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TMI Blog1972 (9) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... essee-bank claimed rebate on this entire amount under section 86(i) of the Income-tax Act, 1961. But the Income-tax Officer deducted a sum of Rs. 4,089 as the proportionate interest on the money borrowed for the purpose of the investment and proportionate expenses in realising the said interest on the securities and arrived at the net income under this source at Rs. 1,387. The assessee preferred an appeal to the Appellate Assistant Commissioner and reiterated his contention that section 86(i) permitted rebate on the entire sum of interest received on tax-free securities and it did not restrict the relief to the amount assessed under section 18 after the deduction provided under sections 19 and 20. The assessee relied on a number of decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... answered it against the assessee on the ground that the language of sections 19 and 20 supported the method of computation adopted by the Income-tax Officer. At the instance of the assessee, the following two questions have been referred for our decision : " 1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the relief under section 86 was only with reference to the net amount of interest and not on the gross amount ? 2. Whether the method of computation of net interest from tax-free securities adopted by the Income-tax Officer was correct ? " Mr. Ramamani, the learned counsel for the assessee, contended that the interest on the securities in question was income-tax free ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Officer's order, the Income-tax Appellate Tribunal held that the bank was entitled to a rebate on the gross amount of interest amounting to Rs. 44,720. The High Court of Kerala agreed with the Tribunal. On appeal filed before the Supreme Court, the Supreme Court held that the notification should be construed on its own terms in its application to the question of rebate and that there was no scope for controlling the provisions of the notification with reference to section 8 of the Income-tax Act. It is useful to refer to the following passage occurring at page 765 of the report : " Section 8 of the Income-tax Act provides for the computation of income and deductions therefrom under the head 'interest on securities'. Section 60 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ysore Government: - ...... (2) Mysore Government 4 per cent. Conversion Loan 1953-63....... (4) Mysore 3 per cent. Loan 1956-61......... " Under section 297(2)(1) of the Income-tax Act, 1961, notwithstanding the repeal of the Income-tax Act, 1922, any notification issued under sub-section (1) of section 60 of the repealed Act and in force immediately before the commencement of the new Act, shall, to the extent to which provision has not been made under the new Act, continue in force until rescinded by the Central Government. The notification issued under section 60(1) of the Income-tax Act, 1922, is therefore, available for the assessee for claiming rebate on the interest received on tax-free securities. The notification which was constr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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