Bank Officers’ Challenge To Tax On Concessional-Loan Benefits Fails At Madras HC, Following Supreme Court Ruling

The petitioner, a registered trade union, sought a declaration that the amendment to Section 17(2) of the Income-tax Act, 1961, made by the Finance Act, 2007, was unconstitutional and ultra vires.

The Court noted that the constitutional validity of Section 17(2) and Rule 3(7)(i) of the Income-tax Rules, 1962, had already been upheld by a Division Bench of the Madras High Court and that decision had been affirmed by the Supreme Court in All India Bank Officers’ Confederation v. Regional Manager, Central Bank of India, 2024 INSC 389; (2024) 464 ITR 286.

1. Whether the amendment to Section 17(2) of the Income-tax Act, 1961, made by the Finance Act, 2007, is unconstitutional and ultra vires.

2. Whether the challenge is already governed by the earlier decisions of the Madras High Court and the Supreme Court upholding the relevant provisions.

Section 17(2) of the Income-tax Act, 1961, read with Rule 3(7)(i) of the Income-tax Rules, 1962, permits the taxation of specified employment-related benefits, including interest-free or concessional loans, as perquisites.

In All India Bank Officers’ Confederation v. Regional Manager, Central Bank of India, 2024 INSC 389; (2024) 464 ITR 286, the Supreme Court held that Section 17(2)(viii) and Rule 3(7)(i) were within the rule-making power, did not constitute excessive delegation, and were not arbitrary or violative of Article 14.

The Madras High Court’s earlier decision had likewise upheld the relevant provisions.

The Court treated the petitioner’s constitutional challenge as covered by the earlier decisions upholding the relevant statutory and rule provisions.

Because the Supreme Court had affirmed the Madras High Court’s ruling on the validity of Section 17(2) and Rule 3(7), the Court concluded that there was no basis to reconsider the same challenge in this petition.

There was no order as to costs, and the interim applications were closed.