(Per : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1) The petitioner No.1 is an association of officers and employees of the fourth respondent Oriental Bank of Commerce, whereas the petitioner No.2 is its secretary. By way of this petition under Article 226 of the Constitution of India, the petitioners seek a direction against the respondents not to treat the difference between deductions actually made from the salary income of any Officer employee of the fourth respondent being provided with a residential accommodation by such bank and 10% of the salary of any such employee assessee as a 'perquisite' within the meaning of section 17(2) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for the purposes of deduction of tax at source from the salary of any such employee. The petitioners also seek a direction to the respondents to refund to the concerned Officer employee of the fourth respondent any amount of tax deducted at source from the salaries of such employees on the basis of treating the difference between the deductions actually made from the salary income of any officer employee of a public sector bank on account of being provided with residential accommodation by such bank and 10% of the salary as a “perquisite' within the meaning of section 17(2) of the Income Tax Act, 1961.
2) The grievance voiced by the petitioners in the present petition is that in the light of the provisions of section 17(8) of the Act, read with section 15 thereof, the standard rent is determined by all public sector banks at similar rates for all similarly placed officers. Accordingly, the fourth respondent bank had been treating the standard rent or 6% of the salary in the first stage of the scale of pay of any officer employee, whichever is lower, as fair rental value for the purpose of calculation of valuation of “perquisite” in respect of provision of residential accommodation to all its eligible officers including the members of the petitioner No.1. It is the case of the petitioners that the Income Tax Authorities by seeking to add the differential amount of 10% of the salary of the members of the petitioner No.1 and the standard rent recovered from the officers to their other salary income by labeling such amount as 'perquisite' without taking into consideration the house rent allowance, is arbitrary and unreasonable. It is in the aforesaid factual background that the petitioners have filed the present petition, seeking the reliefs noted hereinabove.
3) Mr. R. A Mishra, learned advocate for the petitioners submitted that the third respondent is of the opinion that the standard rent is not a fair rent and hence, 10% of the salary is more than the standard rent payable by him. Therefore, the difference between the two should be added to the salary income in order to compute the tax deductible at source. It was submitted that the interpretation made by the respondents does not take into an account that an employee who is provided accommodation does not to merely pay standard rent or 6% of the first stage of his salary scale whichever is lower, but in fact such an employee forfeits his entire entitlement to House Rent Allowance (H.R.A.). It was argued that respondents have erred in applying the provisions of rule 3 of the Income Tax Rules, 1962 (hereinafter referred to as “the Rules”) inasmuch as the object of the said rule is the determination of value of 'perquisite' chargeable to tax. The rule operates at the stage where a finding is independently recorded that the employee is in receipt of any perquisite as defined in section 17(2) of the Act. The rule applies only for determining the value of the perquisites when the fact of receipt of perquisite is independently established. But the same cannot be used to determine whether the officer is really is in receipt of any perquisite. It was submitted that the respondents cannot follow rule 3 first and then determine the existence or absence of the perquisite as is being done in the case of present petitioners. It was, accordingly, submitted that the members of the petitioner No.1 are not getting any perquisite as far as residential accommodation is concerned and, as such, the deduction of 10% of the salary by equating the same with fair rental value and standard rent is legally wrong and unsustainable. The petition, therefore, deserves to be allowed and that the members of the petitioner No.1 are entitled to refund of the amount deducted by way of 10% of the salary of the employee as perquisite under section 17(2) of the Act.
4) On the other hand, Ms. Mauna Bhatt, learned advocate appearing on behalf of the respondents No.2 and 3 invited the attention of the court to the decision of the Supreme Court in the case of Arun Kumar & Ors. v. Union of India & Ors., (2006) 286 ITR 89 (SC) to submit that the controversy involved in the present case stands concluded by the said decision in favour of the revenue and against the assessee and as such the petition deserves to be dismissed.
5) The Supreme Court in the case of Arun Kumar & Ors. v. Union of India & Ors. (supra), wherein while challenging the constitutional validity of rule 3 of the Rules, similar contentions as advanced in the present case had been raised, inter alia, held thus:
“65. As we have already indicated earlier, Rule 3 prior to its amendment in 2001 was totally dif- ferent. It dealt with the method of calculation of concession keeping in view the concept of “fair rental value”. In the light of the prin- ciple and phraseology in Rule 3, the rule-making authority provided an opportunity to the assessee to satisfy the assessing officer that the rent sought to be recovered from the employee could not be said to be “concession” as it was “fair rent”, “reasonable rent”, “market rent” or “standard rent'. When the rule is amended and the concept of “fair rental value” has been done away with and the only method which has been adopted is to calculate the rent on the basis of popula- tion of the city in question, it cannot be suc- cessfully contended that the intention of the rule-making authority was to afford an opportun- ity to the assessee to convince the assessing of-
ficer that the rent recovered by the employer from his employee was not in the nature of con- cession. Nor a court of law would, by interpret- ative process, grant such opportunity to the as- sessee so as to enable him to convince the as- sessing officer that the rent fixed was not covered by Section 17(2)(ii) of the Act and therefore was not a “perquisite”. We are, there- fore, unable to accept the argument of Mr Salve and allow import of the principles of natural justice in Rule 3.”
“71. But in our opinion, the fundamental question of applicability of Section 17(2) of the Act still remains. It cannot be gainsaid that Section 17(2) would apply only if there is “perquisite”. Indisputably, the definition of “perquisite” is inclusive in nature and takes within its sweep several matters enumerated in clauses (i) to (vii). Section 17(2)(ii) declares that the value of any “concession” in the matter of rent re- specting any accommodation provided to the em- ployee by his employer would be “perquisite”. Nevertheless it must be a “concession” in the matter of rent respecting any accommodation provided by the employer to his employee.”
