Section 17(2)(ii) — the law in short
What the courts have decided on section 17(2)(ii), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Arun Kumar v Union of India
Supreme CourtHelps taxpayerSuperseded by amendment
The officer has valued my company flat under Rule 3 and added the difference to my salary. I pay the licence fee my employer charges everybody. Must he first prove I actually got a concession in rent?
On the law as the Supreme Court found it in 2006, yes: 'concession' in s.17(2)(ii) is a jurisdictional fact, and Rule 3 is only a machinery provision that cannot be reached until the officer has first found as a fact that a concession was given. That space was closed almost at once — the Finance Act 2007 inserted the very deeming provision the Court said the Act did not contain, with retrospective effect from 1 April 2002, so from AY 2002-03 a concession is deemed wherever the value computed under Rule 3 exceeds the rent recovered.
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All India Central Bank Officers Federation v Union of India
High CourtHelps departmentValidity unconfirmed
My client is a bank officer taxed on a deemed concession in rent for the bank's quarters even though the market rent is lower than the percentage of salary applied. Is the deeming provision open to challenge?
Not on the grounds run so far. A Division Bench of the Bombay High Court dismissed a batch of writ petitions by bank officers' associations challenging Explanations 1 to 4 below s.17(2) inserted by the Finance Act 2007 with limited retrospective effect. It held the legal fiction is not an impermissible legislative override of Arun Kumar v Union of India, that the retrospectivity is valid, and that classifying by city population and measuring the concession as a percentage of salary does not offend Article 14.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.