List of Current Affairs

Source: Jharkhand High Court

Why in News?

• Recently, the Jharkhand High Court in the matter of the Chairman-cum-Managing Director, National Insurance Co. and Ors v. Kisha Devi and Ors., has held that the Permanent Lok Adalat has a right to decide the dispute which could not be settled by a settlement agreement between the parties and the dispute does not relate to any offence.

What was the Background of the Chairman-cum-Managing Director, National Insurance Co. and Ors v. Kisha Devi and Ors. Case?

• In this case, the husband of the claimant obtained a personal accident insurance from the Senior Divisional Manager, National Insurance Company Limited, for a sum insured of Rs.3,00,000/-.
• The husband of the claimant, Rajeshwar Prasad Singh was gunned to death on 19^th November 2003, where-after, an FIR was lodged, and post-mortem of the deceased was conducted.
• On the sudden murder of the deceased the claimant remained under deep trauma and took time to recover from the trauma.
• After recovering from trauma and other diseases she sent information regarding the death of her husband to the Insurance Company.
• The insurance company rejected the claim, citing policy conditions.
• Thereafter the claimant filed a case before the Permanent Lok Adalat, Sahibganj.
• The Permanent Lok Adalat, Sahibganj had allowed the claim of the claimant and ordered the petitioners that they must pay a sum of Rs.3,00,000/- with interest @ 9%.
• Being aggrieved from the judgement passed by the Permanent Lok Adalat, Sahibganj, the petitioner has filed the instant writ petition before the Jharkhand High Court for quashing the judgment passed by the Permanent Lok Adalat.
• Dismissing the writ petition, the High Court held that the Permanent Lok Adalat has rightly exercised its jurisdiction and this Court does not find any illegality in the impugned judgment.

What were the Court’s Observations?

• Justice Navneet Kumar observed that the Permanent Lok Adalat has a right to decide the dispute which could not be settled by a settlement agreement between the parties and the dispute does not relate to any offence. Such right has been vested in Permanent Lok Adalat with respect to the cases which arise in relation to Public Utility Services such as transport service for the carriage of passenger or goods by air, road or water; postal telegraph or telephone services; supply of power, light or water to the public by any establishment; system of public conservancy or sanitation; service in hospital or dispensary; or insurance service etc. need to be settled urgently so that people get justice without delay.
• It was further stated that the Permanent Lok Adalat shall be guided by the principles of natural justice, objectivity, fair play equity and other principles of natural justice in exercise of its jurisdiction either in the process of conciliation and settlement or in deciding a dispute on merit under the Legal Services Authorities Act, 1987.

What are Permanent Lok Adalats?

About Lok Adalats:

Permanent Lok Adalats:

About:

The Legal Services Authorities Act, 1987 was amended in 2002 to provide for the establishment of the Permanent Lok Adalats to deal with cases pertaining to the public utility services like transport, postal, telegraph etc.

Essential Features:

• These have been set up as permanent bodies under Section 22-B of the Legal Services Authorities Act, 1987.
• It shall consist of a Chairman who is or has been a district judge or additional district judge or has held judicial office higher in rank than that of the district judge and two other persons having adequate experience in public utility services.
• It shall not have jurisdiction in respect of any matter relating to an offence not compoundable under any law. The jurisdiction of the Permanent Lok Adalats is upto Rs. 1 Crore.
• The award of the Permanent Lok Adalat is final and binding upon the parties.
• Before the dispute is brought before any court, any party to the dispute may make an application to the Permanent Lok Adalat for settlement of the dispute. After an application is made to the Permanent Lok Adalat, no party to that application shall invoke jurisdiction of any court in the same dispute.

Source – Supreme Court

Why in News?

The Supreme Court in its recent case of All India Bank Officers' Confederation v. The Regional Manager, Central Bank of India & Ors., has stated that Rule 3(7)(i) of the Income Tax Rules, 1962 does not contravene Article 14 of the Constitution of India, 1950 (COI).

• The benefits in the form of interest-free or concessional loans extended by banks to their employees will be considered taxable perquisites under Section 17 of the Income Tax Act, 1961 (IT Act).

What was the Background of All India Bank Officers' Confederation v. The Regional Manager, Central Bank of India & Ors. Case?

• Various bank staff unions and officers' associations contested the validity of Section 17(2)(viii) of the IT Act, and Rule 3(7)(i) of the Income Tax Rules, 1962 (IT Rules), through writ petitions in the Madhya Pradesh High Court and Madras High Court which were dismissed by the respective High Courts.
• Appeal is filled to challenge the judgment of High Court. Section 17(2)(viii) and Rule 3(7)(i) are challenged on the grounds of excessive delegation of essential legislative function to the Central Board of Direct Taxes.
• Rule 3(7)(i) is also challenged as arbitrary and violative of Article 14 of the COI insofar as it treats the PLR of SBI as the benchmark instead of the actual interest rate charged by the bank from a customer on a loan.
• The Supreme Court dismissed the appeals and upheld the impugned judgments of the High Courts of Madras and Madhya Pradesh.

