FBT, a tax on expenditure payable by the employer, is expected to generate Rs 3,000 crore this year. Prior to today's writ petition, the constitutional validity of FBT has been challenged before the Andhra Pradesh, Chennai and Gujarat high courts as well.

The writ petition filed by two companies, SR Brothers and Centaur Pharmaceuticals, challenged the validity of FBT, saying the tax violates the fundamental rights guaranteed in the Constitution. It is also discriminatory and goes against the directive principles enshrined in the Constitution, the petition adds.

The petition was admitted by a division bench comprising justices HL Gokhale and JP Deodhar. The final hearing is scheduled on January 16, '06.

The main points raised in the petition are as follows: The scope of FBT is beyond the charging section of the Income-Tax Act and it has no relation to the income of the employer. Further, FBT discriminates between government and non-government employees.

The provisions of the FBT go beyond the objects and purpose for which it is enacted. There is discrimination between different kinds of employers, with political parties and proprietary concerns not being liable to pay the tax, and employers in certain industries getting concessional treatment.