The court said interest-free loans were unique to bank staff and in excess of or in addition to the salary, hence taxable as fringe benefit
The court further stated that these provisions are not iniquitous, draconian or harsh on the taxpayers.
The Supreme Court has ruled that the interest-free or concessional loans extended by banks to their employees are “fringe benefits”, liable to be taxed.
Justices Sanjiv Khanna and Dipankar Datta said the loan benefit enjoyed by the bank staff was unique to them and “perquisite” unlike “profit in lieu salary”, which is a reward or recompense for past or future service, the Economic Times reported.
“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,” the bench said on May 7, adding the benefit was taxable under the income tax law.
While the court upheld the income tax rule, it said the fixation of State Bank of India’s interest rate as the benchmark was neither arbitrary nor unequal exercise of power, the ET report said.
By fixing a single clear benchmark for computation of the perquisite or fringe benefit, the rule prevents ascertainment of the interest rates being charged by different banks from the customers and, thus, checks unnecessary litigation,” the bench said.
A report by Deccan Herald said the court said these provisions were not iniquitous, draconian or harsh on the taxpayers.
I-T rules say the interest-free or concessional loan benefits provided by banks to its employees would be taxable as “fringe benefits” or “amenities” if the interest charged by the bank is lower than the interest charged according to the SBI’s prime lending rate.
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