2003 (2) TMI 422 - AT - Income Tax

Summary

Issues involved:
The issue involves the interpretation of the Interest Tax Act, 1974, specifically whether interest on debentures can be considered as chargeable interest under section 2(7) of the Act.

Summary:

Issue 1: Appeal Maintainability
The assessee did not include debenture interest as chargeable interest initially, but later offered it for tax during assessment. The CIT(A) held the appeal was not maintainable due to this self-offering. However, the Tribunal found the appeal maintainable as the concession was made under a misconception of the legal position, allowing the assessee to challenge the assessment.

Issue 2: Interpretation of Law
The main contention was whether debenture interest falls under section 2(7) of the Act, which taxes interest on "Loans and Advances." The CIT(A) held debentures are loans and advances, citing legal precedents. The Tribunal disagreed, following judgments stating interest on debentures is not taxable as interest on loans and advances, ultimately deleting the debenture interest from assessment.

Separate Judgement by Judges:
The Tribunal, comprising R.V. Easwar and R.P. Rajesh, JJ., allowed the appeal, holding the interest on debentures is not taxable under the Interest Tax Act based on legal interpretations and precedents cited by the assessee.