Hello Abhinav,
Rule 3(7)(i) says that interest free loan to employer for medical treatment of diseases specified in Rule 3A is not taxable.
Section 80DDB says that if any expenditure is made on medical treatment of "specified diseases" under Rule 11DD on "specified person" then such expenditure is deductible from total income of assessee. Also deduction under this section is reduced by the amount received from insurer or reimbursed by employer
Note:
1) Diseases specified under Rule 3A and "specified disease" under Rule 11DD are totally different.
2) Maximumm deduction u/s 80DDB = 40000 ( 60000 for senior citizen).
3) There are "specified person" for treatment in case of Section 80DDB, while no such persons are mentioned in case of Rule 3(7)(i) or Rule 3A.
4)
Coming to your question, I think you are saying that loan received from employer for medical treatment is expended on such treatment and interest gets exempt and deduction is availed in Section 80DDB.
My opinion:
As you can observe that since diseases under rule 3A and sec 80DDB are different it will depend whether the disease is covered under rule 3A or sec80DDB and accordingly either exemption from perquisite is granted or deduction is availed. If the disease is common, then both exemption and deduction are available.