Madras HC Dismisses Andhra Bank Officers’ Challenge to Tax on Concessional-Loan Benefits, Citing Supreme Court Ruling

The petitioner, an officers’ federation, sought a declaration that Section 17(2)(vi) of the Income-tax Act, 1961, Rule 3(7)(i) of the Income-tax Rules, 1962, and paragraph 10(iii) of Andhra Bank’s Circular No. 313 dated 26 December 2009 were unconstitutional and ultra vires

The Court noted that a Division Bench had dismissed a batch of earlier challenges to the relevant provisions, including Rule 3(7)(i), and that the Supreme Court had upheld those judgments in All India Bank Officers’ Confederation v. Regional Manager, Central Bank of India (2024) 464 ITR 286

1. Whether Section 17(2)(vi) of the Income-tax Act, Rule 3(7)(i) of the Income-tax Rules, and paragraph 10(iii) of the bank circular were unconstitutional or ultra vires

2. Whether the challenge was foreclosed by the earlier decisions of the Madras High Court and the Supreme Court upholding the relevant tax provisions and rule

Section 17(2) of the Income-tax Act provides for the taxation of specified employment perquisites, and Rule 3(7)(i) prescribes the method for valuing the benefit of interest-free or concessional loans by reference to the State Bank of India’s rate.

The Supreme Court held that the rule-making authority could prescribe this valuation method under Section 17(2)(viii), that the provision did not amount to excessive delegation, and that the SBI benchmark was neither arbitrary nor violative of Article 14; it also upheld the Madras and Madhya Pradesh High Court judgments (All India Bank Officers’ Confederation v. Regional Manager, Central Bank of India, 2024 INSC 389; (2024) 464 ITR 286).

The Madras High Court’s earlier decision had likewise rejected the challenge to the relevant provision and Rule 3(7)(i).

The Court treated the petitioner’s challenge as covered by its earlier decision and the Supreme Court’s subsequent affirmance.

It relied on the Supreme Court’s conclusions that the statutory delegation was permissible and that Rule 3(7)(i)’s SBI benchmark was a valid, uniform method of valuing the perquisite.

The judgment describes the earlier challenge as concerning Section 17(2)(viii), while the present petition expressly challenged Section 17(2)(vi); nonetheless, the Court concluded that the present issue was squarely covered by the cited decisions.

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