Standard rent paid by employees of nationalised bank for accommodation provided by the bank is not a perquisite within the meaning of Section 17(2) of the Income-tax Act.

( 1 ) THIS appeal is directed against the judgment of a. learned single judge of this court dated April 19, 1994. By the said judgment, the learned judge relying upon a decision of this court in the case of Indian Bank Officers' Association v. Indian Bank [1994] 209 ITR 72, disposed of the writ petition filed by the writ petitioner and the rule was made absolute in terms of prayers (a) and (b) of the writ petition.

( 2 ) THE writ petitioner-respondent No. 1 is an association of officers of the Vijaya Bank--a Government of India undertaking. It was alleged that the writ application was filed by respondent No. 1 for and on behalf of and representing the association of officers of the respondent-bank. The respondent-bank is a nationalised bank and is governed by the provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and in exercise of the powers conferred by Section 19 read with subsection (2) of Section 12 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, the board of directors of the Vijaya Bank in consultation with the Reserve Bank of India and with the previous sanction of the Central Government made a regulation known as Vijaya Bank (Officers) Service Regulations. Regulation 25 of the said Regulations provides that no officer shall be entitled as of right to be provided with residential accommodation by the bank ; it shall, however, be open to the bank to provide residential accommodation on payment by the officer of 6 per cent. of the pay in the first stage of the scale of pay in which he is placed or the standard rent for the accommodation, whichever is less.

( 3 ) ADMITTEDLY, the bank has provided residential accommodation to certain officers of the bank and is charging standard rent. Section 15 of the Income-tax Act provides for charging income-tax on the salaries of the employees. Section 17 (1) of the said Act further provides that the salary includes perquisites. What is perquisite is defined in Clause (2) of Section 17 of the Income-tax Act which is as follows :" (2) 'perquisite' includes - (i) the value of rent-free accommodation provided to the assessee by his employer ; (ii) the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer. "

( 4 ) A plain reading of the aforesaid provision shows that if any accommodation is given to an employee of the bank as a rent-free accommodation, the same comes within the meaning of 'perquisite'. Further, any accommodation given to an employee at the concessional rate of rent could also attract Sub-clause (ii) of Clause (2) of Section 17 of the Act meaning thereby that it will also be perquisite and chargeable to income-tax. In the year 1990, the respondent-bank issued a circular to all its branches informing them that in cases where the employees are paying standard rent for the accommodation provided by the bank, the same shall not be treated as accommodation given to them at a concessional rate. It was further clarified that such accommodation is not a perquisite and therefore is not chargeable to income-tax. This circular, however, was sought to be modified by another circular dated October 14, 1992, by providing that the standard rent recovered by the bank in the case of accommodation provided to the employees, is not a fair rental value and as such it is a perquisite to be calculated as per Rule 3 (b) of the Income-tax Rules, 1962.

( 5 ) THE above circular gives rise to a writ petition under Article 226 of the Constitution by the employees of the respondent-bank as stated above. The contention advanced on behalf of the writ petitioners was accepted by the learned trial judge and that is how the Income-tax Department has come up in appeal before us.

( 6 ) THE short question that arises for consideration is as to whether standard rent paid by the employees of the respondent-bank towards their accommodation allotted to them by