The Judgment of the Court was delivered by
Barin Ghosh, J.:— The principal reason to support the claims of the petitioners in this group of writ petitions is based on the pronouncement of a Division Bench of the Madhya Pradesh High Court in Officers' Association, Bhilai Steel Plant v. Union of India [1983] 139 ITR 937, which was followed by a learned single judge of this court in Indian Bank Officers' Association v. Indian Bank [1994] 209 ITR 72 and then by a Division Bench of this court, to which I was a party, in ITO v. All India Vijaya Bank Officers' Association [1997] 225 ITR 37, and lastly by the Division Bench of the Andhra Pradesh High Court in Steel Executives Association v. Rashtriya Ispat Nigam Ltd. [2000] 241 ITR 20.
2. Dr. Pal, who argued the case of one of the petitioners, submitted that similar questions are now being considered by the Supreme Court in a proceeding now pending before it, which has arisen out of a judgment delivered by a Division Bench of the Jharkhand High Court and where his clients have filed an application for transfer of the case of his clients, which is also now been considered by me along with other matters. Despite knowledge of the fact that the Supreme Court is considering similar questions, I have decided to deal with the matter for it appeared to me, upon perusing the judgment of the Division Bench of the Jharkhand High Court, that the issues raised by the petitioners before me were not dealt with by the Jharkhand High Court. The purpose of delivering this judgment was to get what the petitioners and the respondents wanted to submit and to analyse the same in order to help reaching a right conclusion and, accordingly, I have assured Dr. Pal that even if I am not with him, I would stay the operation of the present judgment until such time the Supreme Court decides the transfer application made by Dr. Pal's clients. In simple terms, the issue before me is what is the meaning of “concession in the matter of rent” as provided for in clause (2) of sub-clause (ii) of section 17 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”). Section 17(2), sub-clause (i) and sub-clause (ii) of the Act are 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;”.
3. The petitioners before me, on whose behalf Dr. Pal and Mr. Poddar have argued and assisted me to the hilt as well as other petitioners, have not been provided with any rent-free accommodation by their respective employers. All of them have been provided accommodation by their respective employers but they have been made to pay certain rent in relation thereto. There is no dispute that all such employers are companies fully owned by the Central Government or the State Government or companies owned by such companies. It was submitted by Dr. Pal on the basis of the pleadings filed by his clients that such rent had been fixed by the employer on the basis of the principle of fixing rent as adopted by the Central Government while fixing rent of accommodations provided by the Central Government to its own employees. Mr. Poddar has drawn my attention to the facts that in so far as his clients are concerned, their rents have been fixed on the basis of a direction of their employer based on the recommendations of the Fourth Pay Commission. He has submitted that the principle adopted in the matter of fixation of rent of the accommodations provided to his clients is no way dissimilar to those adopted by the Central Government.
4. Learned counsel for the petitioners has submitted that unless there is a concession in the matter of rent, it would not be a perquisite. They submitted that in order to ascertain whether there was any concession, one has to determine what was the rent. Once it is found that the rent is “X”, only then it can be ascertained whether there is any concession in the matter of rent and that can be verified by comparing the rent so found with the rent that is being paid. In other words, it was submitted that if the rent is Rs. 100 and the employee concerned has been asked to pay Rs. 50, then it can be construed, that the concession in the matter of rent is Rs. 50.
5. Principally, therefore, it was contended that the expression “rent” used in sub-clause (ii) of clause (2) of section 17 is the rent which is payable. It was submitted that if the rent under the said sub-clause is payable at a particular amount and if anything less than that is paid, then the difference would be concession. But if the rent payable is the rent, which is being paid in fact, then there will be no concession and, accordingly, there would be no scope of ascertaining the value of perquisite.
6. Learned counsel, therefore, submitted that the rent payable may vary from employer to employer. They submitted that when the landlord is, in fact, the Government, the rent payable in respect of the property is the rent which is fixed by the Government, for that cannot have any comparable price in the market. They submitted that when the tenancy is granted by any other person, he would grant such tenancy at a rent which is most beneficial to him and, accordingly, such rent would have a nexus with the market rent. Learned counsel, therefore, submitted that this is part of sub-clause (ii) of clause (2) of section 17 of the Act and should be read as such to give it a proper meaning. Learned counsel further submitted that this submission is the very foundation of the judgments referred to above, although those judgments were rendered when the rules for valuing such concession were different.
