K. Shivashankar Bhat, J.—In respect of the assessment years 1978-79 and 1980-81, the following question has been referred under section 256(2) of the Income Tax Act, 1961 ("the Act", for short) :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in rejecting the Revenue's ground that the difference in interest rate between Government loans and that on the loan obtained by the assessee should be treated as perquisite ?"

2. The assessee was an employee of the company called "MICO". The company advanced him certain amounts as loan free of interest for the purpose of house building. That this was the policy adopted by the company and several employees had obtained such loans is not a matter in dispute. In the course of the assessment of the assessee, the assessing authority held that the interest-free loan was a benefit which should be valued as a perquisite.

3. The statement of the case actually does not indicate the basic question which was raised by the assessee before the assessing authority as well as before the Appellate Commissioner to the effect that the interest-free loan cannot be valued as a "perquisite" under section 17(2). However, both learned counsel admitted before the court that this question does arise and that is how the matter was fought out throughout and referred to the assessment order and the order of the Appellate Commissioner.

4. It was contended on behalf of the Revenue that the interest-free loan is a benefit which should be treated as a "perquisite" under section 17(2)(iii) and for the purpose of computation rule 3(g) is attracted and that the principle underlying clause (vi) inserted in section 17(2) by the Taxation Laws (Amendment) Act, 1984, could be looked at for this purpose.

Section 17(2)(iii) reads -

"'perquisite' includes - ....

(iii) the value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases -

(a) by a company to an employee who is a director thereof;

(b) by a company to an employee being a person who has a substantial interest in the company;

(c) by any employer (including a company) to an employee to whom the provisions of paragraphs (a) and (b) of this sub-clause do not apply and whose income under the head 'Salaries', (whether due from, or paid or allowed by, one or more employers), exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds twenty-four thousand rupees."

5. While clauses (a) and (b) cover the special cases of those employed by a company, clause (c) covers all categories of employees (Governmental and non-Governmental), including other categories of company employees), provided their salaried income is above Rs. 18,000. There is no income limit to attract the persons covered by clauses (a) and (b).

6. In the case of clause (c), those whose annual income under the head "Salaries" (as stated therein) is below Rs. 18,000 are not covered.

7. It is also clear that in case the interest-free loan or loan at a concessional rate of interest is a benefit, it would be a perquisite falling under clause (iii) of section 17(2). It can be valued under rule 3 of the Income Tax Rules, 1962. There is also no doubt that, if any particular set of employees is to be brought out of this net of taxation, normally Parliament would enact an exception or proviso to this clause, or by inserting an appropriate rule in the Rules, the benefit of non-inclusion can be extended, as was done by the Rules, immediately on the insertion of clause (vi). However, if already clause (iii) covered the subject of interest-free loan or loan given at a concessional rate of interest (for house building purposes), it was an unnecessary exercise for Parliament to insert clause (vi) to section 17(2), at the time of enacting the Taxation Laws (Amendment) Act, 1984.

8. In the Notes on Clauses appended to the Bill leading to the Taxation Laws (Amendment) Act, 1