GUAJRAT STATE CO-OPERATIVE AGRI. & RURAL DEV.BANK EMP.UNI V. UNION OF INDIA

SCA/2897/2002

AI Insights

The Gujarat State Cooperative Agriculture & Rural Development Bank Employees' Union filed a petition under Article 226 of the Constitution of India, seeking to declare rule 3 of the Income Tax Rules, 1962, as substituted by the Income Tax (22nd Amendment) Rules, 2001, as ultra vires, unconstitutional, and void. The rule in question pertains to the valuation of benefits from concessional loans provided by employers to employees, which are considered perquisites under section 17(2) of the Income Tax Act, 1961. The respondents argued that the petition was not maintainable as it sought only a declaratory relief without any substantive relief and referenced a Supreme Court decision that upheld the constitutional validity of the rule. The court agreed with the respondents, citing the precedent set by the Supreme Court and dismissed the petition.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 723396 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 11-06-2012
• Assessment Year: misc
• Other Referred Cases: Arun Kumar and others v. Union of India and others, (2006) 286 ITR 89 (SC)
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: M R BHATT; MAUNA BHATT
• Assessee Lawyers: CHIRAG PAWAR
• Keywords: Income Tax Rules; Perquisites; Ultra Vires; Unconstitutional; Concessional loan; Essential legislative function
• Section: 17(2); 295; 192(2C)

Judgement Text

"SCAJ/28972/0021 1/4 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 2897 of 2002 For Approval and Signature: HONOURABLE MR.JUSTICE AKIL KURESHI HONOURABLE MS.JUSTICE HARSHA DEVANI ========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 T o be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================= GUJARAT STATE CO-OPERATIVE AGRI. & RURAL DEV.BANK EMP .UNI - Petitioner(s) Versus UNION OF INDIA & 2 - Respondent(s) ========================================= Appearance : MR CHIRAG M PAWAR for Petitioner MR MR BHATT, SR. ADVOCATE with MRS MAUNA M BHATT for RespondentS ========================================= CORAM : HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS.JUSTICE HARSHA DEVANI Date : 11/06/2012 ORAL JUDGMENT (Per: HONOURABLE MS.JUSTICE HARSHA DEVANI) SCAJ/28972/0021 2/4 ORDER 1. The sole relief claimed by the petitioner, Gujarat State Cooperative Agriculture & Rural Development Bank Employees' Union in this petition under Article 226 of the Constitution of India, is to declare rule 3 of the Income T ax Rules, 1962 substituted by the Income T ax (22nd Amendment) Rules, 2001, as ultra vires, unconstitutional and void. 2. It is the case of the petitioner that the value of benefit resulting from concessional rate loan granted by the third respondent to its employees who suffered loss of either movable or immovable property on account of earthquake that occurred on 26th January, 2001 and the value of benefit resulting from vehicle loan, at concessional rate is not an income chargeable under the head “perquisites” as defined under section 17(2) of the Income T ax Act, 1961. Accordingly, rule 3 of the Income T ax Rules, which, inter alia, provides that the value of the benefit to the assessee resulting from the provision of interest-free or concessional loan 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 be determined as the sum equal to the simple interest computed at the rate of 10% per annum in respect of loans for house and conveyance and at the rate of 13% per annum for other loans on the maximum outstanding monthly balance as reduced by the interest, if any, actually paid by him or any such member of his household, amounts to excessive delegation and usurpation of essential legislative function. 3. Mr. M. R. Bhatt, Senior Advocate, learned counsel for the respondent submitted that the present petition only seeks a declaratory relief to the effect that rule 3 of the Income T ax SCAJ/28972/0021 3/4 ORDER Rules, 1962 as substituted by the Income T ax (22nd Amendment) Rules, 2001 be declared as ultra vires, unconstitutional and void, and that no substantive relief has been claimed in the petition, and as such, the petition itself is not maintainable. It was further submitted that the controversy involved in the present case is no longer res integra inasmuch as, the same stands concluded by the decision of the Supreme Court in the case of Arun Kumar and others v. Union of India and others, (2006) 286 ITR 89 (SC), wherein the constitutional validity of rule 3 of the Income T ax Rules, 1962 as amended by notification dated 25th September, 2001 has been upheld. 4. As noted earlier, the sole relief claimed by the petitioner is for a declaration that rule 3 of the Income T ax Rules, 1962 as amended by notification dated 25th September, 2001 issued by the second respondent – Central Board of Direct T axes in exercise of powers under section 295 read with clause (2) of section 17 and sub-section (2C) of section 192 of the Act, is ultra vires and unconstitutional. Apart from the fact that the constitutional validity of a statutory provision cannot be challenged in isolation without seeking any consequential relief, in the case of Arun Kumar and others v. Union of India and others, (supra), wherein the Supreme Court, was, inter alia, called upon to decide the constitutional validity of rule 3 of the Income T ax Rules, 1962 as amended by notification dated 25th September, 2001, the constitutional validity of the said rule has been upheld. The controversy involved in the present case, therefore, stands concluded by the said decision against the petitioner. Consequently, the challenge to the constitutional validity of rule 3 of the Rules in SCAJ/28972/0021 4/4 ORDER the present petition also fails. 5. For the reasons stated above, the petition fails and is, accordingly, dismissed. Rule is discharged with no order as to costs. [AKIL KURESHI, J.] [HARSHA DEVANI, J.] parmar* "