“73. It is, therefore, clear that before Section 17(2)(ii) can be invoked or pressed into service and before calculation of concession as per Rule 3 is made, the authority exercising power must come to a positive conclusion that it is a con- cession. “Concession”, in our judgment is, thus a foundational, fundamental or jurisdictional fact.
74. A “jurisdictional fact” is a fact which must exist before a court, tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on existence or non- existence of which depends jurisdiction of a court, a tribunal or an authority. It is the fact upon which an administrative agency's power to act depends. If the jurisdictional fact does not exist, the court, authority or officer cannot act. If a court or authority wrongly assumes the existence of such fact, the order can be ques-
tioned by a writ of certiorari. The underlying principle is that by erroneously assuming exist- ence of such jurisdictional fact, no authority can confer upon itself jurisdiction which it oth- erwise does not possess.”
“84. From the above decisions, it is clear that existence of “jurisdictional fact” is sine qua non for the exercise of power. If the jurisdic- tional fact exists, the authority can proceed with the case and take an appropriate decision in accordance with law. Once the authority has jur- isdiction in the matter on existence of “juris- dictional fact”, it can decide the “fact in is- sue” or “adjudicatory fact”. A wrong decision on “fact in issue” or on “adjudicatory fact” would not make the decision of the authority without jurisdiction or vulnerable provided essential or fundamental fact as to existence of jurisdiction is present.
85. In our opinion, the submission of Mr Salve is well founded and deserves to be accepted that “concession” under clause (ii) of sub-section (2) of Section 17 of the Act is a “jurisdictional fact”. It is only when there is a “concession” in the matter of rent respecting any accommodation provided by an employer to his employee that the mode, method or manner as to how such concession can be computed arises. In other words, conces- sion is a “jurisdictional fact”; method of fixa- tion of amount is “fact in issue” or “adjudicat- ory fact”. If the assessee contends that there is no “concession”, the authority has to decide the said question and record a finding as to whether there is “concession” and the case is covered by Section 17(2)(ii) of the Act. Only thereafter the authority may proceed to calculate the liability of the assessee under the Rules. In our con- sidered opinion, therefore, in spite of the legal position that Rule 3 is intra vires, valid and is not inconsistent with the provisions of the par- ent Act under Section 17(2)(ii) of the Act, it is still open to the assessee to contend that there is no “concession” in the matter of accommodation provided by the employer to the employee and hence the case did not fall within the mischief of Section 17(2)(ii) of the Act.”
“92. xxxxxxx We are of the view that Rule 3 would apply only to those cases where “concession” has been shown by an employer in favour of an employ- ee in the matter of rent respecting accommoda- tion. Thus, whereas “charging provision” is found in the Act of Parliament [Section 17(2)(ii)], “machinery component” is in the subordinate le- gislation (Rule 3). The latter will apply only after liability is created under the former. Un- less the liability arises under Section 17(2)(ii) of the Act, Rule 3 has no application and the method of valuation for calculating concessional benefits cannot be resorted to.”
6) The court, accordingly, held that though rule 3 of the rules cannot be held arbitrary, discriminatory or ultra vires article 14 of the Constitution nor in- consistent with the parent Act (section 17(2)(ii)), it is in the nature of a “machinery provision” and ap- plies only to the cases of “concession” in the matter of rent respecting any accommodation provided by an employer to his employees. Whether or not Parliament could have in the exercise of legislative power cre- ated a “deeming fiction” as to concession in the mat- ter of rent in certain cases (for which the court did not express any final opinion), no such deeming provi- sion is found in the Act. It is, therefore, open to the assessee to contend that there is no “concession” in the matter of accommodation provided by the employ-
er to the employees and the case is not covered by section 17(2)(ii) of the Act.
7) The grievances voiced by the petitioners, there- fore, substantially stand redressed by the aforesaid decision of the Supreme Court. However, insofar as the reliefs prayed for in the petition are concerned, it is the Association which has come before this court. As to whether or not concession has been provided to a particular employee is a question of fact which would differ from assessee to assessee and as such no omni- bus relief can be granted qua all the employees. As held by the Supreme Court in the aforesaid decision, it is open to the assessee to contend that there is no concession in the matter of accommodation provided by the employer and that the case is not covered by sec- tion 17(2) of the Act. Under the circumstances, if in case of any individual member of the petitioner No.1 association tax had been wrongly deducted at source on an application of rule 3 of the Rules, it is for the concerned assessee to claim refund of the same in ac- cordance with the provisions of the Act and the Rules. In the absence of any factual foundation for claiming the relief prayed for in the petition, it is even oth-
erwise not possible to grant any omnibus relief as prayed. Further, assessment proceedings of each em- ployee would be separate. We do not know the stages of such proceedings and if any such contention was taken without touching such assessment proceedings, pray- ers made cannot be granted. The petitioner has even claimed refund of access tax collected. Refund claims are governed by statutory provisions and cannot be ordered in a writ petition that too without ascertain- ing individual facts and details of assessment pro- ceedings.
8) In the light of the aforesaid discussion, it is not possible to grant the relief prayed for in the petition. Subject to the observations made hereinabove, the petition, is dismissed with no order as to costs.
(AKIL KURESHI, J.)
Vahid
(HARSHA DEVANI, J.)