7. In the case before the Madhya Pradesh High Court the rent was fixed as the standard rent by the employer, which was a fully owned company of the Union of India, under rule 45A of the Fundamental Rules and the same was applied to the officers uniformly.
8. In the case before the learned single judge of this court, in terms of the Indian Bank (Officers) Service Regulations, 1979, the standard rent was fixed in accordance with the procedure for calculating standard rent in vogue in the Central Government and the same was applied to the petitioners before the hon'ble judge.
9. In the case before the Division Bench of this court, the standard rent was ascertained in terms of the provisions contained in the Vijaya Bank (Officers) Service Regulations and such standard rent was applied to the writ petitioners before the Division Bench. The petitioners before this court in the two cases, referred to above, were employees of statutory corporations.
10. The petitioners before the Andhra Pradesh High Court were employees of a fully owned Government company. Under the memorandum of settlement between the employer and the petitioners before the Andhra Pradesh High Court, the rates of house rent were brought on par with the rates charged for Central Government employees under rule 45A of the Fundamental Rules and were fixed as standard rent on the basis of the plinth area of the accommodation provided irrespective of the location of the accommodation anywhere in India.
11. In such circumstances, when, by applying the then rules for valuation of perquisites, an attempt was made to collect tax taking into consideration the difference between ten per cent, of the salary and the rent actually paid, the petitioners before the Madhya Pradesh High Court, before this court and before the Andhra Pradesh High Court approached the courts by filing writ petitions and in those, the above judgments were rendered.
12. The rule making power is provided in section 295 of the Act. The relevant portion thereof is as follows:
“(1) The Board may, subject to the control of the Central Government, by notification in the Gazette of India, make rules for the whole or any part of India for carrying out the purposes of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provided for all or any of the matters:—
(c) the determination of the value of any perquisite chargeable to tax under this Act in such manner and on such basis as appears to the Board to be proper and reasonable;”.
13. The above provision makes it clear that while granting power to make rules without any restriction by sub-section (1) of section 295, the Legislature furnished, amongst others, an example as to in which direction such rule making power can be exercised and held out that such rule making power can be exercised for determination of value of any perquisite chargeable to tax under the Act and while doing so made it explicit that though the manner and basis of such valuation is left with the rule making authority, but the same should be proper and reasonable.
14. In terms of such power, the previous rule, which was dealt with in the aforementioned judgment, had been made. Instead of setting out the same in the manner, it has been set out in the rules, I would set out the same category-wise. The first category would be the extent of the rule applicable to the Government employees and that is as follows:
“Rule 3. For the purpose of computing the income chargeable under the head ‘Salaries’, the value of the perquisites (not provided for by way of monetary payment to the assessee) mentioned below shall be determined in accordance with the following clauses, namely:—
(a) The value of rent-free residential accommodation shall be determined on the basis provided hereunder, namely:—
(i) where the accommodation is provided—
(A) by Government to a person holding an office or post in connection with the affairs of the Union or of a State;
(B) by a body or undertaking under the control of Government to any officer of Government whose services have been lent to that body or undertaking (the accommodation itself having been allotted to it by Government),
an amount equal to—
(1) if the accommodation is unfurnished, the rent which has been or would have been determined as payable by such person or officer in accordance with the rules framed by Government for allotment of residences to its officers;”
15. The applicable rule, as it stood then and was applicable to the employees of fully owned Government companies, was as follows:
“Rule 3. For the purpose of computing the income chargeable under the head ‘Salaries’, the value of the perquisites (not provided for by way of monetary payment to the assessee) mentioned below shall be determined in accordance with the following clauses, namely:—
(a) the value of rent-free accommodation shall be determined on the basis provided hereunder, namely:—…
(ii) where the accommodation is provided—…
(B) by a corporation established by a Central, State or Provincial Act, or by a company in which all the shares held (whether singly or taken together) by the Government or the Reserve Bank of India or a corporation owned by that bank, to any person employed by it;
(BB) by a company (not being a company referred to in sub-clause (ii)(B) or sub-clause (ii)(D)) in which all the shares are held by a corporation referred to in sub-clause (ii)(B) or by a company referred to in that sub-clause, to any person employed by it;….
