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Meaning of interest u/s 2(28A) of the Income Tax Act 1961. - Income Tax - 1159/CBDTExtract INSTRUCTION NO. 1159/CBDT Dated : March 27, 1978 Section(s) Referred: 2(28A) Statute: Income - Tax Act, 1961 Section 2(28A) of the I.T.Act as inserted by the Finance Act, 1976 defines the word interest to mean;- Interest payable in any manner in respect of any moneys borrowed or debt incurred and includes any service fee or the charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised. 2. A question has been raised as to whether payments like brokerage or manager's remuneration payable by the debtor a middleman for arranging loans/advances would be included in the term interest for the purpose of deduction at source u/s.194 A of the I.T.Act. 3. This question has been examined in consultation with the Ministry of Law. The Board is advised that interest is (in the nature of) a payment of money or money's worth for the use of borrowings and is payable by or on behalf of the debtor to the creditor or to any other person on his behalf. Brokerage or manager's remuneration is payable to a broker or a middleman who helps in securing the deposits. The money secured by him does not belong to him. Therefore, payments in the nature of brokerage or manager's remuneration are not includible within the meaning of the word 'interest'. The expression "service fee or other charge" used in the definition of the term 'interest' in section 2(28A) of the Act would mean the amount paid in such form as discount, fee, damages, etc. by the borrower to the creditor in respect of the moneys borrowed or debt incurred or credit facility not utilised but would not include the brokerage charges or manager's remuneration for services rendered by a middleman in securing the deposits.
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