ARUN KUMAR AND ORS versus UNION OF INDIA AND ORS.

Citation: [2006] SUPP. 6 S.C.R. 290 · Decided: 15-09-2006 · Supreme Court of India · Bench: Y.K. SABHARWAL

Judgment (excerpt)

A 
B 
ARUN KUMAR AND ORS. 
i: 
UNION OF INDIA AND ORS. 
SEPTEMBER 15. 2006 
[Y.K. SABHARWAL. CJ. C.K. THAKKERAND 
P.K. BALASUBRAMANY AN. JJ.] 
Income· fox Rules, 196] --Rule 3-lncome Tax Act, 1961 -Section 
C 1-12, -- .\lethod fur computing valuation u( perquisites-Amendment of-
( ·1assifi<·a1ion made between employees uf Government and employees of 
! -•lil[Janies. Corporal ions or other Undertakings regarding acco111111uda1io11 
1wovided hy employers-Validity oF-Held: Classification is reasonable based 
011 i/1/elligible differenlia, h(n·ing rational nexus to the object sought to he 
achieved-It is neither arbitrw~-. discriminato~v or ultra vires Article I./ nor 
D in.-onsiste/l/ with s<!ction t •(!J(iiJ uf the Act--Rule 3 applies 011~11 tu the 
cases ol 'cum:cssiun' sho1m hi· employer to his empi<~rees in the muller of 
rent respecting accommodation--There is no provision creating 'deeming 
jh·tion' as to concession-Thus. assessee can co/1/end that there is no 
·concession' in the mailer of rem respecting accommodation and the case is 
E nut covered by section li{2)(ii)--Constilution of India, 1950-Artic/e /./. 
F 
Jurisdiction: Jurisdictional fact-faistence of-Held: Is sine qua non 
or condition precedent for the exercise of power by a court-If jurisdictional 
fact exists, the authority can take appropriate decision in accordance with 
la11~l1 can decide the fact in issue' or 'adjudicatory fact'. 
Principles/Doctrines: Principle of 'reading down '-Application of. to 
uphold the validity of the lmr---faplained. 
By a Notification, Rule 3 of the Income Tax Rules, 1962 was amended 
and the method of computing valuation of perquisites in the matter of rental 
G accommodation provided by employers to their employees under Section 17(2) 
of the Income Tax Act, 1961 was revised. In respect of the employees belonging 
to private as well as public sector undertakings, the valuation of the perquisites 
relating to accommodation would be 10 per cent of the salary in cities having 
population exceeding 4 lakhs or 7.5 per cent of the salary in cities having 
po1>ulation less than four lakhs. With regard to Central and State Government 
I-I 
290 
ARUN KUMAR v. U.0.1. 
291 
employees, earlier system of valuation of perquisite was retained. Appellants- A 
employees of private sector challenged the validity of Rule 3 of the Rules. It 
was contended that the amended Rule 3 conferred arbitrary and unfettered 
powers on the Revenue; that it was inconsistent with the parent Act; and that 
the computation-method was neither based on intelligible differentia nor had 
any nexus with the object sought to be achieved, thus ultra i1ires Article 14 of B 
the Constitution. High Court,held that the classification between cities with 
regard to population was reasonable and rational, and thus, upheld the rnlid,ity · 
of Rule3. 
In a similar issue before another High Court, the validity of Rule 3 was 
upheld obsen'ing that the rule devised the method and the basis of ascertaining C 
the value of concession in the matter of rent which could not be held arbitrary 
or ultra vires; and that the classification between Government employees and 
employees of Companies, Corporations and other Public Undertakings was 
reasonable and not violative of Article 14 of the Constitution. Hence the 
present matters. 
Partly allowing the appeal and disposing of the transfer cases, the Court 
D 
HELD: I. In considering the validity of a statute the presumption is 
always in favour of constitutionality and the burden is upon the person who 
attacks it to show that there has been transgression of constitutional 
principles. For sustaining the constitutionality of an Act, a court may take E 
into consideration matters of common knowledge, reports, preamble, history 
of the times, object of the legislation and all other facts which are relevant. It 
must always be presumed that the Legislature understands and correctly 
appreciates the need of its own people and that discrimination, if any, is based 
on adequate grounds and considerations. It is also well-settled that courts will F 
be justified in giving a liberal interpretation in order to avoid .constitutional 
invalidity. A provision conferring very wide and expansive powers on authority 
can be construed in conformity with legislative intent of exercise of power 
within constitutional limitations. Where a statute is silent or is inarticulate, 
the court would attempt to transmulate the inarticulate and adopt a 

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