RUMA PAL, J.

(1.) Two questions arise for determination in this case : "(1) Whether accommodation provided by a nationalised bank for which rent is fixed under the Regulations of the bank is a perquisite within the meaning of Section 15 read with Section 17(1)(iv) and Section 17(2) of the Income-tax Act, 1961 (referred to as the) (2) Whether the demand for tax treating such accommodation as perquisites could be made retrospectively "

(2.) The petitioners are employees of the Indian Bank. The Indian Bank is a nationalised bank and is governed by the provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. In exercise of the powers conferred by Section 19 read with Sub-section (2) of Section 12 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, the board of directors of the Indian Bank in consultation with the Reserve Bank of India and with the previous sanction of the Central Government made the Indian Bank (Officers) Service Regulations, 1979 (referred to as "the Regulations"). In terms of the Regulations, the standard rent in respect of accommodation owned by the bank and given to the employee for occupation has been defined as follows : "1. For the purposes of this regulation, standard rent means--(a) in the case of any accommodation owned by the bank, the standard rent calculated in accordance with the procedure for such calculation in vogue in the Government ; (b) with effect from April 1, 1990, where accommodation has been hired by the bank, contractual rent payable by the bank or rent calculated in accordance with the procedure in (a) above, whichever is lower."

(3.) Regulation 25 may also be noted in this context. "25. On and from November 1, 1987, 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. Provided that a further sum equal to 11/2 per cent. of pay in the first stage of the scale of pay will be recovered by the bank from an officer if furniture is provided at such residence. Provided further that, where such residential accommodation is provided by the bank, the charges for electricity, water, gas, and conservancy shall be borne by the officer."

(4.) The petitioners had been paying rent in accordance with the standard rent as fixed by the Regulations to the bank in respect of the accommodation given to them by the bank. Till recently such accommodation was never treated as a perquisite by the income-tax authorities. On June 19, 1992, the bank sought to add the value of the accommodation occupied by the petitioners as a perquisite under Section 17 of thecalculated under Rule 3(a)(ii) of the Income-tax Rules, 1962 (referred to as "the rule"), to the total income of the petitioners. Deductions were accordingly sought to be made by the bank from the petitioners on such basis. Deductions were sought to be made not only for the current year but also for the financial year ending on March 31, 1992. Being aggrieved by the action on the part of the Indian Bank, the petitioners filed this writ application in April, 1993.

(5.) An interim order was passed restraining the respondents from realising any amount on account of income-tax on the basis of the perquisite value of the accommodation subject to certain terms and conditions. The interim order which was granted on April 7, 1993, is still operating.

(6.) Although directions were given for filing of affidavits, no affidavit-in-opposition has been filed by the respondent-authorities till date. Indeed, even at the hearing, the facts, as narrated above, have not been disputed by any of the respondents. The question is one of interpretation. Section 15 of theprovides for chargeability to income-tax of salaries. Section 17(1), inter alia, provides that salary includes perquisite. "Perquisite" has been defined in Section 17(2), The definition, in so far as it is relevant, 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."

(7.) The question, therefore, is whether there was any concession in the matter of rent respecting the accommodation provided by the Indian Bank to the petitioners. In my view, the question of concession must be determined with reference to the nature of the accommodation provided, the normal rent payable in respect of such accommodation by other employees similarly situated and lastly the actual rent paid by the assessee-employee concerned. In this case it is undisputed that the petitioners are, in fact, paying the rent which has been fixed in accordance with the Regulations and all employees similarly situated as the petitioners are making payment of rent in the same manner and to the same extent as the petitioners are doing. It cannot, therefore, be said that the petitioners are at all enjoying any concession within the meaning of Section 17(2)(ii) of the. This view has also been taken by a Division Bench of the Madhya Pradesh High Court in the case of Officers Association, Bhilai Steel Plant v. Union of India [1983] 139 ITR 937. [LQ/MPHC/1980/287] Singh C. J. had to consider a fact situation which is substantially identical with the one before this court. His Lordship held that a case of concession in the matter of rent would arise when the rent normally payable for the accommodation is higher than the rent paid.

(8.) That the standard rent as fixed by the Government or other authorities is acceptable as the normal rent for the purpose of determining the question of concession is apparent from the language of Rule 3(a)(i)(1). Rule 3 provides for the valuation of perquisites. In other words, where there is a concession or perquisite, such perquisite is to be computed in the manner provided by the rules. The rules themselves do not seek to fix any liability which has not been so done under Section 17(2) of the. Under Rule 3(a)(i)(1) if a Government official is occupying rent-free accommodation, the valuation of the perquisite is to be determined "in accordance with the rules framed by Government for allotment of residences to its officers". The argument sought to be put forward by learned counsel on behalf of the income-tax authorities that under Rule 3(a)(ii)(B)(1), the petitioners must be held to be enjoying perquisite because they were paying less than 10 per cent. of the salary, is putting the cart before the horse. The question of perquisite must be determined before the question of computing the value of such perquisite arises. By following the method of valuation provided, the income-tax authorities cannot then determine the existence of the perquisite. Furthermore, to read a portion of the rule relied upon by the income-tax authorities in the manner contended, would be at variance with the provisions of Section 17(2) of the. The rule cannot be permitted to be read in a manner beyond the powers conferred under the substantive provisions of the.

(9.) Additionally, this argument was specifically negatived in the judgment of the Officers Association, Bhilai Steel Plant v. Union of India [1983] 139 ITR 937 (MP) [LQ/MPHC/1980/288] . The reasoning given by the Division Bench of the Madhya Pradesh High Court is unexceptionable and I adopt the same with due respect.

(10.) It would be illogical to determine the norm of the rent payable with reference to the paying capacity of the occupant. Whether the rate of rent is concessional or not, must be the accommodation related and not based on a variable factor such as a percentage of pay irrespective of the nature of the accommodation.

(11.) I am emboldened to take the view that I have by two letters written by the income-tax authorities, copies whereof have been produced by the petitioners at the hearing. These letters have been written by the public relations officer of the Income-tax Department, Calcutta, to various public sector undertakings, which would be similarly situated as the Indian Bank in this case. Briefly stated, the contents of the letters were that if an employee is provided with an accommodation and standard rent as fixed by the appropriate authority is realised from the employee, then the question of perquisite does not arise. The standard rent in this case has been fixed by the appropriate authority as far as the petitioners are concerned and as such the question of the petitioners enjoying any perquisite by reason of the accommodation enjoyed would not arise.

(12.) Having come to this conclusion, the question of realising any income-tax on the basis of the notional value of the alleged perquisite enjoyed by the petitioners retrospectively does not arise. Accordingly this writ application is allowed. The respondents are restrained from making any deduction or payment treating the accommodation occupied by the petitioners at the rate of rent fixed under the "regulations" as perquisite within the meaning of Section 17(2) of the. The circular/messages dated June 19, 1992, September 11, 1992, March 39, 1993, and March 22, 1993, issued by the respondents in this connection are set aside. Any deduction made on the basis of the circulars must he returned to the employees concerned. In view of this decision, the undertaking given by the petitioners stands discharged. There will he no order as to costs.

(13.) The petitioners will be entitled to intimate the gist of the operative portion of this order to the respondents.