an amount equal to—
(I) if the accommodation is unfurnished, 10 per cent, of the salary due to such person or officer, as the case may be, in respect of the period during which the said accommodation was occupied by him during the previous year:
Provided that where the assessee claims and the Assessing Officer is satisfied that the sum arrived at on the aforesaid basis exceeds the fair rental value of the accommodation, the value of the perquisites to the assessee shall be limited to such fair rental value;”
16. The applicable rule in relation to other employees, as the same stood then, was as follows:
“Rule 3. For the purpose of computing the income chargeable under the head ‘Salaries’, the value of the perquisites (not provided for by way of monetary payment to the assessee) mentioned below shallbe determined in accordance with the following clauses, namely:— …
(a) The value of rent-free residential accommodation shall be determined on the basis provided hereunder, namely:—
(iii) in any other case,—
(A) the value of rent-free residential accommodation, which is not furnished, shall ordinarily be a sum equal to ten per cent, of the salary due to the assessee in respect of the period during which the said accommodation was occupied by him during the previous year:
Provided that—…
(2) where the assessee claims, and the Assessing Officer is satisfied that the sum arrived at on the basis provided above exceeds the fair rental value of the accommodation, the value of the perquisites to the assessee shall be limited to such, fair rental value;…
Explanation 2.—For the purposes of sub-clause (iii), the fair rental value of accommodation, which is not furnished, shall be the rent, which a similar accommodation would realise in the same, locality or the municipal valuation in respect of the accommodation, whichever is higher.
17. The above rule also dealt with furnished accommodations. But since the petitioners before the courts, which delivered the judgments mentioned above, were all provided unfurnished accommodations, I have set out the applicable rules to the extent the same applied to unfurnished accommodation. It is to be kept in mind that in the rule nothing was mentioned separately in relation to valuation of concession. Therefore, when the previous rule was made, no separate attempt was made to devise a separate manner or basis of ascertaining the value of rent-free accommodation or the value of concession. What was done was to devise the manner and basis of ascertaining the value of rent-free accommodation. Whatever was paid less than the ascertained value of rent-free accommodation was treated to be the value of the concession.
18. The previous rule provided that in so far as pure Government servants are concerned, the value of rent-free accommodation would be the rent determined in accordance with the rules framed by the Government. If anything was paid less than such rent, the difference would become the value of the concession. It also provided that in the case of employees of companies fully owned by the Government or companies owned by such companies, the value of the rent-free accommodation would be ten per cent, of the salary of the employees who have been provided with such accommodation or the fair rental value of such accommodation, whichever is lower, provided such fair rental value is established. Anything paid by way of rent less than ten per cent, of the salary or less than the fair rent was to be treated as the concesison. In so far as others are concerned the previous rule provided that the value of the rent-free accommodation shall be ten per cent, of the salary or fair rental value, whichever is lower, with the mandate that such fair rental value should correspond with the market rate of rent available in the same locality or determined on the basis of municipal valuation, whichever is higher.
19. Normally, when an expression is used “fair rental value” without making any attempt to define the same, it would mean the reasonable rent. Since the fair rental value applicable to the employees of companies owned by the Government and of companies owned by such companies had not been defined and, on the other hand, what would be the fair rental value, in the case of others, had been defined, to my mind the question cropped up in the aforementioned judgments as to what should be the meaning of fair rental value used in the previous rule applicable to employees of companies owned by the Government and of companies owned by such companies.
20. At this juncture I think it would be proper to refer to certain observations of the courts in the aforementioned judgments. The Madhya Pradesh High Court, after having noted the provisions of sub-clauses (i) and (ii) of clause (2) of section 17 of the Act and after having had noted the then rule 3, observed, inter alia, as follows (see [1983] 139 ITR 940):
“Sub-clause (ii) of the definition of ‘perquisite’ in section 17(2) extends the meaning of that term by including therein ‘the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer’. It is ‘any concession in the matter of rent’ which falls within this clause. If the employer gives no concession to the employee in the matter of rent, there can be no question of any perquisite. 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. The definition of ‘perquisite’ does not say that if the rent paid by the employee is less than 10 per cent, of his salary, the difference will be deemed as perquisite….
