Petitioner is an educational institution. The petitioner challenged the provision relating to tax deduction at source, on the ground that the Institution is State within article 12 of the Constitution of India and therefore, in terms of section 17  and sub rule (1) of rule 3 of the said Rules, the value of the accommodation would be licence fees charged and there would be no question of providing any perquisite to the employees, hence not liable to deduct tax at source.    Dismissing the petition the Court held that that even if the assessee was treated as State within the meaning of article 12 of the Constitution of India it could not escape the liability to deduct tax at source on the difference between the value of the rent as assessed under rule 3(1) of the 1962 Rules and that collected from the employee by way of licence fee. The ITO’s holding that the assessee was not State within the meaning of article 12 of the Constitution of India was not correct. Since the assessee did not provide rent-free accommodation to its employees, it did not fall under clause (i) of sub-section (2) of section 17. However, if there was any concession in the matter of rent respecting the accommodation provided by the assessee to its employees, it would be covered under clause (ii) of sub-section (2) of section 17. Even proceeding on the basis of the assertion of the assessee that it was “State” within the meaning of article 12 would not bring the assessee within the fold of entry 1 (which would be applicable only in a case where the employer was either the Central or the State Government) in the table below sub-rule (1) of rule 3 of the 1962 Rules.. accordingly residential Accommodation provided to regular and contract employees on collection of  licence fee according to area of  quarters and commensurate with salary of  employee/ Perquisite  which is  Liable to deduct tax at source.