A bench of Justices Sanjiv Khanna and Dipankar Datta pronounced this ruling on Tuesday while dismissing petitions filed by All India Bank Officers’ Confederation and a batch of appeals filed by staff unions and officers’ associations of several banks, who had challenged the validity of the provisions of the I-T Act and its rules allowing levying of tax on money saved through interest-free or low-interest loans advanced to bank employees.”The benefit enjoyed by bank employees from interest-free loans or loans at a concessional rate is a unique benefit/advantage enjoyed by them. It is in the nature of a ‘perquisite’, and hence is liable to taxation,” the bench said.
As per the Rule, when a bank employee avails a zero-interest or concessional loan, the amount he saved annually when compared to the amount paid by an ordinary person by taking a loan of same amount from State Bank of India that attracts market rate of interest, would be liable for income tax.
Writing the judgment, Justice Khanna said the value of interest-free or concessional loans is to be treated as ‘other fringe benefit or amenity’ for being taxed as perquisite. “The employer’s grant of interest-free loans or loans at a concessional rate will certainly qualify as a ‘fringe benefit’ and ‘perquisite’, as understood through its natural usage in common parlance,” he said.
“Perquisite is a fringe benefit attached to the post held by the employee unlike ‘profit in lieu of salary’, which is a reward or recompense for past or future service. It is incidental to employment and in excess of or in addition to the salary. It is an advantage or benefit given because of employment, which otherwise would not be available,” the bench said. “We are of the opinion that the enactment of subordinate legislation for levying tax on interest free/concessional loans as a fringe benefit is within the rulemaking power under Section 17(2)(viii) of the Act. Section 17(2)(viii) itself, and the enactment of Rule 3(7)(i) is not a case of excessive delegation and falls within the parameters of permissible delegation,” it said.
“Section 17(2) clearly delineates the legislative policy and lays down standards for the rule-making authority. Accordingly, Rule 3(7)(i) is intra vires Section 17(2)(viii) of the Act,” the SC said. Justices Khanna and Datta said, “Rule 3(7)(i) posits SBI’s rate of interest, that is the PLR, as the benchmark to determine the value of benefit to the assessee in comparison to the rate of interest charged by other individual banks. Fixation of SBI’s rate of interest as benchmark is neither an arbitrary nor unequal exercise of power.”
Credit: Source link