Mumbai: The Bombay high court dismissed petitions filed by officers of nationalised banks against a 2007 change to the income tax law that led to higher taxes for those netting more pay.
A division bench of Justice M S Sonak and Justice Jitendra Jain on Monday said that simply because bank employees drawing higher salaries are called upon to bear a proportionately higher burden does not mean that there is any hostile discrimination within the class or any manifest arbitrariness involved in the impugned amendments.
In law, classifications based on the economic superiority of the persons of incidence are well recognised, said the high court.
The petitions, filed in 2006 and 2008 by the All India Central Bank Officers’ Federation and other associations of bank officers, challenged the constitutional validity of amendments on the ‘machinery to assess and recover taxes’ that led to higher taxes for those with concessions granted in rent for accommodation. There were also petitions filed in 1994 and 1996. The IT law under Section 17 (2) (ii) provided that when a residential accommodation is provided by the public sector bank to its officers, the value of rent-free accommodation or, if the officer is paying certain fixed rent, then the concession so received in the form of reduced rent was considered as a perquisite and amenable to income tax.
The high court said a tax policy may, of course, inevitably result in hardship to some, but that itself does not make it arbitrary or discriminatory.
Earlier, the high court had stayed the amendment. The high court said despite the care required in framing laws it is difficult to conceive of legislation that is incapable of being abused by perverted human ingenuity.
The high court, citing Supreme Court verdicts, said it has to pragmatically check a law’s constitutionality, not by its inequities or “by the possibilities of abuse of any of its provisions”. The legislature can always step in to amend a law to prevent its abuse, said the high court.
While the SC in 2007 upheld the constitutional validity of such a provision, it said whether there was in fact such a concession received or not could be assessed by an assessing officer. Hence, in 2007 the law was amended to deem the existence of such a concession and do away with the need to factually determine if any was in fact provided.
By introducing the amendment, the legislature addressed an existing lacuna and “provided consistency, clarity, and certainty”, said Justice Sonak, authoring the judgment. “These factors promote good tax governance. In fiscal matters or tax measure laws, it is well settled that the legislature enjoys far greater latitude than what may be permitted in non-fiscal legislation,” the HC held.
The HC clarified that the IT department must consider that it was the HC that restrained such deduction during the pendency of petitions and, leaving contentions of parties open, said it must also consider the “plight of the banks vis-a-vis its employees, most of whom must have retired by now”.