KRISHNA MURTHY P Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this writ petition, the petitioner-assessee has brought in challenge the refusal of the assessing authority to grant him exemption from computing taxable income of an amount of Rs. 3,556 being interest subsidy. The assessing authority took the view that as a welfare measure the company reimbursed the interest paid in case of the Central Government Employees House Building Advance Rules and the interest reimbursed is assessable to tax under s. 17(2)(iv) of the IT Act, 1961 (hereinafter referred to as the 'Act'), since the assessee would have paid even if the employer had not reimbursed it. It was further held that the Chairman, CBDT has clarified that the interest subsidy is not taxable when the employer borrows money and in turn advances it to its employees. It was also further held that since the assessee directly borrowed loan from HDFC, his claim for exemption could not be considered and the interest subsidy reimbursed is assessable under the head 'Salary'; and, therefore, Rs. 3,556 was added to the returned income for computation of tax. The assessee moved the matter before the revisional authority, who in exercise of the power under s. 89(1) of the Act (sic) dismissed the revision by holding that there was no reason to interfere with the order under revision. That is why the assessee is before us.

(2.) THE contention canvassed by the learned counsel for the petitioner-assessee that the interest subsidy is not liable to tax, is fully covered by a decision of this Court in CIT vs. M.K. Vaidya, ITRC Nos. 161 and 162 of 1987, decided on 11th June, 1992, by a Division Bench consisting of K. Shivashankar Bhat and R. Ramakrishna, JJ. [reported at (1995) 126 CTR (Kar) 420] THE Division Bench has held that the legislature never intended to treat up the interest as perquisite under s. 17 (2)(iii) of the Act. THE referred question was considered and answered by the Division Bench in the affirmative in favour of the assessee and against the Revenue.