What were the Court’s Observations?

• Justice Sanjiv Khanna and Justice Dipankar Datta observe that 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 the salary. It is a benefit given to employment.
  • The employer's grant of interest-free loans or loans at a concessional rate will certainly qualify as a fringe benefit and perquisite.
• The Court observed the effect of Rule 3(7)(i) of IT Rules.
  • It categorizes the value of interest-free or concessional loans as another fringe benefit or amenity under Section 17(2)(viii).
  • It outlines the method for valuing these loans for taxation purposes.
• Furthermore, the Court recognized that while explicit definitions in laws are useful for precision, it's impractical to define every term exhaustively. Hence, common parlance or commercial usage often guides the interpretation of undefined terms in statutes, including tax laws.
• Regarding delegation of legislative function, the Court held that Section 17(2)(viii) provided sufficient guidance to the rule-making authority and didn't grant boundless power. Therefore, the enactment of Rule 3(7)(i) for taxing interest-free or concessional loans fell within the delegated authority and wasn't excessive.
• In addressing the alleged violation of Article 14, the court found that using the State Bank of India's interest rate as a benchmark wasn't arbitrary or discriminatory. This benchmarking ensured uniformity and prevented disparate treatment among bank employees.
• Additionally, the Court acknowledged that interest-free or concessional loans are unique benefits for bank employees and thus qualify as perquisites subject to taxation.
  • The use of SBI's interest rate as a benchmark was justified due to its influence on other banks' interest rates, promoting consistency and reducing potential disputes.

What are the Relevant Legal Provisions Involved in it?

Taxation in India:

• Taxation in India is based on two precepts:
  • Firstly, based on the mandate of COI that no tax shall be levied or collected except by authority of law.
  • Secondly, it is based on the principle of sureness, that any tax levied ought not to be vague, must be consistent and predictable.

The Income Tax Act 1961:

About:

• It came into force on 1^st April 1962 and provides about the provisions for calculation of tax.
• It is an Act to consolidate and amend the law relating to income tax and super-tax.
  • Income Tax: It refers to a type of tax Governments impose on the income of businesses and individuals within their jurisdiction.
    • All individuals earning above a certain amount are required to pay income tax on their earned income.
  • Super Tax: A very high rate of income tax or company tax paid by those with a very high level of income or profit.
• Appeal under this act lies to High Court (HC) under Section 260A and to the to the Supreme Court (SC) under Section 261.
• The Income-tax Law classifies the year as the previous year (year in which income is earned) and assessment year (year in which the income is charged to tax).
• Appearance by an authorized representative is made under Section 288 of the Act.
• The act also talks about assessing tax authorities (the person who has the jurisdiction (rights) to make an assessment of an assessee, who is liable under the Income-tax Act.

Section 17 of IT Act:

• Section 17 of the Act deals with the definitions of Salary, Perquisite, and Profits in lieu of salary.
• Section 17(2) of the IT Act specifies that "perquisite" includes various fringe benefits and amenities provided to an employee by their employer, which are taxable under the Act.
• Section 17(2)(viii) of the IT Act provides the definition of perquisites and states that it includes any other fringe benefit or amenity as may be prescribed.

Rule 3 of Income Tax Rules, 1962:

• Rule 3 of the IT Rules provides additional fringe benefits or amenities which are taxable as perquisites.
• Rule 3(7)(i) of the IT Rules provided that interest-free/concessional loan benefits provided by banks to bank employees shall be taxable as fringe benefits or amenities if the interest charged by the bank on such loans is lesser than the interest charged according to the Prime Lending Rate (PLR) of the State Bank of India (SBI).

Landmark Cases:

• In the case of Arun Kumar v. Union of India (2006), the Supreme Court had held that perquisites refer to privileges, gains, or profits incidental to employment and are provided in addition to regular salary or wages.
• In the case of Additional Commissioner of Income Tax v. Bharat V Patel (2018), the Supreme Court had held that perquisite commonly denotes any supplementary benefit or perk that accompanies an employee's compensation beyond their salary.

Source: Supreme Court

Why in News?

Recently the Supreme Court held that the removal of the elected representative from the office of Councilor/Vice-President with a further ban on him to contest election for six years is highly excessive and disproportionate to the nature of the so-called misconduct attributed to him.

What was the Background of Makarand alias Nandu v. State of Maharashtra & Ors. Case?

• Markarand was elected for the post of councilor of the Municipal Council, Osmanabad and in 2006 he was elected as the Vice-President.
• One of the respondents filed an application before the Collector, Osmanabad, under Sections 44(1)(e), 55A and 55B of the Maharashtra Municipal Councils, Nagar Panchayats and Industrial Townships Act, 1965 (1965 Act) and allegation was that appellant violates the provision of 1965 Act and misuse the power (illegal construction of house).
• An inquiry was conducted by the collector, and he held that the allegation was correct.
• A show cause notice was issued to the appellant and during the pendency of show cause proceeding the state government took suo moto action and minister-in-charged disqualified the appellant from the post of Vice-President.
• The appellant was also debarred from contesting election of the Council for six years.
• Another appellant Nitin was elected for the post of President of the Municipal Council, Naldurga.
• In this case also a complaint was filed before the Collector and referred to minister-in-charge and after serving show cause notice he was removed from the post of President for irregularity in allotting work.
• In this case, the appellant was debarred from contesting the Municipality election for six years.
• Both the appellants filed a writ petition and challenged the order of minister-in-charge before the High Court. The High Court of Bombay, Bench at Aurangabad dismissed the petition.
• The appeal was filed before the Supreme Court.
• Since both the appeals involve a common issue, they have been clubbed and heard together.
• The Supreme Court passed an interim order during the pendency of these proceedings and allowed the appellants to continue to hold the offices.

