TMI Blog1997 (10) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. This stand of the assessee was negatived by the Assessing Officer. On appeal, the Commissioner (Appeals) has upheld the action of the Assessing Officer by placing reliance on the decision of the Karnataka High Court in the case of CITv. Vijaya Bank [1989] 175 ITR 611 [1988] 41 Taxman 34. 5. We have heard the learned representatives of the parties. In the above cited decision, the Honourable High Court has held that the export credit interest subsidy was paid by the Reserve Bank of India to offset a part of the loss incurred by the bank as a result of charging interest at lower rates than the normal rate of interest. The subsidy is thus linked with the loan advanced. In these circumstances, the 'Honourable High Court has held that the subsidy is to be included in the chargeable interest. The earned counsel for the assessee has fairly admitted that this is the only decision available on the point and no decision to the contrary could be brought to our notice. Given the situation, we are of the view that the amount of subsidy has been rightly included in the chargeable interest. Hence, this ground of appeal is dismissed. 6. Ground No. 3 in all the appeals relates to the incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the expression 'interest' as given in some dictionaries, viz., Stroud's Judicial Dictionary (Vol. 3, Fourth Edition): "Interest 'on the said sum', which sum is payable by instalments, means that the interest is payable on so much of the sum as from time to time shall be unpaid.' A Dictionary for Accountants by Brig. L. Kohler (Fifth Ed.): "Interest: 1 . The service charge for the use of money or capital, paid at agreed intervals by the user, and commonly expressed as annual percentage of outstanding principal. 2. The return on any investment of capital." 10. We have given our anxious consideration to the submissions advanced before us and have gone through the decisions cited at the bar. There is considerable force in the stand of the Revenue that the amount paid or payable on account of delayed payments is in the nature of interest. In fact, even the High Court of Madhya Pradesh in the abovementioned decision has observed that the amount payable by way of compensation for detention of a sum of money due, can be said to be covered by the expression 'interest' in its widest sense, including both interest proper and interest by way of damages. Since the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stand has been negatived by the Assessing Officer as also by the Commissioner (Appeals). 12. Assailing the findings of the revenue authorities, the learned counsel for the assessee had argued that inspection charges are levied depending upon the conveyance expenses incurred by the bank's officials. The assessee has also filed a note on the inspection charges and it was stated that no inspection charges are levied on advances up to Rs. 5,000. For advances above Rs. 5,000 but up to Rs. 25,000, inspection charges are levied at the flat rate of Rs. 2.50 per inspection per borrower. However, the charges do not exceed Rs. 10 per year per borrower. It was also stated that for loans above Rs. 25,000, reasonable inspection charges are levied and care is taken to see that the inspection charges on advances to weeker sections in the priority sector are lower than those on other advances. Thus, it was contended that the inspection charges have been wrongly brought to tax. On the other hand, the learned departmental representative has supported the findings of the revenue authorities. 13. Having considered the rival submissions, we find considerable force in the assessee's stand. There ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s speech of 31st July, 1974. Our attention was also invited towards the statement of objects and reasons given for introduction of the Interest-tax Act, 1974. It has been pointed out that in the statement of objects it has been clearly specified that interest on government securities as also debenture and other securities issued by local authorities, companies and statutory corporations will not be included in the tax base. The learned counsel has also pointed out that while defining the expression 'interest' under section 2(7) of the Act, any amount chargeable to income-tax, under the Income-tax Act, under the head "interest on securities' was excluded. He has, however, admitted that the said section was substituted by Finance (No. 2) Act, 1991, which effect from 1st October 1991, and in the substituted section, that exclusion has been omitted. It was argued that such exclusion from the section should not be interpreted to mean that interest on securities has become liable to tax. According to him, this exclusion has been omitted because the same was superf luous, and while interpreting a provision of the statute, aid can be taken from the speech of the Finance Minister and also f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the present case. It was also argued that the provision of the section is very clear and unambiguous and, therefore, recourse to the speech of the Finance Minister or to the statement of objects of the Act cannot be looked into. 22. We have considered the submissions advanced before us. It is true that when the Interest-tax Act was introduced in Parliament, the intention was that interest on government securities as also debentures and other securities issued by local authorities, companies and statutory corporations will not be included in the tax base. This is clear from a reading of the statement of objects and reasons of the Act. It appears that due to this intention, any amount chargeable to income-tax, under the Income-tax Act, under the head 'interest on securities', was specifically excluded for the purposes of the term 'interest' as defined in section 2(7) of the Act. However, with effect from 1-10-1991, section 2(7) has been substituted and, therefore, the provision as contained in the original section cannot come to the rescue of the assessee, nor can the Statement of Objects and Reasons, as given at the tinfe of introduction of the bill, be of any assistance in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,65,51,147 as adopted in the Income-tax assessment order is taken into account and added to the chargeable interest for the assessment year 1985-86, subject to rectification after passing the modification order in the income-tax assessment.' 28. Similarly, in the assessment year 1986-87, for a period of 3 months from 1st January, 1985 to 31st March, 1985, the Assessing Officer had added a sum of Rs. 82,90,093 being one-fourth of the interest on sticky advances considered in the income-tax assessment. 29. The assessee preferred erred appeals in both the years. The learned Commissioner (Appeals) opined that section 43D of the Income-tax Act, which was introduced with effect from 1st April, 1991, is retroactive in nature and no notional interest can be brought to tax. Hence, the additions made by the Assessing Officer were deleted. The correctness of this order being challenged in the appeals before the Tribunal. 30. The learned departmental representative has submitted that section 43D was inserted by Finance (No. 2) Act, 1991, w.e.f. 1st April, 1991 and it does not speak that the same is retroactive and, therefore, the Commissioner (Appeals) had erred in deleting the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest in the instant case is certain and the matter may be sent back to the Assessing Officer for quantification of such interest. 33. The submissions of the Revenue have been opposed by the learned counsel for the assessee. He has stated that in some cases suits for recovery have been filed by the assessee. He has also argued that the amount of interest, during the assessment years under reference, was transferred to 'protested bills account'. On a query by the Bench, the learned counsel has admitted that the accounts of the debtors were debited by the amount of interest. According to him, no interest was charged in the years under reference and as such there had been no accrual of interest and the same cannot be brought to tax. In support of this proposition, the learned counsel has referred to the decision of the Supreme Court in State Bank of Travancore's case , and has read extensively from the head-note appearing at page 105 of the report. Placing reliance on such observations, he has argued that from the mere fact that interest on sticky advances was charged to the concerned debtors by making debit entries in their respective accounts, no inference can be drawn that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the interest accrued after examination of the individual cases. Referring to sub-section (2) of section 4 of the Interest Tax Act, it was reiterated that accrual of interest is a certainty. 36. We have considered the submissions advanced before us as also the decisions cited by the learned representatives of the parties. Section 4 of the Interest-tax Act relates to the charge of tax under the Act. Section 5 relates to the scope of 'chargeable interest'. At the relevant time, section 5 read as under:- "Scope of chargeable interest. -Subject to the provisions of this Act, the chargeable interest of any previous year of a scheduled bank shall be the total amount of interest (other than interest on loans and advances made to scheduled banks) accruing or arising to the bank in the previous year." A reading of the above provision makes it clear that the 'chargeable interest of any previous year would mean the amount of interest accruing or arising to the bank in that previous year. Section 6 deals with the computation of chargeable interest. Sub-section (1) thereof provides deduction in respect of interest which is established to have become a bad debt during the previous y ..... 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