TMI Blog2007 (5) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1996-97 on the lease rental payments and hire purchase instalments. 2. Brief facts of the case are that the assessee is a credit institution. Subsequent to the assessments for assessment years 1996-97 and 1997-98, the Assessing Officer noticed from the records that the assessee-company has not offered overdue interest receipts for taxation purposes. Accordingly, notice under section 10 of the Interest-tax Act, 1974 was issued to the assessee. Subsequently notice under section 8(1) was also issued in reply to which the assessee submitted that the overdue interest is not liable for inclusion in the chargeable interest under Interest-tax Act. The Assessing Officer was not convinced with the assessee s explanation and held that the ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be in the nature of financing arrangements and therefore interest on the delayed payment also attains the nature of interest on loans and advances and therefore taxable under the Interest-tax Act. In support of his contentions he relied upon the decision of the Karnataka High Court in the case of State Bank of Mysore v. CIT [1989] 175 ITR 607. 5. Having heard both the parties and having considered their rival contentions, we find that the assessee-company, a credit institution, is liable to pay interest tax on the interest earned by it from loans and advances advanced by it. The assessee has taken the stand that the amounts in dispute are overdue interest on the delayed payments on account of bill discounting transactions, hire pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idering the definition of the term "interest", it was held that when only the term means is used, it gives a hard and fast definition whereas when only "includes" is used, it enlarges the meaning of the expression defined so as to comprehend not only such things as they signify according to their natural import but also those things which the clause declares that they shall include. On the other hand, when the term "means and includes" is used, it indicates an exhaustive explanation of the meaning. Thus, it was observed that there may be some other items also which, though strictly, may not be interest, but may be having some characteristics of interest and considering the meaning of the expression "means and includes" as explained in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so expressed by the Kerala High Court in the case of State Bank of Travancore ( supra ), wherein it was held that the character of an overdue bills is wholly distinct from loans and advances, and the interest on the loans and advances alone is taxable under the Interest-tax Act. The character of an overdue bill is not synonymous with loans and advances. Therefore the interest on the overdue bills is to be excluded from chargeable interest under the Income-tax Act, 1974. 6. The J Bench of this Tribunal in the case of Central Bank of India ( supra ) had an occasion to consider whether the service charges received by a bank from its credit cardholders on overdue payments can be considered as interest on loans and advances liable to i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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