ALL INDIA PUNJAB NATIONAL BANK OFFICERS' ASSOCIATION Vs. CHAIRMAN-CUM-MANAGING DIRECTOR, PUNJAB NATIONAL BANK

JUDGEMENT

(1.) 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 singular order. For the sake of clarity and convenience, the facts in Writ Petn. No. 3222 of 2008 are exposited herein.

(2.) THE petitioner, All India Punjab National Bank Officers' Association, is grieved by the deduction of tax at source by the authorities of the bank, the respondent Nos. 1 to 3 in respect of interest -free loan given to the members of the officers' association. The respondent 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 SBI. It is contended that Rule 3 of the IT Rules, 1962 (for short 'the 1962 Rules') has been amended by Notification No. 271 of 2007, dt. 7th Nov., 2007 and is made applicable for the asst. yr. 2008 -09 that is, the financial year 1st April, 2007 to 31st March, 2008. It is urged that vide circular dt. 24th Jan., 2008, the respondent Nos. 1 to 3 have included loan available at concessional rate of interest under the head 'Salaries' by treating such loan as a perquisite in case it is less than the SBI lending rate.

(3.) IT is urged that the determination of perquisite in the matter of concessional loan by comparing it to SBI PLR rate is arbitrary since the respondent -bank has to determine its own cost of funds and only thereafter can proceed to deduct tax in case their lending rate is less than the costs incurred by them. It is put forth that the petitioners are challenging the deduction of tax at source on the valuation of loans at concessional interest. It is put forth that the valuation of perquisite in the form, of loan at concessional rate or interest -free loan with reference to SBI lending rates is contrary to the decision rendered in Arun Kumar and Ors. (supra) wherein it has been held that before Section 17(2)(ii) can be invoked or pressed into service and before the calculation of concession as per Rule 3 is made, the authority exercising power must come to a positive conclusion that it is a concession. The determination of concession can only be made with reference to the cost to the employer and not with reference to any other third party's rate of interest because third party's rate of interest would also include the profit element of that party. In this background, a prayer has been made to declare the Circular No. FD/HO/A&T;/CIR No. 3 of 2008 dt. 24th Jan., 2008 as contrary to the decision of the apex Court insofar 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.