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2011 (5) TMI 828 - HC - Income TaxInterest Tax Act, 1974 - Exclusion of interest tax recovered from the customers as chargeable to interest tax - Held that:- Section 26C of the 1974 Act empowers a credit institution to vary terms of agreement with the borrowers to the extent of liability of interest tax under the 1974 Act, where the term loan had been sanctioned prior to Ist October, 1991. The ultimate destination of interest tax collected by the assessee under the 1974 Act is the Government treasury and no benefit accrues to the assessee. The receipt is infact interest tax on interest and is not in the nature of chargeable interest. Therefore, the interest tax which is collected by assessee cannot partake the character of chargeable interest which is in addition to interest paid by the customer to the assessee and no interest tax would be exigible on it. See Canara Bank (1988 - TMI - 24709 - KARNATAKA High Court - Income Tax) - Decided against the revenue.
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