TMI Blog2009 (11) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... rvedj, J. P. S. Oberai, H. C. Kohli, Anoop Nair, Ms. Snehlata Dixit and Sanjeev Tuli for the respondent. JUDGMENT DIPAK MISRA J. - Regard being had to the similarity of the controversy involved in this batch of writ petitions, they were heard analogously and are disposed of by a single order. For the sake of clarity and convenience, the facts in W. P. No. 3222 of 2008 are exposited herein. 2. The petitioner, All India Punjab National Bank Officers' Association, is aggrieved by the deduction of tax at source by the authorities of the bank, respondents Nos. 1 to 3 in respect of interest- free loans given to the members of the Officers' Association. Respondents Nos.1 to 3 have issued a Circular for taxing the said loans as the rate of interest being charged from the members of the Association is less than the lending rate of the State Bank of India. It is contended that rule 3 of the Income-tax Rules, 1962, (for short "the 1962 Rules") has been amended by Notification No.271 of 2007 dated November 7, 2007, and is made applicable for the assessment year 2008-09, that is the financial year April 1, 2007 to March 31, 2008. It is urged that vide circular dated January 24, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Circular No. FD/HO/A T/CIR No.3 of 2008, dated January 24, 2008, contrary to the decision of the apex court in so far as the valuation of perquisites in respect of loan at concessional rate of interest is being made with reference to the SBI lending rates while the same should be made with reference to the cost to the employer which is unsustainable. 5. A return has been filed by respondents Nos.1 and 2 contending, inter alia, that the contention raised by the petitioner that interest-free loan or loan at concessional rate of interest provided by the employer satisfies the ingredients of a perquisite by virtue of section 37(2) (vi) and the method of valuation of the perquisite has been laid down in rule 3(7) (i) and hence, the petitioner's reliance on the decision of Arun Kumar [2006] 286 ITR 89 (SC) is misplaced. It is contended that the said decision was only in relation to concession in the matter of rent in respect of any residential accommodation provided by an employer to its employees. In the said decision, the constitutional validity of rule 3 was upheld. As there was no deeming provision in section 17(2)(ii) in the matter of concession in rent the apex court held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... senior counsel with Mt V. K. Pandey, Mr. Praveen Chaturvedi, Mr. J. P. S. Oberai, Mr. H. C. Kohli, Mr. Anoop Nair, Ms. Snehiata Dixit and Mr. Sanjeev Tuli, learned counsel for the respondents. 7. The single question that emerges for consideration is whether the loan granted by the employer at the rate of interest below the rate of interest on State Bank of India loan be regarded as a concessional loan and thereby would be amenable to tax which would be deducted at source or it should be treated as machinery provision and be determined at the time of assessment. The learned counsel for the petitioners has submitted that if the language of sub-clause (i) of clause (7) of rule 3 is read in the proper perspective, it would mean that the value of the benefit to the assessee resulting from interest-free or concessional loan has to be determined as per the basis provided thereafter and hence, the significant term is "concessional loan". The existence of concession, contends the learned counsel for the petitioner, becomes a jurisdictional fact which has to necessarily exist before valuation thereof can be ascertained. The adoption of the SBI interest rate as the yardstick for determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he law relating to the same. It is worth noting that section 17(2) of the Act was inserted by the Taxation Laws (Amendment) Act, 1984. Sub-clause (vi) of clause (2) of section 17 of the Act which came to be inserted by the Amendment Act, 1984, stipulates that where the employer had advanced any loan for the purpose of building a house or purchasing a site or a house and a site or for purchasing a motor car, either no interest is charged by the employer on the amount of such loan or interest is charged at a rate lower than the rate of interest which the Central Government having regard to the rate of interest charged from its employees on loans for such purposes granted to them specified in this behalf by notification in the Official Gazette, an amount calculated on certain basis which would be regarded as "perquisite" received by the employee and charged to tax accordingly. The said amendment was intended to take effect from April 1, 1985. However, subsequently the Finance Act, 1985, omitted the aforesaid provisions with effect from the date of their insertion, i.e., April 1, 1985. At this juncture, it is apposite to mention that, after clause (vi) was inserted in section 17(2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of interest-free loan or loan at concessional rate of interest. The value of the benefit to the employee resulting from the pro vision of interest-free or concessional loan for any purpose made available to the employee or any member of his household, during the relevant previous year by the bank or any person on bank's behalf shall be determined as the sum equal to the interest computed at the rate charged per annum by the State Bank of India, as on the 1st day of the relevant previous year in respect of loans for the same purpose advanced by it on the maximum outstanding monthly balance as reduced by the interest, if any, actually paid by him or any such member of his household: SBI lending rates are as follows: As on 1-4-2006 For the assessment year 2007-08 As on 1-4-2007 for the assessment year 2008-09 Housing Loan Up to 5 years Above 5 years 8.50% 10.25% But up to 10 years 8.75% 10.75% Above 10 years But up to 15 years 9.00% 10.75% Above 15 years But up to 20 years 9.25% 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he guidelines in which area the rule-making power can be exercised. It includes the determination of the value of any perquisite chargeable to tax under the Act. Thus, it is quite express that the manner and the basis of the method is left to the rule-making authority. It is apposite to note here that the method has been devised in rule 3 as regards the manner and basis for ascertaining the value of concessional loan, clause (7) of rule 3 has to be read in conjunction with sub-clause (i) which follows it. That seems to us to be the intendment of the rule and when they are read conjointly, it gets abundantly clear that the Legislature has intended to value the concessional loan for the purpose of arriving at the value of the concession by making a simple calculation of the difference between the State Bank rate and the rate paid by the employee. Rule 3 has been held valid in the decisions which have been referred to by Mr. Rohit Aiya, learned senior counsel for the Revenue. Apart from those decisions, it has also been held valid in Tata Workers' Union v. Union of India [2002] 256 ITR 725 (Jharkhand); [2002] 123 Taxman 426, Aditya Cement Staff Club v. Union of India [2003 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the existence of such fact, the order can be questioned by a writ of certiorari. The underlying principle is that by erroneously assuming the existence of such jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not possess." 20. Thereafter, their Lordships, proceeded to state what is jurisdictional fact and expressed the opinion as under (page 118): "In Halsbury's Laws of England , it has been stated: 'Where the jurisdiction of a Tribunal is dependent on the existence of a particular state of affairs, that state of affairs may be described as preliminary, to, or collateral to the merits of the issue. If, at the inception of an inquiry by an inferior Tribunal, a challenge is made to its jurisdiction, the Tribunal has to make up its mind whether to act or not and can give a ruling on the preliminary or collateral issue but that ruling is not conclusive'." 21. Eventually, their Lordships, while upholding the constitutional validity of rule 3 of the Rules, held thus (page 126): "In view of our order passed in Civil Appeal No. 3270 of 2003, Transferred Cases Nos. 101 and 102 of 2006 stand disposed of." 22. From the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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