TaxTMI 
TaxTMI 
2024 (5) TMI 450
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....ncidental to employment, and received in 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)....
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....following cases- (a) by a company to an employee who is a director thereof; (b) by a company to 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 t....
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.... dividend or any other amount of similar nature during the previous year to the balance at the credit of the fund or scheme referred to in sub-clause (vii) to the extent it relates to the contribution referred 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 b....
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....etc. Clause (viia) - annual accretion by way of interest, dividend or other similar amounts with respect to clause (vii). 10. After specifically stipulating what is included and taxed as 'perquisite', clause (viii) to Section 17(2), as a residuary clause, deliberately and intentionally leaves it to the 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 a....
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....l usage. 15. The expression 'perquisite' is well-understood by a common person who is conversant with the subject matter of a taxing statute. New International Webster's Comprehensive Dictionary defines 'perquisites' as any incidental profit from service beyond salary or wages; hence, any privilege or benefit claimed due. 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 empl....
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....(viii) and/or Rule 3(7)(i) lead to a delegation of the 'essential legislative function' to the CBDT? 21. A Constitution Bench of Seven Judges of this Court in Municipal Corporation of Delhi v. Birla Cotton, Spinning and Weaving Mills, Delhi and Another (1968) SCC OnLine SC 13, has held that the legislature must retain with itself the 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 subord....
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.... any essential feature. What constitutes an essential feature cannot be enunciated in exact terms. However, it was held that modification could not include a change in policy, since the 'essential legislative function' consists of the determination of legislative policy and its formulation as a binding rule of conduct. In the context of Section 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 approv....
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....s no in-principle distinction between delegation of power to fix rates of taxes to be charged on different classes of goods and power to fix rates simpliciter; if power to fix rates in some cases can be delegated then equally the power to fix rates generally can be delegated. The Court held that if the power to decide who is to pay the tax is not an essential 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 ex....