1. This appeal is by the assessee, Shri M.C. Muthanna, an employee of Bombay Burmah Trading Corpn. Ltd., relating to his income-tax assessment for the year 1979-80. The grounds of appeal raise two objections. The first is with regard to the inclusion of a sum of Rs. 3,839 as perquisite under Section 17(2)(iii) of the Income-tax Act, 1961 ('the Act'), in determining the assessee's income under the head 'Salaries'. The second objection is to the disallowance sustained qua the assessee's claim for deduction under section SOL of the Act in respect of interest credited to the provident fund in excess of the statutory limit.
2. So far as the first ground is concerned, the relevant facts are that the assessee was given by the employer two loans, one for the purchase of equity shares in the employer-company and another for the purpose of purchase or construction of a house, both carrying interest at 4 per cent per annum. In the assessment made on the assessee, the ITO considered that the grant by the employer of the loans at 4 per cent as against the normal lending rate of the company at 12 per cent resulted in a monetary benefit by way of concession at the rate of 8 per cent.
He, therefore, added the benefit of the concessional rate as perquisite under Section 17(2)(iii). In appeal, the AAC sustained the action of the ITO and dismissed the assessee's appeal. Aggrieved by his finding the assessee is in further appeal on this point.
3. At the hearing of this appeal, the learned representative for the assessee submitted that in the facts of this case it cannot be held that there was any benefit or perquisite with regard to the loan obtained by the assessee from his employer on a consideration of the payment of interest. Reliance was placed in this connection on an order of the Tribunal, D-Bench, in the assessee's own case as well as another employee of the said company, Shri D.D. Khavilkar for the assessment years 1977-78 and 1978-79 [IT Appeal Nos. 1626 to 1629 (Mad.) of 1979] dated 13-7-1981. The learned departmental representative contended in reply that the provisions of Section 17(2)(iii) were wide enough not only to cover the benefit arising to an employee, by way of interest-free loan but also the benefit by way of concessional rate of interest on loans granted by the employer. It was submitted that the yardstick for measuring the value of the benefit is the difference between the normal lending rate prevalent in the market and the rate at which actually the loan was obtained by the employee. Reference was made to and reliance placed on two decisions of the Madras High Court in CIT v. C. Kulandaivelu Konar  100 ITR 629 and Addl. CIT v.A.K. Lakshmi  113 ITR 368.
4. Having considered the facts and the rival contentions of the parties, we hold that the addition made in the assessment on this account is not justified. The two Madras High Court decisions referred to above would apparently support the plea that where an employee obtains loan which was free of interest from an employer the value of the benefit or advantage of the concession on account of non-charge of interest would attract the provisions of Section 17(2)(iii) and would justify its inclusion in determining the employee's income. But in the present case the two types of loans granted are not interest-free.
Moreover, we find that with regard to the loan or advance made by the employer for the purchase of its own shares, it may not be possible to regard it as resulting in any benefit or advantage to the employee having regard to the provisions of the scheme under which the loan is advanced. According to this scheme, this loan is granted for the sole purpose of investment in the employer-corporation's fully paid up shares and it is hoped that this might help to enable the staff to get annual dividend income, appreciation in share prices and possible future bonus issues, but it is also stated that the employer-corporation or its Board cannot offer any guarantee of performance and that if an employee wishes to take advantage of the offer he may do so as a purely commercial transaction and at his own risk. There were also certain further conditions and terms attached to the grant of the loan such as that the shares are to be held throughout the period of service and trading will not be allowed, that a sale of the same while in service can only be made with the approval of the Managing Director and in special circumstances like family hardships, illness in shares shall not be transferred (sic) that the share certificates covered by the loan shall remain in the custody of the corporation so long as the loan is outstanding, etc. It may be seen from the scheme that the money advanced by the employer is in fact retained by it in the shape of paid up shares and the employee can hardly deal with it as his own for any purpose. There are also stringent restrictions with regard to the ownership and alienation of the shares and there is hardly any material which would show that the holding of the shares could result in any benefit or advantage by way of receipt of any annual dividend income, appreciation in share prices, possible future bonus issues, etc. and in fact it has been made clear that the employer does not guarantee performance which would result in any such advantage and further, that the transaction of the employee obtaining loan from the employer is purely in the nature of commercial transaction and at his own risk and responsibility. We are, therefore, satisfied that in any case so far as the loan taken by the assessee-employee in regard to purchase of shares is concerned, there is hardly any benefit or advantage accruing to him which can be brought to charge under Section 17(2)(iii).
