Madras HC Rejects Bank Staff Forum’s Challenge To SBI PLR Benchmark For Taxing Concessional Loans

The petitioner, the Catholic Syrian Bank Executive Forum, sought a declaration that Rule 3(7)(i) of the Income Tax Rules, 1962, and Sub-para A of paragraph 4 of the bank’s circular dated 2 January 2008 were unconstitutional and ultra vires the Income Tax Act

The Court noted that a Division Bench had previously upheld the validity of Section 17(2)(viii) of the Act and Rule 3(7)(i), and that the Supreme Court had upheld that decision

Section 17(2)(viii) of the Income Tax Act authorises rules treating specified benefits or perquisites as taxable; Rule 3(7)(i) is within that rule-making power and does not amount to excessive delegation.

In All India Union Bank Officers v. Union of India (Madras High Court, 20 April 2016), the Court upheld the provision and rule. In All India Bank Officers’ Confederation v. Regional Manager, Central Bank of India, 2024 INSC 389, (2024) 464 ITR 286, the Supreme Court affirmed their validity, holding that use of SBI’s rate as a uniform benchmark for valuing the benefit of interest-free or concessional loans was neither arbitrary nor violative of Article 14

The Court treated the challenge to Rule 3(7)(i) as squarely covered by the earlier Madras High Court decision and the Supreme Court’s affirmance of it

Since those decisions had upheld the rule’s validity, the Court concluded that the issue raised in the petition could not be reconsidered in the petitioner’s favour. The Court did not separately analyse the challenge to the bank circular

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