TaxTMI 
TaxTMI 
TaxTMI 
2024 (5) TMI 450
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....excess of salary, which are made taxable as perquisites. Section 17(2)(viii) is a residuary clause that authorizes a subordinate rule-making authority to prescribe 'any other fringe benefits or amenities' that are liable to taxation as 'perquisites'. , 'any other fringe benefit or amenity', 'as may be prescribed'. Before amendments brought in by Finance (No.2) Act, 2009, with effect from 01.04.2010, Section 17(2)(vi) of the Act read: "(vi) the value of any other fringe benefit or amenity (excluding the fringe benefits chargeable to tax under Chapter XIIH) as may be prescribed". Post the amendment, Section 17(2)(viii), in effect contains the same stipulations as erstwhile Section 17(2)(vi), with some modifications. It states: "(viii) the value of any other fringe benefit or amenity as may be prescribed." Thus, the present Section 17(2)(viii) contains similar stipulations as erstwhile Section 17(2)(vi), reference to Chapter XIIH only being deleted. To retain uniformity, we will be referring to it as Section 17(2)(viii). Rule 3 of the Rules prescribes additional 'fringe benefits' or 'amenities', taxable as perquisites, pursuant to Section 17(2)(viii). It also prescribes the method of ....
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.... an employee being a person who has a substantial interest in the company; (c) by any employer (including a company) to an employee to whom the provisions of paragraphs (a) and (b) of this sub-clause do not apply and whose income under the head "Salaries" (whether due from, or paid or allowed by, one or more employers), exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds fifty thousand rupees: Explanation.-For the removal of doubts, it is hereby declared that the use of any vehicle provided by a company or an employer for journey by the assessee from his residence to his office or other place or work, or from such office or place to his residence, shall not be regarded as a benefit or amenity granted or provided to him free of cost or at concessional rate for the purposes of this sub-clause; (iv) any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee; and (v) any sum payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund or a Depositlinked Insurance Fund established un....
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.... to in the said sub-clause which is included in total income under the said subclause in any previous year computed in such manner as may be prescribed; and (viii) the value of any other fringe benefit or amenity as may be prescribed: xx xx xx" (emphasis supplied) 7. Rule 3(7)(i) of the Rules As it stands after amendment vide Income Tax (First Amendment) Rules, 2004, with effect from 01.04.2004. reads: "(7) In terms of provisions contained in Sub-Clause (vi) of Sub-Section (2) of Section 17, See supra note 4. the following other fringe benefits or amenities are hereby prescribed and the value thereof shall be determined in the manner provided hereunder: (i) the value of the benefit to the assessee resulting from the provision of interest-free or concessional loan for any purpose made available to the employee or any member of his household during the relevant previous year by the employer or any person on his behalf shall be determined as the sum equal to the simple interest computed at the rate charged per annum by the State Bank of India Act, 1955 (23 of 1955), as on the 1st day of the relevant previous year in respect of loans for the same purpose advanced ....
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.... rule-making authority to tax 'any other fringe benefit or amenity' by promulgating a rule. The residuary clause is enacted to capture and tax any other 'fringe benefit or amenity' within the ambit of 'perquisites', not already covered by clauses (i) to (viia) to Section 17(2). 11. In terms of the power conferred under Section 17(2)(viii), CBDT has enacted Rule 3(7)(i) of the Rules. Rule 3(7)(i) states that interest-free/concessional loan made available to an employee or a member of his household by the employer or any person on his behalf, for any purpose, shall be determined as the sum equal to interest computed at the rate charged per annum by SBI, as on the first date of the relevant previous year in respect of loans for the same purpose advanced by it on the maximum outstanding monthly balance as reduced by interest, if any, actually paid. However, the loans made available for medical treatment in respect of diseases specified in Rule 3A or loans whose value in aggregate does not exceed Rs.20,000/- , are not chargeable. 12. The effect of the rule is twofold. First, the value of interest-free or concessional loans is to be treated as 'other fringe benefit or amenity' for the ....
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..... The New International Webster's Comprehensive Dictionary, p.941 'Fringe benefit' is defined as any of the various benefits received from an employer apart from salary, such as insurance, pension, vacation, etc. Similarly, Black's Law Dictionary defines 'fringe benefit' as a benefit (other than direct salary or compensation) received by an employee from the employer, such as insurance, a company car, or a tuition allowance. Black's Law Dictionary, p.188 (10th Edition) The Major Law Lexicon has elaborately defined the words 'perquisite' and 'fringe benefit'. Perquisite means something gained by a place or office beyond the regular salary or fee. It is a gain or profit incidentally made from employment. P. Ramanatha Aiyar The Major Law Lexicon, Vol. 5, p. 5059-5069 (4th Edition). Fringe benefit is a term embracing a variety of employees' benefits, paid by the employers and supplementing the workers' basic wage or salary. P. Ramanatha Aiyarm The Major Law Lexicon, Vol. 3 (4th Edition). 16. 'Perquisites' has also been interpreted as an expression of common parlance in several decisions of this Court. For example, 'perquisite' was interpreted in Arun Kumar v. Union of India (2007) 1 ....
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....e essential legislative function. 'Essential legislative function' means the determination of the legislative policy and its formulation as a binding rule of conduct. Therefore, once the legislature declares the legislative policy and lays down the standard through legislation, it can leave the remainder of the task to subordinate legislation. In such cases, the subordinate legislation is ancillary to the primary statute. It aligns with the framework of the primary legislation as long as it is made consistent with it, without exceeding the limits of policy and standards stipulated by the primary legislation. The test, therefore, is whether the primary legislation has stated with sufficient clarity, the legislative policy and the standards that are binding on subordinate authorities who frame the delegated legislation. 22. In our opinion, the subordinate authority's power under Section 17(2)(viii), to prescribe 'any other fringe benefit or amenity' as perquisite is not boundless. It is demarcated by the language of Section 17 of the Act. Anything made taxable by the rule-making authority under Section 17(2)(viii) should be a 'perquisite' in the form of 'fringe benefits or amenity'.....
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....n 17(2)(viii) and Rule 3(7)(i), we are of the opinion that main legislation does not fall foul of the essential feature test. They do not modify an essential feature nor do they violate the condition of determining legislative policy or a binding rule of conduct. 26. Birla Cotton 7J (supra) also refers to Hari Shankar Bagla v. State of Madhya Pradesh (1955) 1 SCR 380, where the majority held that the legislature must declare the policy of law and legal principles which are to control any given cases and thereby provide a standard of guidance to the executive, empowered to execute laws. 27. In Western India Theatres Limited v. Municipal Corporation of the City of Poona AIR 1959 SC 586, referred by Birla Cotton 7J (supra), the issue related to the power of the municipality to levy "any other tax to the nature and object of which the approval of the Governor-in-Council shall have been obtained prior to the selection contemplated". The delegated legislation was upheld on the ground that municipality was authorised by the principal enactment to impose the tax. The enactment defined the obligations and functions cast upon the municipality. The taxes could only be levied for implementin....
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....ential part of legislation, neither would the power to decide the rate of tax be so. The Court thus held that fixation of tax rate was not unqualified as the legislature had stipulated the maximum rate. The guidance rule was held as satisfied. 31. 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. 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. Section 17(2)(viii) does not lead to an excessive delegation of the 'essential legislative function'. II. Is Rule 3(7)(i) arbitrary and violative of Article 14 of the Constitution insofar as it treats the PLR of SBI as the benchmark? 32. 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 i....