All India Bank Officers’ Confideration vs Regional Manager, Central Bank Of India 2024 INSC 389 – Income Tax – Perquisites – Interpretation Of Statutes

Income Tax Act, 1961; Section 17(2)(viii) – Income Tax Rules, 1962; Rule 3(7)(i) – Rule 3(7)(i) posits SBI’s rate of interest, that is the PLR, as the benchmark to determine the value of benefit to the assessee in comparison to the rate of interest charged by other individual banks. The fixation of SBI’s rate of interest as the benchmark is neither an arbitrary nor unequal exercise of power- the enactment of subordinate legislation for levying tax on interest free/concessional loans as a fringe benefit is within the rulemaking power under Section 17(2)(viii) of the Act. Section 17(2)(viii) itself, and the enactment of Rule 3(7)(i) is not a case of excessive delegation and falls within the parameters of permissible delegation. Section 17(2) clearly delineates the legislative policy and lays down standards for the rule-making authority. Accordingly, Rule 3(7)(i) is intra vires Section 17(2)(viii) of the Act. (Para 31-34)

Interpretation of Statutes- While enacting laws, the legislature can and does delineate the meaning of terms through explicit definitions. Specific meanings are assigned for precision, to distinguish words/expressions from loose or popular meanings, expand or restrict the scope of words or expressions, or to designate ‘terms of art’, that is, words or phrases with specialized meanings. Explicit definitions are useful, but it is wrong to state that all words or expressions must be explicitly defined. Defining each word or expression that is part of normal or commercial vocabulary is neither possible nor expedient. It would be a superfluous exercise, and make statutes voluminous. Instead, popular meaning makes the statute simpler and easier for the common people. After all, it is the common person who is concerned with the ramifications of a statute, and thus, the common man’s understanding is the definitive index of the legislative intent- The legislature is assumed to be aware of the well-understood meaning attributed to the word/expression, and by necessary implication the legislature by not prescribing a fixed and exact definition, ascribes the prevalent meaning assigned to the word/expression in common parlance or commercial usage. This would include meaning assigned to technical words in a particular trade, business or profession, etc. when the legislation is concerning a particular trade, business or transaction. This rule equally applies to construing words or expressions in a taxation statute. (Para 13)

Income Tax Act, 1961; Section 17(2)– ‘Perquisite’ is a fringe benefit attached to the post held by the employee unlike ‘profit in lieu of salary’, which is a reward or recompense for past or future service. It is incidental to employment and in excess of or in addition to the salary. It is an advantage or benefit given because of employment, which otherwise would not be available. From this perspective, the employer’s grant of interest-free loans or loans at a concessional rate will certainly qualify as a ‘fringe benefit’ and ‘perquisite’- (Para 18-19)

Legislation – Legislature must retain with itself the essential legislative function. ‘Essential legislative function’ means the determination of the legislative policy and its formulation as a binding rule of conduct. Therefore, once the legislature declares the legislative policy and lays down the standard through legislation, it can leave the remainder of the task to subordinate legislation. In such cases, the subordinate legislation is ancillary to the primary statute. It aligns with the framework of the primary legislation as long as it is made consistent with it, without exceeding the limits of policy and standards stipulated by the primary legislation. The test, therefore, is whether the primary legislation has stated with sufficient clarity, the legislative policy and the standards that are binding on subordinate authorities who frame the delegated legislation- Referred to Municipal Corporation of Delhi v. Birla Cotton, Spinning and Weaving Mills, Delhi (1968) SCC OnLine SC 13. (Para 22)