TMI Blog2003 (4) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... . - Validity of the amendment to rule 3 had been considered and the amendment upheld in the cases of BHEL Employees' Association v. Union of India [and Tata Workers' Union v. Union of India – So, this petition is dismissed - - - - - Dated:- 30-4-2003 - Judge(s) : R. JAYASIMHA BABU., P. K. MISRA. JUDGMENT The judgment of the court was delivered by R. JAYASIMHA BABU J. - The petitioners challenge the constitutional validity of the amendment made to rule 3 of the Income-tax Rules, 1962, under the Notification No. S. O. 940(E), dated September 25, 2001, with effect from April 1, 2001. By a later Circular No. 15, dated December 12, 2001, option was given to the employees governed by that amended rule to compute the value of perquisite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any sum paid by the employer in respect of any obligation which, but for the payment, would have been payable by the assessee; and any sum payable by the employer, subject to certain exceptions, to effect an assurance on the life of the assessee or to effect a contract for an annuity. "Salaries" is one of the heads of income referred to in section 14, which, inter alia, provides that "all income shall, for the purposes of charge of income-tax and computation of total income, be classified under the following heads of income: - A. Salaries; C. Income from house property; D. Profits and gains of business or profession; E. Income from other sources. Perquisites being part of salaries have always been taxable before and after the amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, a delegated legislative power. The Board itself is an expert body comprising of persons who have experience of decades in direct tax administration. While making rules the scheme and purpose of the Act are to be their guide. The rule making authority is, in addition required, while making the rules for determining the value of perquisites, to proceed on a basis which "appears to the Board to be proper and reasonable". Their judgment with regard to the manner and basis of valuation of perquisites by framing and from time to time amending the statutory rules, is not to be lightly interfered with. Salaried employees are classified in rule 3 as amended, into those in the service of Government and other employees. The elimination of pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to be treated as a special class. The notional rent is taken as 10 per cent, of the salary less rent actually paid by the employee, in cities with population of more than 4 lakhs, and 7.5 per cent, of the salary less the rent actually paid in cities with population of 4.00 lakhs or below. The distinction made among cities based on the size of the population is in no way arbitrary. The lower percentage of salary taken as notional value of accommodation, in cities with less than 4 lakhs population is rational, as the cost of housing in the smaller cities tends to be less when compared to the cost of housing in bigger cities. The choice of the figure of 4 lakhs is a matter of discretion of the rule-making authority and so long as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the object of taxation is not merely to raise revenue for the Government, but also to shape economic policy, the courts would be very slow to invalidate tax legislation whether primary or delegated. Even if the rate of 13 per cent, as the notional interest on loans for purposes other than housing and conveyance is capable of being regarded as excessive, the court would desist from striking down that rule solely on that ground. One other minor point raised by the petitioners is that the exemption from taxation of the value of the rent-free accommodation where such accommodation is located in remote area, is vague. The relevant part of the rule is quite clear. Remote area has been spelt out in sufficient detail as a mining site, an on-shore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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