The question whether an employee is in occupation of an accommodation at a concessional rent, in other words, the question whether the employee is in receipt of any concession in the matter of rent, would depend upon two factors: (i) the normal rent for the accommodation in occupation of the employee, and (ii) rent actually paid by the employee. If the employee is paying that rent which is the normal rent of the accommodation in his occupation, it cannot be said that he is receiving any concession in the matter of rent even though the rent paid by him is less than 10 per cent, of his salary. As earlier pointed out, there is no deeming clause in the definition of ‘perquisite’ contained in section 17(2) that once it is established that an employee is paying rent less than 10 per cent, of his salary it must be deemed that he is receiving a concession in the matter of rent and no such deeming clause can be inferred from rule 3. Indeed, if rule 3 were to be so construed, it will go beyond the rule making power conferred by section 295(2) and would become invalid. We are, therefore, clearly of the opinion that the management of the plant was not right in treating in every case the difference between 10 per cent, of the salary and the rent actually paid as a perquisite for the purposes of deduction of income-tax.”
21. Therefore, while construing what would be the fair rental value, the Madhya Pradesh High Court brought in the concept of normal rent for the accommodation. It held in other parts of the judgment that when the normal rent has been fixed by taking recourse to fundamental rule, that was the rent payable, which was also standardized and, accordingly, if that rent is paid, that should be treated to be the value of the said accommodation and if no rent is paid in relation thereto, the same would tantamount to be the value of the perquisite for a rent-free accommodation and if the same rent is being paid, there will be no concession and, accordingly, no question of valuing the concession will arise. It should be kept in mind that despite such pronouncement, the Madhya Pradesh High Court did not say that in every case the difference between ten per cent, of the salary and the rent actually paid should not be treated as perquisite. That made it explicit that in relation to every case, there may not be a fixation of the normal rent on the basis of the fundamental rules. The adoption of the concept of normal rent equivalent to fair rent by the Madhya Pradesh High Court in the facts and circumstances of that case on the basis of the rule then in force was quite justifiable.
22. This judgment of the Madhya Pradesh High Court was then followed by the learned single judge of this court in the aforementioned judgment. The learned single judge as a fact recorded that the petitioners before his Lordship had been paying rent in accordance with the standard rent as fixed by the regulation of the bank in respect of the accommodation given by the bank. His Lordship then observed as follows (see [1994] 209 ITR 75):
“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.”
23. His Lordship, thus, justified adoption of the normal rent as equivalent to the fair rental value in relation to the employees before his Lordship by holding that if the same rent was actually paid by all employees, who were similarly situated, then that should be treated to be the rent payable in respect of such accommodation, when the same is to be valued for the purpose of valuing the perquisite as rent-free accommodation and, accordingly, deduced that if such rent is paid, there would be no question of any concession. In this connection, the following observations of his Lordship may also be noted (see [1994] 209 ITR 76):
“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.”
24. The Division Bench of this court, while noting the disputes inter se the parties, which led to the lis, observed as follows (see [1997] 225 ITR 39):
“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.”
25. Having thus noted the dispute inter se the parties, the court proceeded to ascertain the method of determination of the value of the perquisite enjoyed by the employees concerned. The court observed (see [1997] 225 ITR 40):
“For determining whether standard rent paid by the employees of the bank for the accommodation provided to them by the bank is a ‘concession’, one has to ascertain the meaning of the word ‘concession’.”
26. After ascertaining the meaning of the word “concession”, the court observed (see [1997] 225 ITR 40):
“Therefore, in this context, we have to see as to whether the accommodation provided to the employees on payment of standard rent is a ‘concession’ within the meaning of sub-clause (ii) of clause (2) of section 17 of the Act. The question of concession depends on the nature of accommodation provided to the employee, namely, the normal rent payable for such accommodation, provided to the employees, by other employees similarly situated and employed by the same employer and the actual rent paid by the assessee-employee concerned. It is not disputed before us that the rent paid by all the employees is of uniform rate and there is no departure of any kind in favour of any of the employees.
27. In the Division Bench judgment of this court it was also held that the concept of normal rent equivalent to fair rent was introduced for the purpose of ascertaining the value of the perquisite if any. It was thus held that if the normal rent is to be treated as fair rent for the purpose of ascertaining the value of the rent-free accommodation and if the employee concerned is paying the self-same rent, there is no question of concession.
