ORDER
R. JAYASIMHA BABU, J:
The petitioner is an association of officers of the Union Bank of India, which is a nationalised bank. They seek a mandamus forbearing the Chief CIT and the CWT as also their employer from treating the difference between the deductions actually made from the salary income of any officer employee of a public sector bank on account of being provided with a residential accommodation by such bank and 10 per cent of the salary of such employee as perquisite within the meaning of s. 17(2) of the IT Act.
2. The affidavit filed by the General Secretary of the association is lacking in relevant factual details. It merely proceeds to set out legal argument without the requisite foundation of facts.
3. The learned counsel for the employer bank submitted that the accommodation provided to its officers is the accommodation owned by the bank and not taken on hire by the bank. The learned senior counsel for the Revenue fairly stated that if the employer chooses to fix a particular rate as a rate of rent for the accommodation owned by it and made available to its employees, the determination so made by the employer cannot be normally regarded as concessional rate of rent, as it is for the owner to decide the rate of rent to be charged to its employees, who are allowed to occupy the building owned by the employer.
4. Insofar as the accommodation hired by the employer and provided to the employee is concerned, the learned senior counsel for the Revenue submitted that in cases where the employer collects a lesser sum from its employee, though it pays a higher sum to its lessor, that difference would certainly amounts to a concession and to the extent of the difference between 10 per cent of the salary of the employee and the amount actually collected from the employee, it would amount to a perquisite for the purpose of s. 17(2) of the IT Act. The submission so made by the learned senior counsel for the Revenue is one, which merits acceptance.
5. Sec. 17(2) of the IT Act defines perquisite in an inclusive way. Sec. 17(2)(i) of the said Act refers to the value of rent free-accommodation provided to the assessee by its employer. Sec. 17(2)(ii) of the said Act refers to the value of any concession in the matter of rent in respect of any accommodation provided to the assessee by its employer. Rule 3 of the IT Rules, which deals with valuation of perquisites in sub-cl. (a) refers to the value of rent free-accommodation and the manner in which it shall be determined. Rule 3(b) of the said rules deals with the mode of computing the value of residential accommodation provided at a concessional rate.
6. Thus, what is required to be treated as a perquisite when a residential accommodation is provided to an employee by an employer is the value thereof in cases where the accommodation has been provided rent-free, as also in cases where the accommodation is provided at a concessional rate. Where an employer provides accommodation to its employees on a rental basis which is not concessional and which obviously is not provided rent-free, it is the actual rent that is required to be considered and not a notional rent. An employer, who builds residential building and apartments for the purpose of accommodating his employees does not do so as an investment with the object of obtaining highest monetary benefit by way of rent, but merely as a facility for his employees with a view to provide them with the basic comforts without which they may be unwilling to remain in the employment of the employer or may feel dissatisfied, which may affect their morale and ultimately productivity of the organisation. The difference between the market rate of rent on such accommodation, if the employer had to hire similar accommodation for the employee and the rate which the employee pays to the employer for occupying the accommodation owned by the employer cannot be treated as a perquisite. The term ‘concessional’ has not been defined in r. 3(b) and no guidelines are set out as to the circumstances in which a concession can be regarded as having been made.
7. Judicial notice can be taken of the fact that many employers should, normally as a welfare measure provide housing to their employees. The
Government also provides housing to its employees as housing being a basic necessity. It could not have been the intention of Parliament to compel all employers to charge the market rate on such accommodation provided to their employees in cases where the buildings are owned by the employers.
8. In the absence of any factual particulars in the affidavit and in the absence of any affidavit from the bank, it cannot be assumed that all the accommodation provided by the bank to its employees is accommodation which is owned by the bank. It is for the AO to make enquiries and decide as to whether r. 3(b) is not at all attracted having regard to the facts as ascertained by him.
9. While doing so, the AO shall keep in view the observations made in the course of this order. The declaration sought by the petitioner cannot be granted. However, liberty is reserved to the members of the petitioner association to place such facts as are relevant, if and when the AO seeks to treat any part of the value of the accommodation provided to them as a perquisite. It is open to the petitioner association to make a collective representation to the CBDT in this regard. The Board shall consider the same in accordance with law.
10. The writ petition is disposed of accordingly. No costs. Consequently, WMP No. 3120 of 1995 is dismissed as unnecessary.
OPEN