Madras HC Rejects Bank Employees’ Concessional-Loan Tax Challenge, Applying Supreme Court’s Upholding Of SBI Rate Benchmark

The petitioner sought a declaration that Rule 3(7)(i) of the Income-tax Rules, 1962, and sub-paragraph 15 of Bulletin 53/2008 issued by the fourth respondent were unconstitutional, ultra vires the Income-tax Act, and void

The Madras High Court had previously upheld the constitutional validity of Section 17(2)(viii) of the Act and Rule 3(7)(i); the Supreme Court subsequently upheld that judgment and dismissed the appeals

The petitioner did not appear at the hearing

Whether the challenge to Rule 3(7)(i) was foreclosed by the earlier decisions upholding its validity

Whether the petitioner’s challenge to sub-paragraph 15 of Bulletin 53/2008 could succeed in light of those decisions

Section 17(2)(viii) of the Income-tax Act authorises the making of rules concerning taxable perquisites, and Rule 3(7)(i) is intra vires that provision and not an excessive delegation of legislative power

The Supreme Court held that using the State Bank of India’s prime lending rate as a benchmark for valuing the benefit of interest-free or concessional loans to bank employees is neither arbitrary nor violative of Article 14, given the need for a uniform and certain method of computation. These holdings were stated in All India Bank Officers’ Confederation v. The Regional Manager, Central Bank of India and Others (2024 INSC 389; (2024) 464 ITR 286)

The Court treated the petitioner’s challenge to Rule 3(7)(i) as squarely covered by the earlier Madras High Court decision and the Supreme Court’s subsequent affirmance, both of which upheld the provision’s validity

In view of those binding determinations, the Court dismissed the petition without separately analysing the challenge to sub-paragraph 15 of the Bulletin

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