TMI Blog2014 (12) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... to the IDBI or RBI, as the case may be – the same has also been decided in CIT Vs. Canara Bank [2007 (7) TMI 11 - SUPREME COURT OF INDIA] – decided against revenue. Subsidy received from the RBI on export credit loans - Whether the Tribunal was justified in law in holding that the amount of subsidy received by the assessee from RBI under the Export Credit (Interest Subsidy), 1968 is not liable to interest tax – Held that:- Assessee rightly contended that as per the scheme of the RBI, the assesse bank used to advance money to various exporters to carry out export business - Such advances generally are termed as packing credit and as per the scheme of the RBI, banks are required to charge interest on such advances at the specific rates provided under the scheme -The RBI would grant subsidy to the bank for the shortfall in interest received from the customer - such subsidy is not received from the customers and is not relatable to what was lended & advanced by the bank, hence it cannot be treated as Interest as provided u/s 2(7) of the Act - Subsidy received from RBI is in the form of support to the bank and cannot be equated to interest - only interest on loans and advances made i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee from the constituents (borrower) cannot be taxed as interest in the hands of the assessee - such charges recovered by the bank cannot be equated to the term interest under the Act - Though the receipt of Guarantee Fees received from constituents (borrowers) is not linked to what is paid to DICGC as insurance cover on behalf of depositors, the issue is not relevant – Decided against revenue. - DB ITA No.201/2005, ITR No.87/1983, ITR No.58/1995, ITANo.67/2004, 82/2004, 83/2004, 91/2004, 93/2004, ITANo.94/2004, ITANo.96/2004, ITANo.97/2004, ITANo.100/2004, /2004, 105/2004, ITANo.130/2004, 135/2004, 155/2004, 157/2004, 181/2005, 230/2005 - - - Dated:- 12-11-2014 - MR. AJAY RASTOGI AND MR. J.K. RANKA, JJ. Mr. RB Mathur, Adv., for Mrs. Parinitoo Jain, Adv. for the appellant Mr. SM Mehta, Sr. Adv. with Ms. Pallivi Mehta, Adv. Mr. PK Kasliwal, Adv. for the respondent Mr. CM Sharma, Adv. Reportable By the Court : (Per Hon'ble Ranka, J.) 1. These Income Tax References and Income Tax Appeals relating to various assessment years commencing from 1975-76 to 1999-2000 between the same parties, are directed against order of the Income Tax Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges on unutilised portion of any credit sanctioned for being availed of in India ; and (b) discount on promissory notes and bills of exchange drawn or made in India, but does not include- (i) any amount chargeable to Income Tax under the Income Tax Act, under the head Interest on securities ; (ii) discount on treasury bills ; (iii) interest on moneys lent for the creation of a capital asset in India where the agreement under which such moneys are lent provides for the repayment thereof during a period of not less than seven years; (iv) interest on any deferred credit (that is to say, credit on the terms that the payment is to be deferred) sanctioned by a scheduled bank in connection with the export of capital plant and machinery outside India; (v) interest on any loan in foreign currency sanctioned by any Corporation or bank referred to in Sub-clause (a) or Subclause (b) or Sub-clause (c) or Sub-clause (d) of Clause (9) for the import of capital plant and machinery from a country outside India. 5. We will briefly discuss on the aforesaid questions in seriatim. (Question No.1): Re-discount paid to RBI/IDBI:- 6. The claim of the bank is that the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges of IDBI collected by the assesseebank cannot be chargeable interest under section 2(7) of the 1974 Act since even before the said amount could reach the hands of the assessee-bank, it is impressed with the character of rediscounting charges payable to IDBI. The Scheme, viewed as a whole, makes it clear that the assessee-bank is only the medium for the disbursement of the development fund for the implementation of the Scheme for which the assessee-bank is allowed to retain 1.75 per cent., Which accrues to the assessee-bank and, therefore, it is not possible to bifurcate the transaction which has to be read in its entirety. 