The Supreme Court recently, sought response from the finance ministry, the Central Board of Direct Taxes (CBDT) and others on a plea challenging the Fringe Benefit Tax provisions of the Income Tax Act that empowers authorities to prescribe value of any additional income (fringe benefit or amenity/perquisites) to the bank employees for income tax purpose.
A bench headed by Justice Kurien Joseph admitted a Special Leave Petition preferred by the All India Bank Officers Confederation, against the order of the Madras High Court dismissing their writ petition by stating that the same was devoid of merit.
In the petition, the AIBOC sought for a declaration that the amendment to Section 17(2) of the Income Tax Act, 1961 as amended by finance act 2007 and also circular dated 16.7.2007 was unconstitutional. They contended that the Parliament ought not to have given to the executive the right to prescribe the value of “perquisites” without any restrictions. According to them, such fiscal liability can only be fixed by a competent legislature under the statute and no such tax or fiscal liability can be imposed by Rules/subordinate legislation.
On Monday, the bench issued notice to all the respondents including the finance ministry, the CBDT, the income tax department, the Federal Bank, the Kerala government and others. Various other banking staff associations have moved the apex court on the issue. The apex court has also restrained the income tax department from levying or collecting or deducting any tax from the salary of the bank officers during the pendency of the appeals.
“Hence impugned Rule 3 (7) (i), which seeks to prescribe, interest free loan or loan at concessional rate granted by the employer to the employee, as a perquisite, is ex-facie not only beyond the scope and power which can be available under the Rules but also ultra vires provisions of Income Tax Act…,” the petition stated.
The petition further states that interest-free loan or loan at concessional rate granted by the employer to the employee cannot be a perquisite as envisaged under the diverse provisions of Income Tax Act.
Read the full text of the petition below.