28. Similar view was expressed by the Andhra Pradesh High Court and a part of the judgment rendered by the Andhra Pradesh High Court, I think, clinches the issue. The same is as follows (see [2000] 241 ITR 24):
“A reading of these two sub-rules will at once indicate the difference in treatment between the Government servant and others. In the case of Government servants, the rent-free accommodation is valued at the standard rent. Consequently, if accommodation is provided at standard rent, there will be no perquisite because the actual rent paid will not be less than the value of the rent-free accommodation, both being standard rents.”
29. Therefore, all the courts on the basis of the then rule held that normal rent or standard rent fixed in accordance with a procedure adopted by the employer, which is either a company fully owned by the Government or a company owned by such companies, will be the applicable value of rent-free accommodation and if the employee concerned is paying such rent, there would be no concession. As aforesaid, these decisions were rendered when a distinction had been made in between fair rental value applicable to employees of companies owned by the Government or of companies owned by such companies and the fair rental value applicable to others.
30. Today the rule, with which I am concerned and which has been introduced by the Amendment effected with effect from April 1, 2001, is totally different and has no nexus with the previous rules at all. Before, however, I address myself to the present rules, it is my duty to point out that in the previous rule the method that had been provided was the method for ascertaining the value of the rent-free accommodation. The method of valuing the concession automatically followed. In other words, it was provided what would be the value of the rent-free accommodation in relation to different types of employees. Consciously a distinction had been made between pure Government employees, employees of Government companies and companies owned by such companies and others. It was devised that if anything was paid less than such value, the difference would be the value of the concession. In the present rule, instead of three categories of employees—pure Government employees, employees of Government companies and of companies owned by such companies and others, existence of two classes of employees has been thought-one is pure Government employees and the other is non-Government employees. The subject rule to the extent we are concerned here is as follows (see [2001] 251 ITR (St.) 81):
“The value of residential accommodation provided by the employer during the previous year shall be determined on the basis provided in the Table below:
SI. No.
Circumstances
Where the accommodation is unfurnished
(1)
(2)
(3)
(1)
Where the accommodation is provided by Union or State Government to their employees either holding office or post in connection with the affairs of Union or State or serving with any body or undertaking under the control of such Government on deputation.
Licence fee determined by Union or State Government in respect of accommodation in accordance with the rules framed by that Government as reduced by the rent actually paid by the employee.
(2)
Where the accommodation is provided by any other employer, and
(a)
where the accommodation owned by the employer, or
(i) 10% of salary in cities having population exceeding 4 lakhs as per 1991 census;
(ii) 7.5% of salary in other cities, in respect of the period during which the said accommodation was occu-pied by the employee during the previous year as reduced by the rent, if any, actually paid by the employee
(b)
where the accommodation is taken on lease or rent by the employer.
Actual amount of lease rental paid or payable by the employer or 10% of salary whichever is lower as reduced by the rent, if any, actually paid by the employee.”
31. The present rule, thus, does not address exclusively to devise the method and basis of ascertaining the value of rent-free accommodation; it also addresses to devise explicitly the method and basis of ascertaining the value of concession in the matter of rent. While, however, doing so it made the value of concession explicit, which was implied in the previous rule. While devising the same it has categorised two types of employees. The first of them are pure Government employees and the second of them are all other employees. In addition to that, it categorised two types of accommodations—one provided by the Government and the other provided by all others. In so far as the Government employees, who have been provided Government accommodations, are concerned, the rule says that the value of rent-free accommodation as perquisites would be the licence fee determined by the Government in accordance with the rules and the value of the concession would be the difference between such licence fee and the amount of rent paid by the employees. In so far as other employees, who have been provided accommodations by their respective employers, are concerned, the rule says that the value of rent-free accommodation would be ten per cent, of the salary if the accommodations are in certain cities and if the accommodations are in other cities, 7.5 per cent, of the salary and nothing else. The rule further provides that in relation to other employees, the value of the concession would be the difference between 10 per cent, or 7.5 per cent, of the salary, as the case may be, and the amount of rent actually paid. There is no scope for determination of fair rental value. The concept of fair rental value either on the basis of the normal rent or on the basis of the market rent available in the locality or on the basis of the municipal valuation has been done away with. It has said that when “X” is the value of the rent-free accommodation, then the amount paid less than “X” would be deemed to be the value of concession. How the value of “X” would be determined has been made explicit. One standard has been prescribed. There is now no scope of determining rent for non-Government employees on the yardstick of rent determined in accordance with the rules framed by the Government or by taking recourse to standard rent. To my mind, therefore, unless the above judgments have read the expression “normal rent” equivalent to “standard rent” in the expression “rent” occurring in sub-clause (ii) of clause (2) of section 17 of the Act, as was canvassed before me by learned counsel appearing on behalf of the petitioners, the said judgments have no bearing at all for the purpose of interpretation of the provisions contained in the present rules. Having regard to the provisions of the then rule, I do not think that was at all required at that time.
