which had read down Rule 3.

[Bhel Workers Union and
Another v. Union of India and Another, (2010) 324 ITR 26 (SC)]

In the cases before the
Supreme Court, the appellants had challenged the validity of Rule 3 of the
Income-tax Rules, 1962, as amended by the Income-tax (Twenty-second Amendment)
Rules, 2001 which amended the method of computing valuation of perquisites
u/s.17(2) of the Income-tax Act, 1961. According to the appellants, the amended
Rule 3 was inconsistent with the parent Act and also ultra vires Article 14 of
the Constitution.

Writ petitions filed by the
appellants were dismissed by the High Court, aggrieved by which appeals were
filed before the Supreme Court.

The Supreme Court observed
that the amended Notification was the subject matter of appeals in the case of
Arun Kumar v. Union of India reported in (2007) 1 SCC 732. A three-Judge
Bench of the Supreme Court did not strike down Rule 3 of the Rules, but read
down the Rule to make it in line with S. 17(2)(ii) of the Act.

The Supreme Court held that
as the point involved in the present appeals had been concluded by the aforesaid
judgment, the same were disposed of in terms thereof.

The Supreme Court noted that
subsequent to the aforesaid judgment, the Legislature has added an Explanation 1
to S. 17(2) of the Act by the Finance Act, 2007, with effect from April 1, 2002,
taking away the effect of the judgment on or after April 1, 2002. According to
the appellant, however, the year 2001-02 which was also covered under Rule 3 had
not been affected by the amendment. Since, there was no challenge to the amended
provision before the Supreme Court, it declined to record any opinion on the
same and disposed of the appeals noticing the subsequent amendment brought out
by the Legislature.