P.R. SHARMA Vs. UNION OF INDIA

JUDGEMENT

(1.) THE challenge in the present writ petition, filed on behalf of the employees of the Food Corporation of India, is to the retrospective effect given to Explanation-1 added to Section 17(2)(ii) of the Income Tax Act, 1961 (for short 'the Act') inserted by Section 11 of Finance Act, 2007 with effect from 1.4.2002.

(2.) SECTION 17(2)(ii) of the Act, before its amendment was to the following effect :-

(3.) THE Hon'ble Supreme Court further found that Section 17(2)(ii) does not contain any deeming clause that once it is established that an employee is paying rent less than 10% of his salary in cities having population of 4 Lacs and 7.5 per cent, in other cities, it should be deemed to be a "concession" within the meaning of the Act. The Hon'ble Supreme Court concluded that Rule 3 would apply only to those cases where a "concession" has been shown by the employer in favour of an employee in the matter of rent respecting any accommodation. The argument that Rule 3 is discriminatory creating distinction between the employees of the Central Government and the State Governments and other employees i.e. employees of companies, corporations and other undertakings, did not find favour with the Hon'ble Supreme Court. The Court found the aforesaid classification to be a reasonable classification based on Intelligible Differentia. The same was found to have reasonable rational nexus with the object sought to be achieved and, thus, it was found that such provision cannot be held ultra-vires to Article 14 of the Constitution of India.