1. The assessee is an employee of Scindia Steam Navigation Co. Ltd. He received a house building loan of Rs. 65,000 on 12-3-1975 from the employer at a concessional rate of interest of three and a half per cent per annum. According to the ITO, the prevailing market rate of interest varied from 12 to 15 per cent per annum. He proceeded to treat the difference between 12 per cent being the market rate and three and a half per cent being the rate at which the interest was charged by the employer, namely, eight and a half per cent as a perquisite in the hands of the assessee under section 17(2) (iii) (c) of the Income-tax Act, 1961 (the Act).
2. On an appeal by the assessee before that the AAC, the AAC relied on some decisions of the Tribunal and held that the loan given by the employer to the assessee at a concessional rate of interest did not constitute a perquisite in the hands of the employee.
3. The revenue is in appeal against the order of the AAC on this issue Conflicting decisions of the Tribunal have been placed before me on behalf of the parties in support of the appeal on behalf of the revenue and against it. On behalf of the assessee, however, my attention was invited to the letter No. 200/65/77-IT (A-I), dated 8-8-1977 from the Board wherein a clear direction has been given that the loans given by a company for the purpose of house building at low rate of interest would not constitute a perquisite. On behalf of the revenue, my attention was invited to another letter No. 200/133/83-IT (A-I), dated 7-12-1983 from the Board referring to the earlier letter dated 8-8-1977 stating that the loans given by the company for the purpose of house building at a low rate of interest would not constitute a perquisite and it has been directed in this letter that the earlier letter stands withdrawn with immediate effect. It was submitted that the AACs decision was erroneous in the light of the subsequent letter of the Board dated 7-12-1983.
4. I have carefully considered the submissions on either side. Irrespective of the view expressed by the various Benches of the Tribunal in favour of or against the revenue on the question whether such concessional interest constitute a perquisite under section 17(2) (iii) (c), I have to examine here the applicability of the Boards letter dated 8-8-1977 to the facts of the case. The AAC has decided the appeal on 16-7-1983. The income-tax assessment has been made after August 1977. The Boards latter dated 8-8-1977 was in force when the ITO made the assessment and also when the AAC decided the appeal. During this period this Boards letter was in force. As observed by the learned judges of the Supreme Court in the case of Navnit Lal C. Javeri v. K. K. Sen, AAC : 56ITR198(SC) and again in the case of Ellerman Lines Ltd. v. CIT : 82ITR913(SC) , the instructions issued by the Board under section 119 of the Act were binding on the authorities working under them. In the circumstances, the ITO should not have proceeded to tax the income attributable to concessional advance as a perquisite in the hands of the assessee. The latter instructions from the Board dated 7-12-1983 are with immediate effect that means from the date of the said letter, i.e., 7-12-1983. They would not affect the proceedings under consideration before me today. In the circumstances, the order of the AAC calls for no interference, though for different reasons.
5. In the result, the appeal filed by the revenue is dismissed.