TMI Blog2006 (6) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners from various financial institutions is not a perquisite coming under section 17(2) of the Income-tax Act, 1961, hereinafter called the "Act" for the purpose of deduction under section 192 of the Act. The petitioners are relying on the decision of the Karnataka High Court reported in CIT v. M. K. Vaidya [1997] 224 ITR 186 (Appex.) and the decision of the Andhra Pradesh High Court in P. V. Rajagopal v. Union of India [1998] 233 ITR 678 for the proposition that interest subsidy granted by the employer is not a perquisite to be subjected to deduction of tax at source on salary. Standing counsel appearing for the Income-tax Department contended that in the above two decisions, the courts have considered only the interest subsidy paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as originally introduced. By introducing clause (vi) to section 17(2) Parliament made it clear that interest concession given by the employer to employees for the loan advanced forms a perquisite. In view of this specific inclusion of interest incentive as a perquisite under clause (vi) the High Courts of Karnataka and Andhra Pradesh took the view that section 17(2)(iii) does not cover interest incentive. In other words, interest concession granted by the employer to the employee would not have been perquisite, but for the inclusion of sub-clause (vi) to section 17(2) which was later deleted with effect from the date on which it was introduced. Even though the Karnataka High Court has not considered the scope of sub-clause (iv) of section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in this regard is upheld. However, I find it would be discriminatory and violative of article 14 of the Constitution of India to permit deduction of tax at source on interest subsidy borne by the employer in the form of direct payment to the financial institution which grants loan to the employees, while granting exemption of interest subsidy or interest incentive given by the employer directly to the employee. In both the cases, the incentive is one and the same that is interest concession granted by the employer to the employee. lam of the view that if a perquisite directly paid by the employer to the employee is not to be taxed, then it should not be taxed merely because payment is made directly by the employer on behalf of the emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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