Bank Officers’ Challenge To Taxing Concessional Staff-Loan Benefits As Perquisites Fails At Madras HC

The Karur Vysya Bank Officers Association petitioned under Article 226 seeking a declaration that the amendment to Section 17(2) of the Income-tax Act, 1961, made by the Finance Act, 2007, and the Bank’s Circular No. 61/2005 dated 18 February 2005 were unconstitutional and ultra vires

The Court noted that a Division Bench had previously upheld the constitutional validity of Section 17(2)(viii) and Rule 3(7)(i) of the Income-tax Rules, 1962, and that the Supreme Court had affirmed that decision

Whether the amendment to Section 17(2) of the Income-tax Act, 1961, made by the Finance Act, 2007, was unconstitutional or ultra vires

Whether Karur Vysya Bank’s Circular No. 61/2005 dated 18 February 2005 was unconstitutional or ultra vires

Section 17(2)(viii) of the Income-tax Act, 1961, permits rules to prescribe the valuation of perquisites, and Rule 3(7)(i) of the Income-tax Rules, 1962, treats the benefit of interest-free or concessional loans as a taxable perquisite, using the State Bank of India’s rate as the benchmark.

The Supreme Court held that this rule-making authority did not amount to excessive delegation and that the SBI benchmark was neither arbitrary nor violative of Article 14, given the need for a uniform and certain method of valuation

The Court relied on the Supreme Court’s decision in All India Bank Officers’ Confederation v. The Regional Manager, Central Bank of India (2024 INSC 389; (2024) 464 ITR 286), which upheld the relevant provisions

The Court treated the challenge as covered by the prior decisions upholding the constitutional validity of Section 17(2) and Rule 3(7)(i).

Since the Supreme Court had affirmed those decisions, the Court concluded that the issue raised in this petition was already decided against the petitioners

It gave no separate analysis of the Bank’s circular beyond concluding that the petition’s challenge was covered by those judgments

It made no order as to costs and closed the interim applications.