32. In the normal circumstances, the pure, simple and grammatical sense of the language used by the Legislature is the best way of understanding what the Legislature intended. If the Legislature intended that the meaning of the word “rent” as used in sub-clause (ii) of clause (2) of section 17 of the Act would be as has been set out above, the Legislature could have used the same in the section itself. That having not been done, the question that arises is whether the same can be read into it. In the ordinary parlance “rent” means periodical payment made for use of another's property, specially houses and lands. In other words, “rent” means charges for use of another's houses and lands. “Rent”, in the present context, would, therefore, mean charges for using unfurnished accommodation provided by the employer to its employees. That such charges should be normal or fair or standardised, is not a sine qua non. If while construing “rent”, as used in sub-clause (ii) of clause (2) of section 17 of the Act, it is assumed that the same means normal rent, fair rent as well as standardised rent, three possible situations will crop up, namely, rent comparable with market; rent, which has been adjudged to be fair; and rent, which has been standardised, which of these rents would then be taken note of? The rent comparable with the market would always be higher than rent adjudged to be fair or standardised, then which one should be taken note of? The question of ascertaining fair rent or standardising rent will arise when the quantum of rent comparable with the market can be ascertained. If the quantum of rent payable in respect of an accommodation comparable with the market cannot be ascertained, the question of ascertaining fair rent of such accommodations or standardising rent of such accommodations will not arise. Even then rent-free value of such accommodations is required to be ascertained for the purpose of valuation of perquisites. The Legislature brought sub-clause (ii) in clause (2) of section 17 of the Act after introducing sub-clause (i) of clause (2) of section 17 of the Act. These two sub-clauses should not be read in isolation. They were intended to be read together and if read together, it makes it abundantly clear, and as was done previously as well as done presently, that the Legislature intended to value the rent-free accommodation for the purpose of arriving at the value of the concession by making a simple calculation of the difference between the value of rent-free accommodation and the rent actually paid. I would, therefore, not read either fair rent or normal rent or standard rent in the expression “rent” used in sub-clause (ii) of clause (2) of section 17 of the Act, for there was no just reason, nor there is any such reason therefor at all.
33. This brings me to the last part of the submissions of Mr. Poddar. He submitted that there was no just reason for prescribing a standard for pure Government employees and yet another standard for employees of companies owned by the Government and of companies owned by such companies. It was submitted that many of the employees of the employer, being the clients of Mr. Poddar, are occupying the same accommodations belonging to the employer of his clients which are also being occupied by pure Government employees, for the Government has taken those accommodations from the employer of his clients under certain arrangements. Although no particulars had been furnished in relation thereto, but having regard to the fact that no affidavit-in-opposition has been filed to the writ petition filed by the clients of Mr. Poddar and it having not been pointed out in the affidavit-in-opposition that such allegations are vague, the clients of Mr. Poddar had no opportunity to supply particulars in relation thereto, and as such I would proceed on the basis that such statements do represent facts. Mr. Poddar submitted that the licence fees payable by his clients are exactly the same in relation to the same accommodations as are being charged from the pure Government employees and that has been fixed by the Government on the basis of the Fourth Pay Commission Report and the same has been asked to be adopted by the employers of his clients. He added that although the companies of which the petitioners are employees carry on commercial activities but each movement of their employer is controlled and directed by the Government. It was stated that when the Government decided to do away with for some time the leave travel concession available to its own employees, the Government asked the employers of the clients of Mr. Poddar to also do away with the same in the similar manner and the same was done. Mr. Poddar, therefore, submitted that there was, in fact, no difference between pure Government employees and employees of the Government companies and of companies owned by such companies and, accordingly, it is unjust, if not discriminatory, for treating the licence fee of accommodations provided to Government employees by the Government as the value of rent-free accommodation and prescribing 10 per cent, or 7.5 per cent, as the value of rent-free accommodation for the clients of Mr. Poddar.