6.3. In view of the above, this question is no more res-integra and even counsel for the revenue conceded Accordingly, the aforesaid question is answered in favour of the assessee and against the revenue. (Question No.2): Subsidy received from the RBI:- 7. The next question for consideration is with regards to the subsidy received by the assessee from the RBI on export credit loans. It was the claim of the assessee that as per the scheme of the RBI, the assesse bank used to advance money to various exporters to carry out export busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome has to be taxed and the so-called overdue interest does not fall within the ambit of Sec. 2(7) of the Interest Tax Act and it is neither a loan nor advance by the bank. It was further contended that the charges for delayed payments are recovered from person who is not a borrower of the bank, as after the due date such relationship ends. It was further contended that after the due date, if anything is recovered by the bank, the character of the receipt changes and does not fall within the ambit and definition of Interest under the Interest Tax Act. He further relied upon the judgments rendered in CIT Vs. State Bank of Travancore (1997) 228 ITR 40 (Kerala); CIT Vs. State Bank of Indore (1988) 172 ITR 24 (MP); CIT Vs. Corporation Bank (2007) 295 ITR 193 (SC); CIT Vs. Canara Bank (1988) 175 ITR 601 (Kar.); CIT Vs. Cholamandalam Investment Finance Co. Ltd. (2008) 296 ITR 601 (Mad.); CIT Vs. Vijaya Bank (2006) 285 ITR 97 (Kar.); CIT Vs. State Bank of Mysore (2009) 315 ITR 278 (Kar.). 8.2. The contention of the revenue, on the contrary, is that the very nature of the term ''overdue interest'', which is also credited by the assessee under the head int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etation of taxing statutes was enunciated by Rowlatt J. in his classic statement in Cape Brandy Syndicate Vs. I.R.C. reported in (1921) 1 KB 64(KB) 71: In a taxing statute one has to look merely at what is clearly said. There is no room for intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One must only look fairly at the language used. 8.7. The definition of interest under the Interest Tax Act is comprehensive and devoid of any ambiguity. The words employed in the said definition clearly envisage that only the interest on loans and advances is exigible to tax under the Interest Tax Act. The Apex Court has also stated in A.V. Fernandez Vs. State of Kerala (1957) AIR 657 (SC) the following fiscal principle : If the Revenue satisfies the court that the case falls strictly within the provisions of the law, the subject cannot be taxed. If on the other hand, the case is not covered within the four corners of the provisions of the taxing statute no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the Legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of that transaction. The definition as we have pointed out of ''interest'', shall not cover the amount received by the assessee after the due date. 8.11. We have gone through the judgments rendered by various High Courts as quoted above and are not in conformity with the view of Karnataka and Punjab and Haryana High Court and we concur with the view of Madhya Pradesh Kerala High Court. Recently the Telangana and Andhra Pradesh High Court also had an occasion to consider the same issue in the case of CIT Vs. State Bank of Hyderabad: (2014) 367 ITR 128 and after considering the same issue, as is being examined by this Court and have come to the conclusion that the amount received after due date is not in the nature of interest. 8.12. Accordingly, in our view, the amount received as overdue interest in inland/foreign demand bills is not liable to be taxed as interest under the Interest Tax Act and we answer this question in favour of the assessee and against the revenue. (Question No.4): Guarantee Fees Paid to Deposit Insurance and Credit Guarantee Corporation (DICGC):- 9. The contention of the assessee is that the guarantee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusive, what is necessary to be considered is the true nature of the transaction and whether in case it has resulted in profit or loss to the assessee. Ld. counsel thus contended that the amount as collected was passed on to the DICGC and he further contended that even if it can be termed as interest, then the entire amount was passed on to the DICGC and that if taxed interest at the end of the day, nothing remains with the assessee. 9.2. Per-contra, learned counsel for the revenue contended that the nature of the transaction itself speaks that it is in the nature of interest and was also shown as interest in the books of accounts and when it has been shown by way of interest, character remains the same as that of interest. He further contended that, had it been so, the assessee ought to have credited the said amount which has been charged by the assessee from the constituents (borrower) as incidental charges or service charges for onward payment to DICGC. He also contended that there is nothing on record to show that assessee paid in advance and collected later from constituents and no reason has been assigned, why one would pay in advance when no occasion arose f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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