Case Law Details
All India Bank Officers’ Confederation Vs Regional Manager (Supreme Court of India)
Supreme Court recently ruled on the taxation of interest-free/concessional loans to bank employees. This article provides an in-depth analysis of the judgment, examining the legal framework, challenges, and implications of the decision.
The case centered around the interpretation of Section 17(2)(viii) of the Income Tax Act and Rule 3(7)(i) of the Income Tax Rules. The petitioners, including staff unions and officers’ associations of various banks, challenged the vires of these provisions, arguing against the taxation of interest-free/concessional loans provided by banks to their employees.
Section 17(2)(viii) defines ‘perquisites’ to include ‘any other fringe benefit or amenity’, as prescribed. Rule 3(7)(i) specifies that interest-free/concessional loan benefits provided by banks to employees are taxable as perquisites if the interest charged by the bank is lower than the Prime Lending Rate (PLR) of the State Bank of India.
The petitioners raised concerns about excessive delegation of legislative function to the Central Board of Direct Taxes (CBDT) and argued that Rule 3(7)(i) was arbitrary and violated Article 14 of the Constitution. However, the Supreme Court rejected these arguments, affirming the validity of the provisions.
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Author Bio
Petitioners challenged that setting the benchmark rate by CBDT violates Article 14, “everything must be equal in the eyes of the law”. I am still not getting as to how the bank employees were prejudiced against everyone who had to compare their concessional lending rates with PLR of SBI.