FEDERAL BANK EXECUTIVE FORUM vs UNION BANK OF INDIA, REP.
- Court
- Madras High Court
WP No.4775 of 2009
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 14.10.2026
CORAM
THE HON'BLE MR.SUSHRUT ARVIND DHARMADHIKARI,
CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE G. ARUL MURUGAN
WP No. 4775 of 2009
CNR:{HCMA010183542009}
and MP No.1 of 2009
1. Federal Bank Executive Forum
Rep. By Its Regional Secretary
Chenani Mr. K.P. Jaan Defral
Towers, Bank Injunction, Aljuva
683 011, Kerala
Petitioner(s)
Vs
1. Union Bank Of India, Rep.
By Secretary To Govt., Ministry Of
Finance, New Delhi
2.The Central Board Of Direct
Taxes, North Block, New Delhi
3.The Federal Bank Limited
Having Its Registered Office At
Fedral Towers, Aluva 638 101
Kerala
4.The Chief Commissioner
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WP No.4775 of 2009
Of Income Tax, Ayakar Bhavan,
Nungambakkam, Chennai 34
5.The Fedral Bank Limited
Regional Office, Bhattad Towers,
30 West Cott Road, Royepettah,
Chennai
Respondent(s)
PRAYER Petition filed under Article 226 of the Constitution of India
praying for issuance of Writ of Declaration declaring the Rule 3(7)(i) of
the Income Tax Rules and also impugned sub-para 15 of Bulletin
th
53/2008 issued by the 4 respondent are unconstitutional, ultra vires
the Income Tax Act and therefore null and void.
For Petitioner(s): No appearance
For Respondent(s):Dr.B.Ramaswamy,
Senior Standing Counsel
for RR 1, 2 and 4 Thr' VC
Mr.R.Rajashree for R3
No appearance for R5
*
ORDER
(Order of the Court was made by G.Arul Murugan, J.)
This writ petition is filed seeking a declaration to declare Rule
3(7)(i) of the Income Tax Rules and also impugned sub-para 15 of
th
Bulletin 53/2008 issued by the 4 respondent as unconstitutional, ultra
vires the Income Tax Act and, therefore, null and void.
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WP No.4775 of 2009
2. The provisions of Section 17(2), 17(2)(iii), 17(2)(vi), 17(2)
(viii) of the Act and Rule 3(7)(i) of the Income Tax Rules, 1962 (in
short ‘the Rules’) were under challenge before this Court in separate
writ petitions and a Division Bench of this Court, heard the entire
batch of writ petitions analogously and by common judgment dated
20.04.2026 in the case of All India Union Bank Officers & Others
vs. Union of India, rep. By its Secretary to Government,
Ministry of Finance & others (CDJ 2016 MHC 2413) , dismissed
the writ petitions and upheld the constitutional validity of Section
17(2)(viii) of the Act and Rule 3(7)(i) of the Rules. The relevant
portion of the judgment dated 20.04.2016 reads as under:
“49. More than helping the petitioners, the said
decision helps the respondent – Department. If salary is
taxable and some perquisite or benefit forms part of a
package, the same should also be taxed. Therefore, we are
of the considered view that the challenge to Section 17(2)
(viii) as well as Rule 3(7)(i) has to fail.
50. As a consequence, all the above writ petitions are
dismissed as devoid of any merits. Consequently, all
connected pending MPs are also dismissed. There will be no
order as to costs.”
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WP No.4775 of 2009
3. In the appeals filed against the aforesaid judgment before the
Hon’ble Supreme Court, vide judgment dated 07.05.2024, in the case
of All India Bank Officers’ Confederation vs. The Regional
Manager, Central Bank of India and Others (2024 INSC 389 ::
(2024) 464 ITR 286) (Civil Appeal No.7708 of 2014 and batch
of cases) , the Hon’ble Supreme Court upheld the judgment of this
Court dated 20.04.2016 and dismissed the appeals upholding the
constitutional validity of Section 17(2) of the Act and Rule 3(7) of the
Rules.