34. While answering this part of the submissions of Mr. Poddar, the learned Additional Solicitor General, Mr. S.K Kapoor, submitted that it is now trite law that article 14 does not apply when there is a reasonable classification. He submitted that Mr. Poddar's clients had failed to establish that the classification between pure Government employees and the employees of Government companies and of companies owned by such companies was not permissible. In this connection, Mr. Kapoor cited a judgment of the Supreme Court in the case of Malwa Bus Services Pvt, Ltd. v. State of Punjab, (1983) 3 SCC 237 : AIR 1983 SC 634. In that case, Rs. 35,000 was levied as annual tax on a motor vehicle used as a stage carriage, but only Rs. 15,000 was levied as such tax on a motor vehicle used as a goods carriage. It was contended that this was discriminatory and there was no reasonable nexus for the classification. In this connection, the Supreme Court observed, amongst others, as follows (page 642):
“A law of taxation cannot be termed as being discriminatory because different rates of taxation are prescribed in respect of different items, provided it is possible to hold that the said items belong to distinct and separate groups and that there is a reasonable nexus between the classification and the object to be achieved by the imposition of different rates of taxation.
35. Mr. Poddar in his reply submitted that the Supreme Court in that case was really considering imposition of tax on goods and not to type of classes of people. He then added that in any event the classification must be reasonable and the same must have, nexus with the object to be achieved by treating people differently. At the commencement of his arguments, the learned Additional Solicitor General started by saying that there is no equity in the matter of tax. I wholly accept the said submission of the learned Additional Solicitor General. In the matter of income-tax with which we are concerned, people earning a sum of Rs. 50,000 a year are totally exempted. They are charged no tax at all. People earning around Rs. 1,00,000 a year are charged less. People earning more than Rs. 3,00,000 are charged at higher rate. I think, having regard to the objects of the Constitution, although no equity is otherwise applicable to tax matters, Parliament has tried to introduce equity by keeping away from the tax-net those who have less income and by charging more tax to those who have more income. Therefore, treating people having different income appears to be a settled principle. There cannot be any dispute that at least in one sphere, i.e, in the sphere of income Government employees are far below employees of the companies owned by the Government and of companies owned by such companies. In such circumstances, if a classification is made, I do not think that can be interfered with, for the courts do not act more readily in the matters pertaining to economics in view of the complexity involved in the social and economic life of the community as has been observed by the Supreme Court in the judgment, referred to above.
36. Furthermore, the entry into the service, the purpose of such entry, the job responsibility and the performance of such employees are so different that there cannot be any comparison with a pure Government employee and an employee of a Government company or of a company owned by such company. The apparent distinction, therefore, made between the Government employees and others in the rules cannot, therefore, be termed as discriminatory or unjust.
37. The rental value of an accommodation belonging to the Government has no nexus with the market rent for such an accommodation is not available in the market. The licence fee determined by the Government to be paid is, therefore, the only standard of ascertaining the charges payable for using such accommodation. Any other employer including a company owned by the Government or a company owned by such a company may also device the matter in such a manner that an accommodation belonging to it may not be actually available in the market and, accordingly, its market value may not be ascertained, but it cannot be said that such an accommodation has no rental value. At the same time it cannot be said that the rental value of such an accommodation if ascertained on the basis of the device adopted by the Government for assessing the rental value of the accommodations owned by it, would be the true reflection of rental value of such accommodation.
38. For the reasons aforesaid, I have no other option but to hold that the present writ petitions have no merit at all. Those are, accordingly, dismissed. All interim orders stand vacated. But, as aforesaid, this order will remain stayed until such time the Supreme Court decides the transfer application filed before it by the clients of Dr. Pal. There will be no order as to costs.
39. Let urgent xerox certified copies of this order, if applied for, be delivered to learned counsel for the parties.