Facts:
a)
Petitioner (‘All India Union
Bank O icers Federation’) filed a writ petition before the High Court
challenging constitutional validity of section 17(2)(viii) of the Income-tax
Act, 1961, read with Rule 3(7)(i) of the Income-tax Rules, 1962.
b)
Section 17(2)(viii) provides
the method for computation of perquisite value of interest free or concessional
loan provided by an employer to his employee on the basis of interest rate
charged by the State Bank of India (SBI).
c)
Petitioner challenged the
constitutional validity of aforesaid section by contending that it was unfair
to compare the rate of interest charged by the individual banks on the loans
advanced to their employees with the rate of interest o ered by the State Bank
of India as each bank fixed its own rate of interest, depending upon the
economies of their operation.
The High Court held as
under:
1)
Rule 3(7)(i) does not even make
a distinction between di erent categories of employees or between employees of
di erent banks. Hence, the petitioners cannot compare themselves with the
employees of the State Bank of India to contend that there is discrimination.
2)
If the State Bank of India
charges interest at rate of 10% per annum on the loans advanced to its
employees and another bank charges interest at rate of 7% per annum on the
loans advanced to its employees, then the employees of the State Bank of India
end up paying more in the form of interest than their counterparts in other
banks.
3) If at all it is the employee
of the State Bank of India, who can perhaps raise an argument that they are su
ering a handicap in the form of a higher rate of tax. The employees of other
banks end up paying income tax at slab rate on the di erential interest rate of
3%.
4) Therefore, the challenge on
the basis of Article 14 is completely meaningless. The challenge to Section
17(2)(viii) as well as to Rule 3(7)(i) has to fail- [2016] 69 taxmann.com 371
(Madras)
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