3.1. The relevant portions of the Supreme Court judgment is
usefully reproduced hereunder:
31. We are of the opinion that the enactment of subordinate
legislation for levying tax on interest free/concessional loans as a
fringe benefit is within the rule- making power under Section 17(2)
(viii) of the Act. Section 17(2)(viii) itself, and the enactment of Rule
3(7)(i) is not a case of excessive delegation and falls within the
parameters of permissible delegation. Section 17(2) clearly
delineates the legislative policy and lays down standards for the
rule-making authority. Accordingly, Rule 3(7)(i) is intra vires
Section 17(2)(viii) of the Act. 26 AIR (1967) SC 1895. Section 17(2)
(viii) does not lead to an excessive delegation of the ‘essential
legislative function’.
II. Is Rule 3(7)(i) arbitrary and violative of Article 14 of the
Constitution insofar as it treats the PLR of SBI as the
benchmark?
32. Rule 3(7)(i) posits SBI’s rate of interest, that is the PLR,
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as the benchmark to determine the value of benefit to the assessee in
comparison to the rate of interest charged by other individual
banks. The fixation of SBI’s rate of interest as the benchmark is
neither an arbitrary nor unequal exercise of power. The rule-making
authority has not treated unequal as equals. The benefit enjoyed by
bank employees from interest-free loans or loans at a concessional
rate is a unique benefit/advantage enjoyed by them. It is in the
nature of a ‘perquisite’, and hence is liable to taxation.
33. Rule 3(7)(i), it can be hardly argued, is arbitrary or
irrational for the reason it benchmarks computation of the
perquisite with reference to the SBI’s PLR. SBI is the largest bank in
the country and the interest rates fixed by them invariably impact
and affect the interest rates being charged by other banks. 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. Rule 3(7)(i) ensures consistency in
application, provides clarity for both the assessee and the revenue
department, and provides certainty as to the amount to be taxed.
When there is certainty and clarity, there is tax efficiency which is
beneficial to both the tax payer and the tax authorities. These are all
hallmarks of good tax legislation. Rule 3(7)(i) is based on an
uniform approach and yet premised on a fair determining principle
which aligns with constitutional values.
34. It is also apposite to note that when it comes to uniform
approach the laws relating to fiscal or tax measures enjoy greater
latitude than other statutes. The Legislature should be allowed some
flexibility in such matters and this Court would be more inclined to
give judicial deference to legislative wisdom. Commercial and tax
legislations tend to be highly sensitive and complex as they deal
with multiple problems and are contingent. This Court would not
like to interfere with the legislation in question, which prevents
possibilities of abuse and promotes certainty. It is not iniquitous,
draconian or harsh on the taxpayers. A complex problem has been
solved through a straitjacket formula, meriting judicial acceptance.
To hold otherwise, would lead to multiple problems/issues and
override the legislative wisdom. The universal test in the present
case is pragmatic, fair and just. Therefore, Rule 3(7) is held to be
intra vires Article 14 of the Constitution of India.
35. We, accordingly, dismiss the appeals and uphold the
impugned judgments of the High Courts of Madras and Madhya
Pradesh. No order as to costs.”
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WP No.4775 of 2009
4. In view of the fact that already the issue regarding the
constitutional validity of Rule 3(7)(i) of the Rules has been considered
by this Court and decided in favour of the Revenue and the said order
was also upheld by the Supreme Court in the judgment referred supra,
the issue raised in this writ petition is squarely covered by the
aforesaid judgments of this Court and the Hon’ble Supreme Court.
In view of the above, the writ petition stands dismissed. There
shall be no order as to costs. Consequently, the interim application
stands closed.
(SUSHRUT ARVIND DHARMADHIKARI, CJ.) (G.ARUL MURUGAN, J.)
14.10.2026
Index : Yes/No
Neutral Citation : Yes/No
sra
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WP No.4775 of 2009
To
1. The Secretary To Govt.,
Union Bank Of India,
Ministry Of Finance, New Delhi
2.The Central Board Of Direct
Taxes, North Block, New Delhi
3.The Federal Bank Limited
Having Its Registered Office At
Fedral Towers, Aluva 638 101
Kerala
4.The Chief Commissioner
Of Income Tax, Ayakar Bhavan,
Nungambakkam, Chennai 34
5.The Fedral Bank Limited
Regional Office, Bhattad Towers,
30 West Cott Road, Royepettah,
Chennai
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WP No.4775 of 2009
THE HON'BLE CHIEF JUSTICE
AND
G. ARUL MURUGAN, J.
(sra)
WP No.4775 of 2009
14.10.2026
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