5. So far as the other loan is concerned, it is no doubt true that the loan is for helping the employee in the construction of a house of his own. But as we have already stated, it is not interest-free loan. The earlier order of the Tribunal relied on by the learned representative for the assessee has considered the matter in somewhat great detail and has held that the facts are distinguishable from the facts obtained in the two Madras High Court decisions stated supra. In that order dealing with both the types of loans it has been found that the ratio of the decisions of the Madras High Court could not be applicable to the facts in this case. Besides, it has also taken into consideration, in deciding the matter, the purport and effect of the Circular No. 33 of 1955 and Circular No. 123 dated 19-10-1973 and also the effect of Rule 3(g) of the Income-tax Rules. A reference has also been made to a news item reported in 'The Hindu' dated 16-12-1980 under the title 'Concessional loans to be taxed etc.', from which it was seen that it is the stand of the Government before the Public Accounts Committee that it is not possible to tax such concession under the law at present and it was proposed to amend the rules to provide for specific guidelines for evaluation of such perquisites in future. It was also observed that in the absence of such guidelines it is not possible to tax such concessions allegedly embodied in loans from employer to employees. It is seen that in a reference taken by the department dated 22-9-1981 against this order, the department has not sought reference of any question with regard to this finding and the decision of the Tribunal from which it is obvious that the department has accepted this decision of the Tribunal in its earlier order. The orders of the departmental authorities in this case are much earlier to the date of the reference application. In these circumstances, it is uncessary for us to go into the question as to whether the ratio of the decisions of the Madras High Court could be held to be applicable even to the grant of loan by an employer to the employee at concessional rate even assuming that in the present case the rate of interest charged could be regarded as concessional rate in either case. In the circumstances, we accept the assessee's contention and delete the inclusion of the perquisite value added in the assessment in this connection.
6. We now come to the second objection. Section 80L provides for deduction from interest income by way of, inter alia, interest on security of the Central Government or the State Government, interest on deposit under any scheme of the Central Government, interest on deposit of banking company, etc. It appears, the assessee's income included interest from a provident fund the quantum of which was in excess of the statutory rate as prescribed by the Government. There is no dispute on the facts and figures, but the contention of the assessee is that the interest received by the trustees of the provident fund was from deposits in bank and, therefore, it satisfies the requirement of Section 80L for being entitled to a deduction. It is this contention which was negatived by the departmental authorities. The first appellate authority in rejecting the assessee's claim has followed an order of the Full Bench of the Tribunal, 'D' Bench, dated 25-2-1978 in the case of N.M. Karumbaya [IT Appeal Nos. 1172 and 1173 (Mad.) of 1977-78] who was also an employee of the same Bombay Burmah Trading Corporation Ltd. 7. In the appeal before us it is the assessee's contention that although the order relied on by the AAC supports the department's stand, there is a recent decision of the Allahabad High Court in CIT v.Smt. Shakuntala Banerjee  120 ITR 837, the ratio of which supports the assessee's claim in this case and, therefore, the ratio of the Allahabad High Court decision should be applied in preference to the ratio of the Full Bench decision of the Tribunal. In the Special Bench order, the claim of the assessee has been negatived on the ground that the contribution by the Provident Fund which is a trust cannot be said to belong to the assessee as the legal ownership of the trust property vests in the trustees and not in the assessee. The Allahabad High Court decision referred to by the learned representative of the assessee clearly postulates that a beneficiary of a trust can claim deduction under Section 5OL on interest received from bank and also credit for tax deducted at source and the beneficiary need not be the owner of the securities. Thus, the Allahabad High Court decision directly supports the assessee's claim in this connection. We have not been referred to by the department to any contrary decision. It has been held by the Bombay High Court in CIT v. Smt. Godavaridevi Saraf  113 ITR 589 that an authority like the Tribunal acting anywhere in the country has to respect the law laid down by the High Court though of a different State so long as there is no contrary decision of any other High Court on the question. It is also well established that when two views on a question of law are possible, one which favours the assessee and leaves him with a lesser burden of tax, the view that favours the assessee, should be applied. In these circumstances, we are satisfied that the Full Bench decision of the Tribunal must give way to the law declared by the Allahabad High Court. We, therefore, accept the assessee's contention on this point also and direct relief accordingly.