What were the Court’s Observations?

• The Court held that the manner in which the proceedings, while pending before the Collector at the stage of show-cause notice, were suo moto transferred to the State Government and the minister-in-charge coming forward to hastily pass an order of removal, are sufficient for us to infer that the action was unfair, unjust and founded upon irrelevant considerations.
• In any case, the impugned action does not satisfy the doctrine of proportionality.
• The Court was satisfied that the action taken against the appellant was totally unwarranted and it exceeded jurisdictional limits.
• The Supreme Court set aside the order of the High Court and quashed the order passed by minister-in-charge.

What are the Legal Provisions Involved in this Case?

Sections 44(1)(e) of 1965 Act:

• This Section deals with the disqualification of Councilor during his term of office. It states that-

(1) A Councilor shall be disqualified to hold office as such, if at any time during his term of office, he—

(e) Has constructed or constructs by himself, his spouse or his dependent, any illegal or unauthorized structure violating the provisions of this Act, or the Maharashtra Regional and Town Planning Act, 1966 or the rules or bye-laws framed under the said Acts ; or has directly or indirectly been responsible for, or helped in his capacity as such Councilor in, carrying out such illegal or unauthorized construction or has by written communication or physically obstructed or tried to obstruct any Competent Authority from discharging its official duty in demolishing any illegal or unauthorized structure and he shall be disabled subject to the provisions of sub-section (3) from continuing to be a Councilor and his office shall become vacant:

Section 55 A of 1965 Act:

• This Section deals with the removal of President and Vice-President by Government.
• It states that without prejudice to the provisions of sections 55-1A and 55, a President or a Vice-President may be removed from office by the State Government for misconduct in the discharge of his duties, or for neglect of, or incapacity to perform, his duties or for being guilty of any disgraceful conduct, and the President or Vice-President so removed shall not be eligible for re-election or re-appointment as President or Vice-President, as the case may be, during the remainder of the term of office of the Councilors : Provided that, no such President or Vice-President shall be removed from office, unless he has been given a reasonable opportunity to furnish an explanation.

Section 55 B of 1965 Act:

• This Section deals with the disqualification for continuing as Councilor or becoming Councilor on removal as President or Vice-President. It states that-

Notwithstanding anything contained in section 55A, if a Councilor or a person is found to be guilty of misconduct in the discharge of his official duties or being guilty of any disgraceful conduct while holding or while he was holding the office of the President or Vice-President, as the case may be, the State Government may, —

(a) Disqualify such Councilor to continue as a Councilor for the remainder of his term of office as a Councilor and also for being elected as a Councilor, till the period of six years has elapsed from the order of such disqualification;

(b) Disqualify such person for being elected as a Councilor till the period of six years has elapsed from the order of such disqualification.

What are the Constitutional Provisions Related to Municipalities?

• The 74^th Constitutional Amendment Act, 1992 introduced Part IX-A in the Constitution of India, 1950 (COI) which talks about the establishment, administration and power & function of Municipal bodies at different levels.
• Article 243P to 243ZG under Part IX-A of the COI deals with the municipalities and the 12^th Schedule was added through the 74^th Amendment Act.
• The Amendment Act created 3 types of municipalities:
  • Nagar Panchayat
  • Municipal Council
  • Municipal Corporation
• The members of a municipality shall be elected directly by the people.
• There is a reservation of seats for Scheduled Castes (SC) and Scheduled Tribes (ST) in the proportion of their population.
• 1/3^rd seats of total numbers of seats to be filled by direct election would be reserved for women, including the number of seats reserved for the women belonging to SC and ST.
• Article 243V of the COI talks about Disqualifications for membership. It states that-

(1) A person shall be disqualified for being chosen as, and for being, a member of a Municipality—

(a) If he is so disqualified by or under any law for the time being in force for the purposes of elections to the Legislature of the State concerned.

Provided that no person shall be disqualified on the ground that he is less than twenty-five years of age, if he has attained the age of twenty-one years;

(b) If he is so disqualified by or under any law made by the Legislature of the State.

(2) If any question arises as to whether a member of a Municipality has become subject to any of the disqualifications mentioned in clause (1), the question shall be referred for the decision of such authority and in such manner as the Legislature of a State may, by law, provide.

• Article 243W of the COI deals with Powers, authority and responsibilities of Municipalities, etc.
• The term of every municipality is 5 years.