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TMI Blog2003 (9) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ication dated September 25, 2001 (annexure 1 to the writ petition), by which rule 3 of the Income-tax Rules, 1962, was substituted by the Income-tax (22nd Amendment) Rules, 2001, issued by the Central Board of Direct Taxes. The petitioner is also challenging the validity of section 17(2)(vi) of the Income-tax Act, 1961, as inserted by the Finance Act, 2001, on the ground that it has delegated essential legislative powers and that it is violative of articles 19(1) and 246 of the Constitution. We have heard learned counsel for the parties. It is alleged in para. 2 of the petition that the petitioner is an association of officers of the Airports Authority of India. Before dealing with the controversy in this case, we may refer to section 17(2)(vi) of the Income-tax Act which states that for the purposes of sections 15 and 16 and of that section "perquisite" includes "the value of any other fringe benefit or amenity as may be prescribed". The expression "the value of any other fringe benefit or amenity as may be prescribed" was inserted by the Finance Act, 2001, with effect from April 1, 2002. Before the above amendment by the Finance Act, 2001, clause (vi) was not there in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est-free loans given by the employer to the employees for various purposes, e.g., purpose of car, house, etc., were not treated as a perquisite since that was not provided in the Act. Under the new rule 3 of the Income-tax Rules for the purposes of valuation of perquisite of rent-free accommodation employees have been classified under the new rule into two categories, viz., (a) Central and State Government employees, (b) others. For the first category the system of valuation of the perquisite of the accommodation on the basis of rent payable as per the rules framed by the Government was retained. For others, i.e., for private as well as public sector employees it was provided that the valuation of the perquisite of accommodation would be 10 per cent. of the salary in cities having population exceeding 4 lakhs as per 1991 census, and 7.5 per cent. of the salary in other cities. It may be mentioned that section 2(33) of the Income-tax Act states that the word "prescribed" means prescribed by the rules made under the Act. Section 295 of the Income-tax Act confers power on the Central Board of Direct Taxes to make rules and rule 3 has been framed for the purposes of section 17(2)(vi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the opinion that rule 3 framed under section 295 is not invalid on the ground of excessive delegation or violation of article 14 of the Constitution. The classification of the Central Government and the State Government employees on the one hand, and the employees of the public sector and private sector cannot be said to be unreasonable. In Hoechst Pharmaceuticals Ltd. v. State of Bihar [1985] 154 ITR 64; [1984] 55 STC 1; AIR 1983 SC 1019 (vide para. 84) the Supreme Court observed: "On questions of economic regulations and related matters, the court must defer to the legislative judgment. When the power to tax exists, the extent of the burden is a matter for the discretion of the law-makers. It is not the function of the court to consider the propriety or justness of the tax, or enter upon the realm of legislative policy. If the evident intent and general operation of the tax legislation is to adjust the burden with a fair and reasonable degree of equality, the constitutional requirement is satisfied...." In our opinion, employees of the Government and employees of the public and private sector undertakings belong to two distinct and different classes. The nature of work, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and). We may mention that the Karnataka High Court in BHEL Employees' Association v. Union of India [2003] 261 ITR 15 and the Jharkhand High Court in Tata Workers' Union v. Union of India [2002] 256 ITR 725 upheld the validity of section 17(2)(vi) as well as rule 3 and we are in respectful agreement with these decisions. It may be mentioned that in tax matters the Government has a greater latitude to tax one category and not to tax other categories vide Anant Mills Co. Ltd. v. State of Gujarat, AIR 1975 SC 1234; R.K. Garg v. Union of India [1982] 133 ITR 239 (SC); [1982] UPTC 355 (SC); Malwa Bus Service P. Ltd. v. State of Punjab [1983] 3 SCC 237; ITO v. N. Takin Roy Rymbai [1976] 103 ITR 82 (SC); AIR 1976 SC 670; Amalgamated Tea Estate Co. Ltd. v. State of Kerala [1974] 94 ITR 479 (SC); [1975] UPTC 89, etc. A taxing statute is not open to attack on the ground that it taxes some persons or objects and not others. East India Tobacco Co. v. State of A. P., AIR 1962 SC 1733; [1962] 13 STC 529. The State has a wide discretion in selecting the objects or persons that it will tax, and in order to tax something it is not bound to tax everything. Orient Wvg. Mills (P.) Ltd. v. Union of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of taxes or social control measures, and the court should not, unless compelled by the Constitution, encroach into this field. As Justice Frankfurter of the U.S. Supreme Court observed in American Federation of Labour v. American Sash and Door Co. (1949) 335 US 538: "Even where the social undesirability of a law may be convincingly urged, invalidation of the law by a court debilitates popular democratic Government. Most laws dealing with social and economic problems are matters of trial and error. That which before trial appears to be demonstrably bad may belie prophecy in actual operation...But even if a law is found wanting on trial, it is better that its defects should be demonstrated and removed by the Legislature than that the law should be aborted by judicial fiat. Such an assertion of judicial power deflects responsibility from those on whom in a democratic society it ultimately rests the people. Hence, rather than exercise judicial review courts should ordinarily allow Legislatures to correct their own mistakes wherever possible." Similarly in his dissenting judgment in New State Ice Co. v. Liebmann [1932] 285 US 262. Mr. Justice Brandeis, the renowned judge of the U.S. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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