hence, the assessee before us cannot be said to have received any benefit for the purpose of taxation as perquisite under section 17. This leads us to the question as to whether it can be taxed under the head 'Income from other sources'. For this, we have to look into the inclusive definition of 'income' under section 2(24)(iv) of the Act. However, on going through the language of section 2(24)(iv), we find that it does not apply to an employee like the assessee before us. Further, it cannot be sai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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